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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The long-delayed unit additions at the Alfred W. Vogtle Nuclear Power Station have a new estimated price tag of $32 billion to $34 billion, according to a new report from the Institute for Energy Economics and Financial Analysis (IEEFA) (Cleveland, Ohio).
That cost estimate was contained in IEEFA's report, Southern Company's Troubled Vogtle Nuclear Project, released January 20. That estimate includes financing costs for all four co-owners, as well as all remaining construction costs. Vogtle units 3 and 4 are owned by Georgia Power (45.7%), Oglethorpe Power Corporation (Tucker, Georgia) (30%), Municipal Electric Authority of Georgia (Atlanta) (22.7%) and Dalton Utilities (Dalton, Georgia) (1.6%). Georgia Power is a subsidiary of the Southern Company (NYSE:SO) (Atlanta, Georgia). The two-unit addition at Vogtle will add about 2,234 megawatts (MW) of nuclear generation capacity.
It has been difficult to obtain all-in cost estimates for the project, as only Georgia Power is regulated by the Georgia Public Service Commission (GPSC) (Atlanta, Georgia), and thus has to publicly disclose its share of the costs. When the utility does file cost reports with its utility regulators, the cost information is redacted. In the past, when contacted about the total project costs, including financing, Georgia Power spokespeople have said grossing up the project costs based on Georgia Power's share would not be accurate.
The IEEFA report also hints at possible future legal actions facing Georgia Power, aside from a regulatory prudence review. The report claims officials at the utility have "repeatedly misled the commission and its staff about the project's likely cost and schedule." The report cited December 2021 testimony from a staff member of the GPSC and two outside experts, that:
"The Company has provided ten cost estimates (certification and nine revisions) over the life of the Project and at least the first nine were materially inaccurate. Due to the fact that the Company provided inaccurate cost information, both the Company's and the Staff's economic analyses, conclusions and recommendations were inaccurate. A fundamental responsibility of Company management is to provide accurate cost estimates, which it failed to do during the first 12 years of the Project. The materially inaccurate cost estimates are an example of management's continuous poor judgment over the life of the Project that should be taken into account when the Company seeks recovery of cost overruns."
In an interview, Daniel Schlissel, the author of that report, said of the three people providing direct testimony, "these people are not the kind of people who use those terms casually. The Georgia PSC looks like it is loading up for bear on the prudence review." And maybe litigation beyond that.
In his report, Schlissel wrote, "If financing costs are included, the total cost of the Vogtle project will have risen from an estimated $14.1 billion in 2009 to approximately $32 billion in the fall of 2021, an approximate 127% increase--and that's if Georgia Power's current cost estimate is accurate, which staff experts dispute."
"If the additional (completion) costs estimated by the commission staff team, and associated financing costs are included, then the total cost of the Vogtle project is very likely, if not certain, to exceed $34 billion, especially if the project continues to be delayed as frequently and as long as it has been in recent years," he wrote.
In developing his $32 billion to $34 billion total project cost estimate, Schlissel relied on testimony filed in December 2021 by GPSC staffers as well as outside experts.
He also took issue with Georgia Power's projection of when the two-unit addition would achieve commercial operation. In Georgia Power's most recent estimate, last fall, the projected in-service dates had slipped to between May and September 2022 for Unit 3 and March and June 2023 for Unit 4. But Schlissel, a lawyer with an engineering background who has offered testimony on nuclear projects in about a half-dozen states, wrote that the GPSC's "nuclear experts believe that continuing problems at Vogtle will further extend the construction schedule, pushing Unit 3's commercial date of operations to between November 2022 and February 2023 and Unit 4's commercial operations date to November 2023 at the earliest and 'perhaps more probably' during the first quarter of 2024. But even longer delays could be experienced."
The unit additions have been troubled by cost overruns and construction delays for years. For more on that, see November 15, 2021, article - Vogtle Units 3 and 4 Costs Rise, Again, as Owners Squawk Over Cost Overruns and June 8, 2021, article - Georgia PSC Staff: New Vogtle Nuclear Units to be Later than Expected, Cost $2.4 Billion More than Projected. The two Vogtle units are the only nuclear power construction projects still underway in the U.S. Several years ago, efforts to add two units at the Summer Nuclear Power station were abandoned. For more on that, see August 1, 2017, article - Utilities Abandon Construction of Summer Nuclear Plant in South Carolina.
