Georgia PSC lowers return on equity for Vogtle Units 3 and 4

The Georgia Public Service Commission on Dec. 20 unanimously approved a cost ruling for Southern (NYSE:SO) utility Georgia Power and its share of Units 3 and 4 of the Vogtle nuclear station currently under construction near Waynesboro.

The PSC said 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 (NCCR) tariff and deferring the cash recovery of certain other related financing costs.

Under a PSC order from February, Georgia Power’s cost was set at $5.68bn.

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 Dec. 31, 2020, additional reductions in ROE are provided for in the settlement agreement. 

In keeping with the approved agreement, the PSC approved a zero ($0) increase for 2017 in the NCCR. The PSC also approved a motion by PSC Chair Lauren “Bubba” McDonald to require Georgia Power to show the estimated amount customers will save in a message box on future bills beginning in the first quarter of 2017.

The savings will be included on the bills quarterly and include estimates for the typical residential customer. This order will remain in effect as long as the NCCR tariff is in place.

The PSC directed staff and Georgia Power through a Feb. 5 order to review the reasonableness of all costs incurred in the project through Dec. 31, 2015 and whether the capital cost forecast should be adjusted.  Under the stipulation as approved, the capital cost forecast of Georgia Power’s share of the plant would be adjusted to $5.68bn including a $240m contingency.

State law provides a process for making periodic adjustments in the forecast when justified. Under the terms of this settlement, staff and Georgia Power agreed that no costs 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.

Plant Vogtle is a nuclear power electric generating plant near Waynesboro, Georgia. When fully operational, Units 3 and 4 will produce 2,200 MW, enough to power about 500,000 homes. Plant Vogtle Units One and Two have been in commercial operation since 1987 and 1989 respectively.

The PSC certified Georgia Power’s share of the construction cost of Vogtle Units 3 and 4 on March 17, 2009 at $6.114bn. Georgia Power owns 45.7% of Vogtle with its partners, Oglethorpe Power, Municipal Electric Authority of Georgia (MEAG) and the City of Dalton Utilities.

Units 1 and 2 have been in commercial operation since 1987 and 1988 respectively. The construction of Units 3 and 4 is addressed in Georgia PSC Docket 29849.

 

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.