Political Insider

An AJC blog about Atlanta politics, Georgia politics, Georgia and metro Atlanta election campaigns. Because all politics is local.

Staffer: PSC could stand pat, let Ga. Power absorb new Plant Vogtle costs

If you read today’s print column, you know that a federal rescue has now become part of the discussion about how – or whether – to salvage those two new nuclear reactors being built at Plant Vogtle. This was the lede:

To call it a spur-of-the-moment act would be wrong. “Impromptu” might be the better word.


Tim Echols, a member of the state Public Service Commission, knew that last Friday, newly installed Energy Secretary Rick Perry would be the featured speaker at an Earth Day luncheon in Dallas.


Echols quickly booked a flight from Atlanta, wangled a seat at the table next to the former Texas governor, and crossed his fingers for an opportunity to get a brief word with the man. But even that required a Plan B.


“He came in late. I was sitting at the table next to him. I shook his hand, and handed him the letter,” Echols said. In that letter, the PSC member from Georgia — acting on his own — suggested that federal assistance might be required to complete two new nuclear reactors at Georgia Power’s Plant Vogtle.

But Tom Bond, the PSC’s director of utilities, focused on these two paragraphs:

Regardless, the overwhelming odds are that Georgia Power will soon go before the five members of the PSC with a “cost to complete” report, with itself as the new chief contractor. And the utility commission will have to determine whether to fish or cut bait on those two nuclear reactors.


If their answer is “fish,” then the PSC will have to determine how much of the additional cost should be paid by ratepayers. It will be a contentious debate that’s likely to linger through next year’s campaigning.

In a note forwarded to us this morning, Bond writes that, regardless of the Westinghouse bankruptcy, the PSC isn’t obliged to renegotiate the deal it has already cut with Georgia Power.  It can if it chooses -- but it doesn't have to.

The commission could stand pat, and let Georgia Power and its other utility partners absorb the added costs. His note:

I assume that the Commission could use that type of process if it wanted to (for instance, if the Company were willing to write off a sizable portion of the overruns in exchange), but that is not the current approved process. Under the current process, the Company is not entitled to a higher approved cost as a condition to finishing the project. Unless the Commission affirmatively decides to cancel the project under O.C.G.A. 46-3A-6, the Company is obligated to finish it under the terms of the Prudency Review Stipulation. (The Company could still cancel the project, but it would lose the right to collect the costs from ratepayers)



The Company is required to keep the Commission informed as to the forecasted schedule and cost to complete. But, the Company has no right to demand that the Commission pre-approve costs or increase the certified amount. They gave up that right in the VCM 8 Stipulation in exchange for Staff not pursuing $100s of millions in disallowances at that time. The Prudency Review Stipulation cemented this framework. The entire stipulation is premised upon the fact that Staff did not believe the Company's cost and schedule forecasts.



Under the Prudency Review Framework, there are two types of ratepayer protections. First, there are automatic provisions that kick in if the costs and schedules that the Company promised this fall are not met. These provisions, while not enough by themselves to keep the project economic on a cost to complete basis, will still prove critical in the event of a large increase in cost and schedule. For example, if capital costs were to increase $2b and the schedule were delayed 36 months, ratepayers would pay almost $800 million less with these provisions than without them.



Second, there are provisions that authorize additional pro-active disallowances by the Commission. Significantly, the Prudency Review Stipulation already has decided that the Company will retain the burden of proof on reasonableness and prudency on all capital costs over $5.6b. This is a huge ratepayer benefit that should not be tossed away simply because Staff was right and the Company was wrong about the cost and schedule. And the Company does not get to cancel the project and make ratepayers reimburse it for the costs simply because it is now concerned that it will not be able to meet its agreed upon burden of proof.

Reader Comments ...

About the Author

Jim Galloway is a three-decade veteran of The Atlanta Journal-Constitution who writes the Political Insider blog and column.