Georgia Power ignores rising costs, partner concerns to force Vogtle forward
Late yesterday, Georgia-based Oglethorpe Power Corporation voted to move forward with the ill-fated Vogtle nuclear expansion project despite significant concerns about recent and future multi-billion dollar cost increases. Oglethorpe is one of four utilities, including lead partner Georgia Power, that has ownership over the project in Waynesboro, Georgia.
As the last owner to vote on whether or not to continue the project, Oglethorpe came to its decision after days of deliberation and unsuccessful demands for Georgia Power to cap ballooning construction costs. The majority of continued cost overruns – well over $10 billion at this point – will be passed on to utility customers, not the utilities.
The agreement also follows on the heels of a letter from Georgia lawmakers stating it is unfair for the rising costs of the project to be passed along to smaller public power companies, like Oglethorpe, that do not have shareholders to shield their customers from further financial blowback.
Georgia Power’s refusal to accept any cap—even a generous one—on Plant Vogtle should alarm nearly every Georgian who pays an electric bill,” said Senior Attorney Kurt Ebersbach. “Georgia Power clearly has no faith in its ability to finish this plant without more billion-dollar surprises. Worse, Georgia Power still has little incentive to contain costs, which leaves Georgians exposed to unchecked financial risk and uncertainty about how much they’ll ultimately be forced to pay.
While the agreement shifts some additional risk and responsibility to Georgia Power if costs continue to skyrocket, it’s unclear whether utility shareholders or Georgia Power customers will foot the bill. What’s more, the new agreement strips away the last remaining safety net—the option for the other project owners to pull the plug if project costs continue to soar.
The question of whether the project would proceed arose recently after another $2.3 billion in additional costs were revealed. While Georgia Power agreed to absorb $700 million of those costs, the remaining partners needed to agree to proceed. Specifically, in order to continue construction, the project needed the agreement of at least 90 percent of the partners – Georgia Power, Oglethorpe Power Corporation, Municipal Electric Authority of Georgia, and City of Dalton – to go forward.
On Monday afternoon, MEAG voted to continue with no apparent conditions attached. That evening, Oglethorpe voted to continue with one major condition: there needed to be a cost cap on the project. Oglethorpe’s suggested condition would have allowed for some additional spending, but would have ultimately limited the risk to its customers.
Georgia Power rejected Oglethorpe’s overture, resulting in two days of negotiations. As a 30 percent owner, Oglethorpe’s refusal to move ahead with the project without a cost cap would have likely meant the end of the Vogtle expansion.
With Oglethorpe’s agreement last night, all project owners have ultimately decided to move forward with no cap on costs and no ability for the non-Georgia Power owners to quit the project if further cost overruns come to light.
Following the vote, Southern Company submitted an updated filing with the U.S. Securities and Exchange Commission, stating that all project owners are obligated to pay their share of the latest total cost estimate (including the recent $2.3 billion increase), plus another $800 million in construction costs. This means the owners have all agreed to move forward, knowing the project price is likely to increase by at least another $800 million.