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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The staff of the Georgia Public Service Commission (GPSC) (Atlanta, Georgia) on Monday cast significant doubt on Georgia Power's projected in-service dates for units 3 and 4 of the Alvin W. Vogtle Nuclear Power Station, and said construction costs could be as much as $2.4 billion over the most-recently agreed upon amount.
Testimony filed Monday by Don Grace, vice president of engineering for the Vogtle Monitoring Group ("VMG"), a group established by the GPSC, projected that Unit 3 would not reach commercial operation until June 2022 at the earliest, and the commercial operation is "more likely to occur in the June -- August 2022 timeframe, and (with the emergence of currently unidentifiable risk) could occur even later than August 2022." Unit 4 could begin commercial operations as much as 16 to 18 months after that, though it could be reduced to 12 months, he forecast.
The comments contained in Monday's testimony were made in response to Georgia Power's filing of its semi-annual construction monitoring report for the period July 1, 2021 through December 31, 2021. Grace commented: "The company's forecast dates continue to be based on unachievable plans and are therefore unrealistic."
Grace's prediction, though it only covered Vogtle construction activities in the second half of 2021, received some confirmation from the utility recently.
In a March 19 filing with the U.S. Securities and Exchange Commission (SEC) (Washington, D.C.), Georgia Power's parent company, Southern Company (NYSE:SO) (Atlanta), said that another subsidiary, Southern Nuclear Operating Company, "has identified, and is in the process of completing, additional construction remediation work, primarily related to electrical commodity installations, necessary to ensure quality and design standards are met as system turnovers are completed prior to starting hot functional testing and fuel load for Plant Vogtle Unit 3. As a result, Georgia Power now expects the start of hot functional testing for Unit 3 will be delayed into April (2022)."
Subsequently, officials from Georgia Power met with GPSC officials in mid-May to confirm the delayed in-service date for Unit 3, following Southern's first-quarter earnings call with investors and analysts. That unit was scheduled to become operational near the end of this year. In their mid-May meeting with Georgia regulators, company officials said a first-quarter 2022 in-service date was the current projection, but cautioned that further delays were possible.
Unit 3 is said to be about 98% finished. It was supposed to be operating by November 2021.
The unit additions at the Vogtle station in Waynesboro, Georgia, are years late and billions of dollars over budget. The project has been bedeviled by: first-of-its-kind learning curves; the Chapter 11 bankruptcy filing by its engineering, procurement and construction (EPC) firm, Westinghouse Electric Corporation LLC (Cranberry Township, Pennsylvania), and that company's decision to exit the nuclear construction business; the switch to Bechtel (Reston, Virginia) as EPC; a shortage of skilled craft labor; and the COVID-19 pandemic.
In 2009, when Georgia regulators originally approved the project, the estimated cost to add two units of 1,117 megawatts (MW) each to the existing two units at Vogtle was about $12 billion. Unit 3 was originally scheduled to begin operating in late 2017, with Unit 4 coming online about six months later.
In his June 7 testimony, Grace estimated the project will come in about $2.4 billion over the most recent total project cost of about $17.1 billion that was agreed to between Georgia Power and the GPSC. He characterized costs were being driven up by the owners' approach of "spending whatever it takes" to minimize the project schedule.
Georgia Power owns 45.7% of the new units. Oglethorpe Power Corporation (OPC) (Tucker, Georgia) owns 30%, Municipal Electric Authority of Georgia (MEAG Power) (Atlanta) owns 22.7% and Dalton Utilities (Dalton, Georgia) owns 1.6%.
The financial reckoning of Vogtle Units 3 and 4 likely will be complex, lengthy and litigious.
In an early 2017 settlement with the GPSC, Georgia Power agreed to accept a three-percentage-point reduction in their return on equity (ROE), to about 7%, if both units were not generating electricity by the end of 2020. For more on that, see January 5, 2017, article - Georgia Power Hit with Financial Penalties for Construction Delays at Vogtle Nuclear Plants. At the end of 2017, the commission toughened its stance, saying it would lower Georgia Power's ROE from 10% to 8.3%, effective January 1, 2020, and to 5.3% in January 2021, if the units were not operating by their then-scheduled in-service dates. For more on that late-2017 decision, see December 22, 2017, article - Georgia Power Authorized to Complete Construction of Vogtle Units 3 and 4.
Georgia Power reportedly has agreed to write off about the first $700 million over the $7.3 billion that the Public Service Commission has approved as its share of the project. The company currently projects it will spend $8.7 billion to build the new units, not including some $300 million in borrowing costs.
The unit additions at Vogtle are the only active new-build nuclear power construction project in the U.S. Billions were spent to add two units to the Virgil C. Summer Nuclear Power Station in Jenkinsville, South Carolina, but that partially built project was abandoned in 2017. For more on that, see September 1, 2017, article - Utilities Abandon Construction of Summer Nuclear Plant in South Carolina.
