Grab a cup of coffee and settle in, boys and girls. This is going to get complicated.
Last week, Georgia Power announced that its cost of finishing two new nuclear units at Plant Vogtle, which just eight months ago had been set at $7.3 billion, had increased by $1.1 billion.
For Georgia Power customers, the good news is that stockholders are covering the added cost. The picture may be different for those served by smaller utility operations in Georgia that are also stakeholders in the project.
Together, Oglethorpe Power Corp., Municipal Electric Authority of Georgia and Dalton Utilities own 54 percent of the Vogtle pie, and thus their own share of the cost that comes with keeping alive the only nuclear construction project in the U.S.
The total added cost to all parties: $2.3 billion. The full price of the Vogtle upgrade is now $27 billion, double what was originally estimated and five years behind schedule. It is not a happy picture.
Moody’s has downgraded Georgia Power’s credit rating, citing a number of worries, which boil down to two sets of votes. One in September, and another in November.
The magnitude of the cost increase has triggered an opt-out provision for Oglethorpe and MEAG. The two entities are expected to vote on whether to continue their participation by the end of next month. Oglethorpe has indicated it can absorb the blow.
Then there’s the Nov. 6 general election. Two of five statewide seats on the Public Service Commission are up for grabs. Both incumbents are Republican. Moody’s didn’t point to these contests directly. But it did offer a telling quote from a senior credit officer.
“The latest revised cost estimate risks damaging the ongoing support from regulators, given it occurred so soon after they vetted and approved an earlier estimate,” he said.
Last Friday, three days after the news broke, we had PSC member Tim Echols on GPB’s “Political Rewind,” hosted by Bill Nigut, to explain what was happening. Echols outlined the deep investments that have been made by a web of power-suppliers in Georgia — a web so extensive that most power-users in Georgia would be touched if things go even further south.
So I asked Echols the obvious: Has Plant Vogtle become too big to fail?
“I think it has gotten too big to fail,” he replied. Echols pointed to four new nuclear reactors that are up and running in China, using the same technology.
“That gives us a lot of confidence that this is not some kind of theory anymore. We know these things will work. It’s just a matter of getting through all the grunt work,” he said. “The only thing worse than this project going over is canceling it.”
But Echols is not on the November ballot. So I posed the same question to the four PSC candidates who are: Republican incumbent Chuck Eaton, who faces Democrat Lindy Miller; and Republican incumbent Tricia Pridemore, who faces Dawn Randolph.
In essence, Eaton had answered the “too big to fail” question last December, when he and four other PSC members unanimously agreed to allow Georgia Power to continue with the Vogtle construction after its lead contractor, Westinghouse Electric Co., declared bankruptcy.
“You can’t be for a project and not pay for it,” he said. But Eaton argued that he and his colleagues have shielded Georgia Power ratepayers by encouraging the utility to shift to natural gas as a fuel source for its generators.
“We’ve been able to diversify, and we’ve protected the ratepayer against the increases that have occurred at Vogtle,” Eaton said. “In the last seven years, the average power bill for Georgia Power customers has not gone up one dime.”
(Ratepayers have been paying in advance to help finance the cost of the new nuclear units since 2011 – an annual average of about $100 per customer. But that was by act of the Legislature, as PSC members are always quick to point out.)
Pridemore was appointed to the PSC in February by Gov. Nathan Deal, to fill the unexpired term of Stan Wise – and so was spared that December vote to continue with Vogtle. She redefined my question.
“I don’t believe the question is whether it’s too big to fail. I believe that the question is, has the project moved so close to completion that it doesn’t make sense not to finish it? And I believe that it has,” she said.
Both Democrats in the two contests refused to put a “too big to fail” label on Plant Vogtle.
“Saying Vogtle is ‘too big to fail’ is fear-mongering by commissioners who are bought and paid for by the utilities,” said Miller, who is running against Eaton and is co-founder of a renewable energy company. “We’re in this mess because we’ve had years of commissioners rolling over for special interests.”
And then there is Dawn Randolph, a consumer advocate running against Pridemore. “The real question is, how did Vogtle become too big — i.e. so far over-budget and over-time? she asked via email. “The answer is just as clear. The regulators are asleep on the job.”
Notice what the two Democrats didn’t say. Neither said the two nuclear projects should be shut down — that we should walk away, as happened in South Carolina.
Miller and Randolph may reject “too big to fail” as a slogan, but not as underlying policy. Randolph came closest to acknowledging the broader impact that failure could have.
“Great regulators respond to reports on the ground, promote financial wellness of the project, and protect ratepayers from overzealous corporate entities,” she wrote. ”We are also not just talking about Georgia Power, but other [electric membership corporations] and MEAG Power, that have invested ratepayer monies into the expansion.”
There is another reason that Democrats don’t want to see the Plant Vogtle construction disappear. Georgia Power explained the latest increase in the cost of the new Plant Vogtle reactors on labor expenses. Specifically, “craft labor incentives to both attract and retain adequate staffing levels.”
Randolph said she has been in close touch with some of the 7,000 workers now on the project — electricians, carpenters and others who tell of bad planning, poor logistics and too much idle time.
“Now Georgia Power wants to blame this additional $1.1 billion on skilled labor because they bungled their opportunity to hire union-trained employees from the beginning,” she said.
The Vogtle reactor project is one of the largest construction projects in the country, which means it’s most likely the largest union work site in Georgia. And that matters to a rising Democratic party.
In November, when it comes to these two nuclear units, we may have PSC candidates who will disagree on how we should extract ourselves from this bog. But at the moment, the survival of the Plant Vogtle project doesn’t appear to be on the table.
Which should offer Moody’s some comfort.