Ga. Regulators Wrestle With Pulling Plug on Vogtle Nuclear Reactors

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The Georgia Public Service Commission (PSC) last week agreed to accelerate a decision on the Vogtle newbuild reactors -- the only remaining nuclear project in the US -- to this week instead of in February as previously planned. This decision on which the US industry is hanging its last remaining hopes of a limited revival potentially pits Georgia Power against its co-owners that could yet back out, and PSC staffers who have concluded the twin-unit AP1000 project is uneconomic. Some key things have not changed as regulators wrestle with this decision -- including that nuclear power will struggle for profitability in a market increasingly dominated by gas-fired power. The levelized cost of energy for a newbuild gas plant in the US is $41.3 per megawatt versus $100/MW for a nuclear reactor, according the NGW sister publication EI New Energy data. And the long-term cost for gas as a fuel is seen as fairly stable in a $3-$4 per million Btu range. But for Georgia Power, the project has gone so far down the road that it might be more expensive to turn back despite the huge cost overruns and daunting economics. PSC Chairman Stan Wise filed an order Dec. 11 to move up the date of the commission's decision by six weeks to Dec. 21, citing a $150 million tax advantage should the utility decide to abandon the project before Dec. 31. Meanwhile, Florida-based JEA, the initial off-taker on a take-or-pay contract securing a $1.4 billion bond issued by project co-owner, is signaling that it wants out of its 20-year contract. JEA has requested that Municipal Electric Authority of Georgia, known as Meag Power, or a third party replace it as the contract holder. In a Dec. 1 letter to Georgia Power, the majority-owner of the Vogtle newbuild, Wise asked the utility about the implications of a federal tax reform plan winding its way through the US Congress and expected to pass this week. Georgia Power CEO Paul Bowers replied on Dec. 6 saying that while the new plan significantly lowers the corporate tax rate, it would also eliminate a project abandonment deduction currently allowed, and that would result in a $150 million tax benefit if the project is abandoned by year's end. Georgia Power announced in August it planned to proceed with the Vogtle newbuild after its sister AP1000 project in South Carolina was abandoned. But that decision was contingent on three steps: securing a federal loan guarantee; an extension of federal production tax credits to allow for the fact that start-ups are now scheduled well past 2020 when the current credits expire; and securing a $3.2 billion project guaranty from Toshiba, the parent company of the former primary Vogtle contractor Westinghouse. So far, only that third step is completed. The PSC staff report on the project's economics concluded that Vogtle -- whose final total costs now stand north of $25 billion -- is no longer feasible and hurts ratepayers because project risk has been transferred to Georgia Power and its co-owners since Westinghouse went bankrupt and rejected its fixed-price engineering, procurement and construction contract. The project’s “economic cornerstones are no longer in place," the staff argued in its report. Moreover, Westinghouse and constructor Bechtel are now operating under a cost-plus arrangement, meaning they are “ensured full recovery of their costs and a fixed percentage mark up on every dollar the $4.4 billion already incurred.” Given sunk and future costs, the staff report -- which is based on Georgia Power's assumptions about gas prices and the environmental effects of increased carbon dioxide emissions -- ratepayers would save $1.6 billion if a gas plant were built instead of the Vogtle units in 2022-23. Georgia Power's arguments about alternative options to the nuclear plant were notably weak, with utility attorney Kevin Greene arguing that the PSC staff's estimates of gas forecasts could change depending on future gas prices. This highlighted a central argument against the plant put forth by Peter Bradford, who served as a state utility commissioner for more than two decades, initially in in Maine and then in New York. Bradford said in written testimony submitted on behalf of an intervener -- the Southern Alliance for Clean Energy -- that given that operating nuclear plants in other parts of the country "are having to seek special rate increases" to protect them from competitive new natural gas plants, energy efficiency and lower renewable costs, the PSC should have "a far more thorough analysis of the available alternatives than Georgia Power has chosen to offer in this proceeding." Jessica Sondgeroth, Atlanta

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