The project has had numerous challenges, not the least of which have been: the Chapter 11 bankruptcy of engineering, procurement and construction (EPC) firm Westinghouse Electric Corporation LLC (Cranberry Township, Pennsylvania); changing EPC firms after that bankruptcy; and multiple waves of the COVID-19 pandemic, which made it harder and more expensive to find skilled craft labor. Vogtle units 3 and 4 also are the first new-build nuclear reactors in the U.S. in three decades. The project also is under investigation by the U.S. Nuclear Regulatory Commission (NRC) (Rockville, Maryland) over safety and construction processes.
The Southern Company's Troubled Vogtle Nuclear Project report also compared Vogtle units 3 and 4's estimated cost per megawatt-hour (MWh) of electricity generated to the MWh costs of gas-fired generation and solar + storage. The electricity generated by Vogtle 3 and 4 is nearly twice the per-MWh cost of gas generation, and five times the cost of electricity produced by solar + storage systems. The solar + storage cost data came from five purchase power agreements (PPAs) Georgia Power signed with developers. Georgia utility regulators approved those PPAs last summer.
Click on the image at right to see a comparison of the per-MW cost to construct Vogtle Units 3 and 4 with the estimated costs to build gas-fired generation and solar + storage.
Georgia Power spokesman Jeffrey Wilson would not comment on the IEEFA's total project cost estimate. However, in an emailed statement, he did say, "Georgia Power's share of the total project capital cost forecast is $9.5 billion, although the company has not sought approval of any capital costs from the Georgia Public Service Commission above $7.3 billion (that had been approved previously). An open and transparent prudency review of the final cost recovery is planned near the completion of Unit 4."
Wilson pushed back against the assertion that Georgia Power misled Georgia utility regulators: "Throughout the open and transparent construction monitoring public process with the Georgia Public Service Commission, we have always provided the latest, most up-to-date information regarding our projected costs and estimated time for when the new nuclear units are expected to go into operation. Any suggestion or claim to the contrary is not true."
He added, "We remain fully committed to getting the job done--and getting it done right--with safety and quality our top priority."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.
That cost estimate was contained in IEEFA's report, Southern Company's Troubled Vogtle Nuclear Project, released January 20. That estimate includes financing costs for all four co-owners, as well as all remaining construction costs. Vogtle units 3 and 4 are owned by Georgia Power (45.7%), Oglethorpe Power Corporation (Tucker, Georgia) (30%), Municipal Electric Authority of Georgia (Atlanta) (22.7%) and Dalton Utilities (Dalton, Georgia) (1.6%). Georgia Power is a subsidiary of the Southern Company (NYSE:SO) (Atlanta, Georgia). The two-unit addition at Vogtle will add about 2,234 megawatts (MW) of nuclear generation capacity.
It has been difficult to obtain all-in cost estimates for the project, as only Georgia Power is regulated by the Georgia Public Service Commission (GPSC) (Atlanta, Georgia), and thus has to publicly disclose its share of the costs. When the utility does file cost reports with its utility regulators, the cost information is redacted. In the past, when contacted about the total project costs, including financing, Georgia Power spokespeople have said grossing up the project costs based on Georgia Power's share would not be accurate.
The IEEFA report also hints at possible future legal actions facing Georgia Power, aside from a regulatory prudence review. The report claims officials at the utility have "repeatedly misled the commission and its staff about the project's likely cost and schedule." The report cited December 2021 testimony from a staff member of the GPSC and two outside experts, that:
"The Company has provided ten cost estimates (certification and nine revisions) over the life of the Project and at least the first nine were materially inaccurate. Due to the fact that the Company provided inaccurate cost information, both the Company's and the Staff's economic analyses, conclusions and recommendations were inaccurate. A fundamental responsibility of Company management is to provide accurate cost estimates, which it failed to do during the first 12 years of the Project. The materially inaccurate cost estimates are an example of management's continuous poor judgment over the life of the Project that should be taken into account when the Company seeks recovery of cost overruns."
