Georgia Power: Contractor Issues Fixed, Construction of Vogtle 3 and 4 is 'On Track'

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Problems with contractors that threatened to delay the completion of two new nuclear generators at the Alvin W. Vogtle Nuclear Power Station have been fixed and the project is "on track," according to a regulatory filing last week from Georgia Power Company (Atlanta, Georgia), a unit of the Southern Company (NYSE:SO) (Atlanta, Georgia). The 2,234-megawatt (MW) Vogtle expansion project, which has a total investment value (TIV) of $16 billion, will create an estimated 3,500 construction jobs.

Every six months, Georgia Power and an independent construction monitor are required to file separate reports on the process and costs to build Vogtle units 3 and 4, the first nuclear generators in the U.S. in more than 30 years. Georgia Power's testimony was filed August 31. The independent construction monitor, Bill Jacobs, is scheduled to file his next semi-annual testimony in October. Jacobs, a nuclear engineer, is vice president of GDS Associates (Marietta, Georgia).

In his previous semi-annual testimony, filed in June, Jacobs created a stir by saying it was "very possible" that units 3 and 4 would miss their completion dates of April 2016 and April 2017, respectively, due to "extensive licensing, procurement, engineering and construction challenges that lay ahead, the first-time nature of this project, and the experience to date with the Consortium's inability to meet the project schedule." He also said it was very possible that the project could come in over budget.

Jacobs' June testimony noted that Shaw Modular Solutions, a unit of Shaw Group Incorporated (NYSE:SHAW) (Baton Rouge, Louisiana), was not meeting the project schedule for design and fabrication of modules and sub-modules for Vogtle 3 and 4, and had been hit with a Stop-Work Order (SWO) in December 2010. In addition, last October Chicago Bridge & Iron (NYSE:CBI) (CB&I) (The Woodlands, Texas) was ordered to stop work on Vogtle until it remedied safety issues. Jacobs' June testimony noted that work quality at both companies "appears to be improving." The SWOs were lifted, in phases, for both companies earlier this year.

Jacobs' June testimony also noted that other factors could affect the cost and completion date of Vogtle 3 and 4. The U.S. Nuclear Regulatory Commission (NRC) (Bethesda, Maryland) is required to certify the Westinghouse AP1000 reactor design before the agency can issue a combined construction and operating license (COL) to build and run the generators. The completion date for the NRC's certification of the reactor design slipped from November 2011 to late December 2011 "and could easily slip into early 2012," which could delay issuance of a COL for Vogtle 3 and 4, Jacobs noted in his June testimony.

As the first grassroot nuclear project to be started in the U.S. in more than 30 years, a variety of parties--including regulators, engineering, procurement and construction (EPC) firms, utilities, elected officials, financiers, policymakers and consumer advocates--are paying close attention to the Vogtle 3 and 4 project.

In its Aug. 31, testimony, Georgia Power asserted that safety and construction issues are being addressed, and that a feared two-month delay in completion of Vogtle Unit 3 would be erased with a compressed construction schedule. Georgia Power said it "continues to conduct surveillance and closely monitor the audit and vendor issues with Shaw Modular Solutions," particularly its development of a "comprehensive plan to address nuclear safety culture, quality assurance effectiveness, application and understanding of nuclear fundamentals and continuous process improvement culture." During the first half of 2011, Shaw Modular Solutions "demonstrated significant progress in implementing its improvement plan," Georgia Power said.

CB&I's stop-work order was lifted in phases during the spring and summer of 2011 after it showed "tremendous improvement in following work instructions and procedures," the Georgia Power testimony noted.

Completing the two-unit, 2,234-MW nuclear project will be "significantly less expensive than any of the available alternatives," including construction of natural gas-fired combined-cycle generators, the utility said in its testimony. "All 12 scenarios shown in the current economic analysis report positive benefits to customers if (the nuclear) units are completed." However, Georgia Power redacted nearly all financial specifics from the testimony released to the public.

The economics of Vogtle 3 and 4 will be improved by nearly $1 billion as a result of:

• Federal construction loan guarantees
• Federal production tax credits (PTCs)
• The gradual recovery of construction costs as they are incurred, rather than when the project is completed

In fact, Georgia Power said that the loan guarantees and the PTCs have helped reduce its share of the Vogtle expansion project. The loan-guarantee program alone will save Georgia Power customers between $15 million and $20 million in annual interest costs over the expected lifetime of the bonds it will issue to build the plant. As of June 30, 2011, Georgia Power estimated that its 45.7% share of Vogtle 3 and 4 would cost $6.095 billion, about $18 million less than the $6.113 billion that Georgia regulators have certified as its share of the project. The other owners of Vogtle Units 3 and 4 are Oglethorpe Power Corporation (Tucker, Georgia), the Municipal Electric Authority of Georgia (MEAG Power) (Atlanta, Georgia) and the City of Dalton, Georgia.

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