Two Co-Owners of Vogtle Nuclear Additions Sue Over Cost Overruns

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--As the cost to add two units to the Alvin W. Vogtle Nuclear Power Station continues to spiral upward, and the units' in-service dates have again been delayed, two co-owners filed separate suits against project manager Georgia Power (Atlanta, Georgia) for the 2,244-megawatt (MW) unit addition. The in-service dates are now set for 2023, and the project carries a price tag of more than $30 billion.

The separate suits were both filed in the Superior Court of Fulton County, Georgia. Oglethorpe Power Corporation (Tucker, Georgia), owner of 30% of the unit addition, and the Municipal Electric Authority of Georgia (MEAG) (Atlanta), owner of 22.7% of units 3 and 4, sued Georgia Power, a unit of Southern Company (NYSE:SO) (Atlanta). Georgia Power owns 45.7% of units 3 and 4. The fourth co-owner of Vogtle 3 and 4 is City of Dalton Utilities (Dalton, Georgia), which owns 1.6% of the nuclear construction project.

Oglethorpe and MEAG filed their separate suits under a provision of a 2018 agreement among the co-owners outlining the terms under which cost overruns beyond a certain point allowed any co-owner a one-time option to cap its financial obligations to the construction project in exchange for relinquishing some of its ownership stake. For more details, see September 27, 2018, article - Four Owners Vote to Continue Construction of Vogtle Units 3 and 4.

Of the two plaintiffs, MEAG's suit has a more limited scope: It asks the court to interpret a few points in the 2018 members' agreement regarding cost overruns, including how costs are calculated. Oglethorpe, by contrast, is suing to cap its financial obligations to the Vogtle unit expansion project at $8.1 billion. Neither lawsuit seeks to stop construction of the nuclear project, which is about 97% complete.

In a June 18 statement after its lawsuit was filed, Oglethorpe Power's Chief Executive Michael Smith said: "Oglethorpe Power and our member cooperatives are deeply invested in the success of these nuclear units that will provide emission-free energy for Georgians for the next 60-80 years. At the same time, we feel responsible for protecting our not-for-profit member cooperatives and their consumers. Georgia's (electric membership corporations) serve 4.4 million consumers in mostly residential, rural service territories. Our decision to freeze protects EMC energy consumers who can least afford increases in their electricity rates, especially in today's economy."

The Oglethorpe statement said that under the 2018 agreement, if total sharable project costs increase by $2.1 billion from the time the agreement was executed, each co-owner, other than Georgia Power, has a one-time option to freeze their capital investment in the project. Since September 2018, the total project budget has increased five times, totaling an increase of $3.4 billion since the co-owners jointly negotiated the cost-sharing agreement, Oglethorpe said. Cumulatively, these cost increases pushed the total project budget beyond the $2.1 billion increase threshold, triggering the freeze option.

In return for capping its share of the Vogtle 3 and 4 project at about $8.1 billion, Oglethorpe said it would hand over to Georgia Power about 42 MW of its ownership share in the unit expansion. Originally, Oglethorpe's share was about 660 MW. After invoking the cost cap provision of the 2018 agreement, Oglethorpe's share of the project would fall to about 28%, or about 618 MW.

The MEAG suit was narrower in scope. It asked the court to rule on a disagreement about how cost overruns would be partitioned among co-owners and to clarify the right of each of the Vogtle units 3 and 4 co-owners to tender a portion of its ownership interest in the project once cost overruns exceeded a certain amount.

In a statement from MEAG, it said it disagrees with Georgia Power about the starting dollar amount for the determination of cost increases subject to the increased GPC cost responsibility and tender provisions under the ownership arrangements, as well as the extent to which COVID-19-related costs impact the calculation.

Georgia Power said this is all a mistake. In an emailed statement to media outlets, a Georgia Power spokesperson said that the utility and Oglethorpe "have a difference of opinion over the dollar amount" at which the tender option is triggered. "We continue to have a difference of opinion, and Georgia Power does not believe OPC's tender notice is valid," the statement said. The statement did not address the MEAG lawsuit.

Vogtle units 3 and 4 are years late and billions of dollars over budget. The two units originally were projected to cost about $12 billion, and they were scheduled to begin operating in late 2016 and late 2017. The project's current estimated cost exceeds $34 billion. Unit 3 currently is scheduled to begin operating by March 31, 2023, and Unit 4 is projected to be online by the end of 2023.

The final cost of the project will be lessened by the $3.68 billion payment Westinghouse agreed to make to the co-owners when it declared Chapter 11 bankruptcy and terminated its role as the project's engineering, procurement and construction (EPC) contractor in 2017. For more on the Westinghouse payment, see September 1, 2017, article - Georgia Power Recommends Construction Continue at Vogtle.

For more on the project's troubled history, see January 27, 2022, article - New Estimate for Vogtle Unit Additions: $32 Billion to $34 Billion; 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.

Aside from the cost-overrun litigation, Georgia Power on June 24 said it would seek a retail price increase of about 12%, to be spread out over the next three years. The Georgia Public Service Commission (Atlanta) will consider the request, which, if approved, is slated to go into effect in January 2023.

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