Oglethorpe Power Imposes Conditions on its Vogtle Vote

Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Construction of the Vogtle nuclear plant unit additions will go forward, providing Southern Company (NYSE:SO) (Atlanta, Georgia) accepts cost-cap conditions put forth Monday evening by Oglethorpe Power Corporation (Tucker, Georgia), which owns 30% of the two units under construction.

In a statement issued Monday night, Oglethorpe said it submitted a "conditional vote in support of completion" of Vogtle units 3 and 4, providing Southern Company agrees to cost control options, including one that freezes costs at the currently budgeted amount (reportedly in excess of $27 billion) plus an allowance for $800 million to be added to a contingency fund.

Two other major Vogtle 3 and 4 owners, Georgia Power Company (Atlanta, Georgia), a subsidiary of Southern Company, and the Municipal Electric Authority of Georgia (MEAG) (Atlanta), had earlier voted to continue construction. MEAG owns 22.7% of the unit additions. Georgia Power owns 45.7% of the project.

In an August 8 filing with the U.S. Securities and Exchange Commission (SEC) (Washington, D.C.), Southern Company said the owners would have to vote on whether to continue or cancel construction. Construction would only continue if owners representing 90% of the two units' ownership voted to continue. If the vote fell short of 90%, construction would cease and the project would be cancelled, according to Southern Company's 10-Q filing. For more on that, see August 10, 2018, article - Vogtle Costs Increase $2.3 Billion, Cancellation is Possible.

The SEC filing coincided with a cost escalation of $2.3 billion in the Vogtle units 3 and 4 construction project. Georgia Power's share of the new costs amounted to about $1.1 billion while the other three owners would bear about $1.2 billion of the new costs. The project's fourth owner, City of Dalton Utilities, owns 1.6% of the construction project.

Over the course of several years, construction costs have ballooned and operating dates have been pushed back. Last month, Georgia Power confirmed the projected in-service dates for Unit 3 was still November 2021, while Unit 4 was still on track to be operating by November 2022. Construction on the two units is about 50% complete.

"With four years remaining on the construction schedule," Oglethorpe said in a September 24 statement, the organization sought cost caps "to protect (it's member) electric cooperatives, and their rural energy consumers, and hold Southern Company accountable for its newly revised budget and let their owners be responsible for any additional amounts beyond this level."

"We are hopeful that the Southern Company will agree with a proposal to protect our rural energy consumers in Georgia who should not be responsible for excessive future increases in the costs of this project," said Mike Smith, president and chief executive of Oglethorpe Power. "The Southern Company directly owns and controls Southern Nuclear Corporation (SNC), which has control of the site and project oversight of Vogtle 3 and 4. As SNC's owner, Southern Company should be willing to bear further risk of SNC's missed budgets, not our members."

Representatives from Georgia Power and Southern Company could not be immediately reached Monday night for comment on the Oglethorpe cost cap contingency.

Oglethorpe's statement said it and its electric member corporations (EMCs) "believe in nuclear power as a reliable source of clean, carbon-free electric generation that could benefit the region for 60 to 80 years. However, they recognize it would not be in their electric consumers' best interests to continue building a project with uncapped, unchecked expenses."

"Capping our costs, and by extension the costs borne by our EMC members, is a reasonable request and a prudent business decision that would allow the project to move forward," Smith added.

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