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.
Testimony filed Monday by Don Grace, vice president of engineering for the Vogtle Monitoring Group ("VMG"), a group established by the GPSC, projected that Unit 3 would not reach commercial operation until June 2022 at the earliest, and the commercial operation is "more likely to occur in the June -- August 2022 timeframe, and (with the emergence of currently unidentifiable risk) could occur even later than August 2022." Unit 4 could begin commercial operations as much as 16 to 18 months after that, though it could be reduced to 12 months, he forecast.
The comments contained in Monday's testimony were made in response to Georgia Power's filing of its semi-annual construction monitoring report for the period July 1, 2021 through December 31, 2021. Grace commented: "The company's forecast dates continue to be based on unachievable plans and are therefore unrealistic."
Grace's prediction, though it only covered Vogtle construction activities in the second half of 2021, received some confirmation from the utility recently.
In a March 19 filing with the U.S. Securities and Exchange Commission (SEC) (Washington, D.C.), Georgia Power's parent company, Southern Company (NYSE:SO) (Atlanta), said that another subsidiary, Southern Nuclear Operating Company, "has identified, and is in the process of completing, additional construction remediation work, primarily related to electrical commodity installations, necessary to ensure quality and design standards are met as system turnovers are completed prior to starting hot functional testing and fuel load for Plant Vogtle Unit 3. As a result, Georgia Power now expects the start of hot functional testing for Unit 3 will be delayed into April (2022)."
Subsequently, officials from Georgia Power met with GPSC officials in mid-May to confirm the delayed in-service date for Unit 3, following Southern's first-quarter earnings call with investors and analysts. That unit was scheduled to become operational near the end of this year. In their mid-May meeting with Georgia regulators, company officials said a first-quarter 2022 in-service date was the current projection, but cautioned that further delays were possible.
Unit 3 is said to be about 98% finished. It was supposed to be operating by November 2021.
The unit additions at the Vogtle station in Waynesboro, Georgia, are years late and billions of dollars over budget. The project has been bedeviled by: first-of-its-kind learning curves; the Chapter 11 bankruptcy filing by its engineering, procurement and construction (EPC) firm, Westinghouse Electric Corporation LLC (Cranberry Township, Pennsylvania), and that company's decision to exit the nuclear construction business; the switch to Bechtel (Reston, Virginia) as EPC; a shortage of skilled craft labor; and the COVID-19 pandemic.
In 2009, when Georgia regulators originally approved the project, the estimated cost to add two units of 1,117 megawatts (MW) each to the existing two units at Vogtle was about $12 billion. Unit 3 was originally scheduled to begin operating in late 2017, with Unit 4 coming online about six months later.
In his June 7 testimony, Grace estimated the project will come in about $2.4 billion over the most recent total project cost of about $17.1 billion that was agreed to between Georgia Power and the GPSC. He characterized costs were being driven up by the owners' approach of "spending whatever it takes" to minimize the project schedule.
Georgia Power owns 45.7% of the new units. Oglethorpe Power Corporation (OPC) (Tucker, Georgia) owns 30%, Municipal Electric Authority of Georgia (MEAG Power) (Atlanta) owns 22.7% and Dalton Utilities (Dalton, Georgia) owns 1.6%.
The financial reckoning of Vogtle Units 3 and 4 likely will be complex, lengthy and litigious.
In an early 2017 settlement with the GPSC, Georgia Power agreed to accept a three-percentage-point reduction in their return on equity (ROE), to about 7%, if both units were not generating electricity by the end of 2020. For more on that, see January 5, 2017, article - Georgia Power Hit with Financial Penalties for Construction Delays at Vogtle Nuclear Plants. At the end of 2017, the commission toughened its stance, saying it would lower Georgia Power's ROE from 10% to 8.3%, effective January 1, 2020, and to 5.3% in January 2021, if the units were not operating by their then-scheduled in-service dates. For more on that late-2017 decision, see December 22, 2017, article - Georgia Power Authorized to Complete Construction of Vogtle Units 3 and 4.
Georgia Power reportedly has agreed to write off about the first $700 million over the $7.3 billion that the Public Service Commission has approved as its share of the project. The company currently projects it will spend $8.7 billion to build the new units, not including some $300 million in borrowing costs.
The unit additions at Vogtle are the only active new-build nuclear power construction project in the U.S. Billions were spent to add two units to the Virgil C. Summer Nuclear Power Station in Jenkinsville, South Carolina, but that partially built project was abandoned in 2017. For more on that, see September 1, 2017, article - Utilities Abandon Construction of Summer Nuclear Plant in South Carolina.
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.