In an interview, Daniel Schlissel, the author of that report, said of the three people providing direct testimony, "these people are not the kind of people who use those terms casually. The Georgia PSC looks like it is loading up for bear on the prudence review." And maybe litigation beyond that.
In his report, Schlissel wrote, "If financing costs are included, the total cost of the Vogtle project will have risen from an estimated $14.1 billion in 2009 to approximately $32 billion in the fall of 2021, an approximate 127% increase--and that's if Georgia Power's current cost estimate is accurate, which staff experts dispute."
"If the additional (completion) costs estimated by the commission staff team, and associated financing costs are included, then the total cost of the Vogtle project is very likely, if not certain, to exceed $34 billion, especially if the project continues to be delayed as frequently and as long as it has been in recent years," he wrote.
In developing his $32 billion to $34 billion total project cost estimate, Schlissel relied on testimony filed in December 2021 by GPSC staffers as well as outside experts.
He also took issue with Georgia Power's projection of when the two-unit addition would achieve commercial operation. In Georgia Power's most recent estimate, last fall, the projected in-service dates had slipped to between May and September 2022 for Unit 3 and March and June 2023 for Unit 4. But Schlissel, a lawyer with an engineering background who has offered testimony on nuclear projects in about a half-dozen states, wrote that the GPSC's "nuclear experts believe that continuing problems at Vogtle will further extend the construction schedule, pushing Unit 3's commercial date of operations to between November 2022 and February 2023 and Unit 4's commercial operations date to November 2023 at the earliest and 'perhaps more probably' during the first quarter of 2024. But even longer delays could be experienced."
The unit additions have been troubled by cost overruns and construction delays for years. For more on that, see November 15, 2021, article - Vogtle Units 3 and 4 Costs Rise, Again, as Owners Squawk Over Cost Overruns and June 8, 2021, article - Georgia PSC Staff: New Vogtle Nuclear Units to be Later than Expected, Cost $2.4 Billion More than Projected. The two Vogtle units are the only nuclear power construction projects still underway in the U.S. Several years ago, efforts to add two units at the Summer Nuclear Power station were abandoned. For more on that, see August 1, 2017, article - Utilities Abandon Construction of Summer Nuclear Plant in South Carolina.
The project has had numerous challenges, not the least of which have been: the Chapter 11 bankruptcy of engineering, procurement and construction (EPC) firm Westinghouse Electric Corporation LLC (Cranberry Township, Pennsylvania); changing EPC firms after that bankruptcy; and multiple waves of the COVID-19 pandemic, which made it harder and more expensive to find skilled craft labor. Vogtle units 3 and 4 also are the first new-build nuclear reactors in the U.S. in three decades. The project also is under investigation by the U.S. Nuclear Regulatory Commission (NRC) (Rockville, Maryland) over safety and construction processes.
The Southern Company's Troubled Vogtle Nuclear Project report also compared Vogtle units 3 and 4's estimated cost per megawatt-hour (MWh) of electricity generated to the MWh costs of gas-fired generation and solar + storage. The electricity generated by Vogtle 3 and 4 is nearly twice the per-MWh cost of gas generation, and five times the cost of electricity produced by solar + storage systems. The solar + storage cost data came from five purchase power agreements (PPAs) Georgia Power signed with developers. Georgia utility regulators approved those PPAs last summer.
Georgia Power spokesman Jeffrey Wilson would not comment on the IEEFA's total project cost estimate. However, in an emailed statement, he did say, "Georgia Power's share of the total project capital cost forecast is $9.5 billion, although the company has not sought approval of any capital costs from the Georgia Public Service Commission above $7.3 billion (that had been approved previously). An open and transparent prudency review of the final cost recovery is planned near the completion of Unit 4."
Wilson pushed back against the assertion that Georgia Power misled Georgia utility regulators: "Throughout the open and transparent construction monitoring public process with the Georgia Public Service Commission, we have always provided the latest, most up-to-date information regarding our projected costs and estimated time for when the new nuclear units are expected to go into operation. Any suggestion or claim to the contrary is not true."
He added, "We remain fully committed to getting the job done--and getting it done right--with safety and quality our top priority."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.
