Toshiba payment helps finish Plant Vogtle
Dalton Utilities President Tom Bundros was working at the Southern Co., in Atlanta in the 1980s when the first two reactors at Southern’s Vogtle nuclear power plant were being finished amid criticisms and questions over the repeated delays and higher-than-expected costs.
“I remember there was all kinds of wailing and gnashing of teeth, but Vogtle units 1 and 2 have ended up being some of the highest functioning nuclear units in the country,” Bundros said. “Over the past 20 years, the first two units at Plant Vogtle have been the cheapest and most reliable source of electricity for our utility, and I’m confident when you look at the long-term life of a nuclear plant, we’re going to see the same thing
with Units 3 and 4 at Plant Vogtle.”
Despite cost overruns, delays and the bankruptcy of the designer of America’s next new nuclear power plant, the Georgia utility owners of the new reactors taking shape near Waynesboro, Ga., insist the next-generation reactors at Plant Vogtle should ultimately pay off in new, clean and cost-competitive power. They have billions of dollars riding on their continued confidence in the new units.
The recent agreement by the Toshiba Corp., to pay $3.68 billion to help Georgia Power continue building the new units despite the bankruptcy of its Westinghouse Electric Co. subsidiary, should help ensure the plant is finished, even though the units missed their original 2016 completion schedule and the cost of the two new reactors is at least $3 billion above initial estimates.
“We are happy to have Toshiba’s cooperation in connection with this agreement, which provides a strong foundation for the future of these nuclear power plants,” Southern CEO Tom Fanning said in an announcement of the settlement with Toshiba.
The move comes after Georgia Power Co., a subsidiary of Southern Co., took over the plant’s project management from Westinghouse, which filed for Chapter 11 bankruptcy on March 29 due to cost overruns at both of the new nuclear plants it designed and is helping build in Georgia and South Carolina.
Westinghouse began building its first AP 1000 reactors at Plant Vogtle in 2009 after the Tennessee Valley Authority scrapped its earlier plans to become the first utility to build the new Westinghouse design. The nuclear industry billed it as a 21st-century plant design intended to be safer and more efficient than today’s nuclear plants. But so far, the new Westinghouse design has proven to have some of the same construction delays and cost overruns of the previous generation of nuclear plants.
Westinghouse cited cost overruns at Vogtle as a major factor in its bankruptcy filing. The company also is building the VC Summer expansion near Jenkinsville, S.C., and said cost overruns at that plant also contributed to its financial woes.
Georgia Power, the Southern Co. subsidiary that is building Units 3 and 4 at the Waynesboro, Ga., plant and owns 45.7 percent of the facility, projected earlier this year that its electric rates will likely have to rise 6 to 8 percent once the new reactors begin generating power and come into the rate base. But Georgia Power President Paul Powers acknowledged in a statement last week that the utility is still assessing the completion costs for Plant Vogtle after Westinghouse is no longer managing the project.
“We are pleased with today’s positive developments with Toshiba and Westinghouse that allow momentum to continue at the site while we transition project management from Westinghouse to Southern Nuclear and Georgia Power,” Powers said in a statement. “We are continuing to work with the project’s co-owners to complete our full-scale schedule and cost-to-complete analysis and will work with the Georgia Public Service Commission to determine the best path forward for our customers.”
Georgia Power spokesman Jacob Hawkins said the agreement must still be approved by the bankruptcy court and Georgia’s Public Service Commission must determine how much and when ratepayers will pay for the extra costs of finishing Plant Vogtle.
Georgia Power said in its February semi-annual report on Vogtle that the project is still needed and will be beneficial for ratepayers, even if it may not be quite as good of a deal as originally forecast.
“The 60-plus year operating life for Vogtle units 3 and 4 represents the best cost option for our customers even without considering the value that nuclear adds to Georgia’s future in light of pending environmental regulations,” the utility said in its most recent assessment of Plant Vogtle.
But critics of the new nuclear plant suggest that Westinghouse’s bankruptcy and plant construction delays indicate that the nuclear power industry continues to suffer from the same design and building problems that led utilities nationwide in the 1970s, ’80s and ’90s to cancel about 100 planned reactors due to cost overruns. In the end, ratepayers and taxpayers shelled out about $40 billion for those abandoned projects in what Forbes magazine called “the largest managerial disaster in business history, a disaster on a monumental scale.”
Dr. Stephen Smith, executive director for the Southern Alliance for Clean Energy, said the utility and regulators should have seen the problems coming with the Westinghouse design.
“Time and time again, our legitimate concerns and consumer-protecting recommendations were ignored,” Smith said earlier this year. “Now there is a lot of wringing of hands and surprise by those with the power to protect utility customers claiming that no one could have predicted this. The reality is, they shouldn’t have ignored the predictions they were presented over and over again, and they should not ignore the predictions now.”
Dalton Utilities has already spent $143 million for its 1.6 percent share of the incomplete units at Plant Vogtle and will have to continue to shoulder higher-than-originally forecast expenses. In April, the bond rating service Moody’s Investors Services gave the utility and the city of Dalton a negative outlook because of the Westinghouse bankruptcy and uncertainty over the completion costs and schedule for the new units at Plant Vogtle.
“The negative rating outlook incorporates a view that Westinghouse’s Chapter 11 bankruptcy calls into question their ability to complete the Vogtle 3 and 4 project,” Moody’s financial analyst Daniel Aschenbach wrote in his ratings assessment. “This will, in turn, create disruptions to construction progress and result in a
rejection of the fixed price (engineering procurement) contract and additional costs to complete the project, which in our opinion will trigger greater nuclear construction risk and costs borne by Dalton and its customers.”
But without any longterm debt and a net worth of more than $750 million, Bundros said Dalton Utilities remains well capitalized and unlikely to have to pass along big rate increases once Plant Vogtle is complete and its costs roll into the rate base. Moody’s reaffirmed the utility’s favorable A2 Issuer rating, and Bundros said the utility has no plans to issue additional bonds.
“Our rates remain among the lowest anywhere in the region, and we are one of the best capitalized utilities in Georgia,” he said, noting that the utility paid off its previous long-term debt in 2011 and has funded its capital budget since with funds generated from its operations.
Bundros is confident Dalton Utilities will benefit by Plant Vogtle, which will provide about 35 megawatts of its 285-megawatt electric load it supplies to more than 17,000 households and businesses in portions of Whitfield, Murray, Gordon, Catoosa and Floyd counties in Northwest Georgia.
Dalton Utilities, which powers much of America’s carpet industry based in Northwest Georgia, has enjoyed a growth in power demand of more than 6 percent in the past year, or more than five times the growth pace of electric utilities nationwide.
“We are extraordinarily grateful for our carpet industry, which has accounted for most of that growth,” Bundros said.
Currently, about 42 percent of Dalton’s utility is generated by coal, 22 percent from nuclear, 17 percent from natural gas, 13 percent from hydro and the rest from diesel, solar and other sources, according to utility spokeswoman Lori McDaniel.
“By having additional nuclear capacity in its generating stack, Dalton Utilities will benefit by having additional fuel diversification of a non-greenhouse emiting electric generating source,” Bundros said. “I am very pleased that Southern Nuclear and Georgia Power will be taking over the management of the (Vogtle) project and have the highest confidence in their ability to complete construction of the units in the most cost effective and timely manner.”
Contact Dave Flessner at dflessner@timesfree press.com or at 757-6340.