The Georgia Public Service Commission staff and Georgia Power have signed a preliminary agreement on costs for the Southern (NYSE:SO) utility’s construction of Units 3 and 4 of the Vogtle nuclear plant.
The proposed agreement means customers over the next four years will see a reduction of approximately $325m in rates towards the construction of units 3 and 4 at Plant Vogtle, according to an Oct. 20 statement from the Georgia PSC.
If approved by the PSC, the capital cost forecast of Georgia Power’s share of the plant would be adjusted to $5.68bn including a $240m contingency.
The final decision on this issue however is up to the full commission which can approve, reject or modify the agreement. The two 1,100-MW Westinghouse Electric AP 1000 reactors are currently under construction at the Vogtle complex in Waynesboro, Georgia. Both new units are currently scheduled to be in commercial operation by the end of 2020.
The proposed stipulation finds that cost incurred through Dec. 31, 2015 were prudent; the settlement with the contract was prudent and the revised cost forecast is “presumed prudent.”
In the PSC-directed review of the construction costs of Georgia Power Company’s Nuclear Plant Vogtle Construction Project in Docket 29849.
Regardless, the PSC intends to conduct hearings on the proposed agreement to give all parties an opportunity to comment. In the coming days the Commission is expected to schedule a hearing before taking any further action on the settlement.
The PSC directed staff and the company through a Feb. 5 order to review the reasonableness of all costs incurred in the project through December 31, 2015 and whether the capital cost forecast should be adjusted.
State law provides a process for making periodic adjustments in the forecast when justified.
The Georgia PSC is a five-member constitutional agency that exercises its authority and influence to ensure that consumers receive safe, reliable, and reasonably-priced telecommunications, electric and natural gas service from financially viable and technically competent companies.
Under the terms of this settlement, staff and Georgia Power Company agreed no costs were incurred through 2015 were imprudent and the recent settlement reached between the plant owners, including Georgia Power, and contractors on the project is reasonable and prudent.
Current customers will see a reduction of approximately $325m in rates over the next four years as a result of the agreed upon reductions in Georgia Power’s allowed return on equity (ROE) associated with its Nuclear Construction Cost Recovery tariff and deferring the cash recovery of certain other related financing costs.
The impact of reducing the allowed ROE on project financing costs reduces shareholder earnings by approximately $115m over the same period.
If the project is not in commercial operation by December 31, 2020, additional reductions in ROE are provided for in the settlement agreement.
“Current Georgia Power ratepayers have paid $1.8 billion in financing costs for Plant Vogtle thus far,” said Tom Bond, the Commission’s Director of Utilities. “We felt it was appropriate that these current customers get the lion’s share of any benefits from the settlement and that shareholders should also contribute in a meaningful way,” said Bond.
The PSC certified Georgia Power’s share of the construction cost of Plant Vogtle Units Three and Four on March 17, 2009 at $6.1bn. Georgia Power owns 45.7 per cent of Plant Vogtle with its partners, Oglethorpe Power Corp., Municipal Electric Authority of Georgia (MEAG) and the City of Dalton Utilities.