Plant Vog­tle de­lay, cost over­run could cost Cov­ing­ton


South­ern Co. has had a sim­ple mes­sage for the past few years: The ef­fort to build the coun­try’s first new nu­clear power plant in a gen­er­a­tion was on time and on bud­get. Now, that mes­sage is chang­ing.

The $14 bil­lion project to build two re­ac­tors at Plant Vog­tle is trend­ing hun­dreds of mil­lions of dol­lars over bud­get and trail­ing more than a year be­hind sched­ule, ac­cord­ing to a report from a state-hired con­struc­tion watch­dog. Now top-rank­ing util­ity ex­ec­u­tives are say­ing qual­ity counts more than cost.

The report is noth­ing new for an in­dus­try with a his­tory of cost over­runs and project de­lays, but the news is con­cern­ing to the projects’ part­ners, in­clud­ing the Mu­nic­i­pal Elec­tric Author­ity of Ge­or­gia, a con­sor­tium of lo­cal gov­ern­ments that run their own power sys­tems. Cov­ing­ton is a mem­ber of MEAG and buys its power from the group.

The fu­ture of the project is of keen in­ter­est to Cov­ing­ton of­fi­cials, who have pledged to in­vest $168 mil­lion in the ex­pan­sion of Plant Vog­tle. If costs in­crease, it’s pos­si­ble Cov­ing­ton’s share could in­crease as well.

MEAG has 22.7 per­cent own­er­ship in Vog­tle, while Ge­or­gia Power has the larg- est share at 45.7 per­cent. The two new units were bud­geted to cost ap­prox­i­mately $14.5 bil­lion to con­struct and will pro­vide 1,117 megawatts of power apiece, slightly less than the 1,215 MW pro­duced by ex­ist­ing units 1 and 2.

“I say this very care­fully — we man­age it so we keep costs the best we can,” said Buzz Miller, ex­ec­u­tive vice pres­i­dent of nu­clear devel­op­ment at South­ern Co., who over­sees the project. “But build­ing it [right is] pri­or­ity one. The ab­so­lute cap­i­tal num­ber here is not what’s im­por­tant. What’s im­por­tant is the over­all project, eco­nomic and value to the cus­tomers for the next 60 to 80 years.”

That first re­ac­tor was sup­posed to be fin­ished in April 2016, fol­lowed by the sec­ond re­ac­tor a year later. While the com­pany has not for­mally changed those dates, it said com­ple­tion of the first re­ac­tor has been pushed to Novem­ber 2016. Un­der ques­tion­ing, an ex­ec­u­tive said the time­line might stretch to early-to-mid 2017. Now a state mon­i­tor re­ports that first re­ac­tor will be fin­ished no ear­lier than June 2017. He es­ti­mated the cost of a one-year de­lay as in the range of hun­dreds of mil­lions of dol­lars.

In a let­ter sent out to MEAG mem­bers, Bob John­ston, MEAG’s CEO and pres­i­dent, said, “any de­lay to the sched­ule,

re­gard­less of fault, would re­sult in ad­di­tional fi­nanc­ing costs to each of the co-own­ers.

“We are work­ing closely with our agent Ge­or­gia Power Com­pany, in an ef­fort to min­i­mize the im­pact of th­ese is­sues upon the project’s sched­ule and bud­get.”

In a move that raised eye­brows of project crit­ics, the com­pany re­cently said that a con­tin­gency fee of 20- to 25-per­cent was nor­mal for a project of this size. It did not re­quest a con­tin­gency fee when state reg­u­la­tors ap­proved the project.

Much rides on the project. In­dus­try of­fi­cials rang­ing from Fan­ning to U.S. En­ergy Sec­re­tary Steven Chu ac­knowl­edge it’s a test for whether the nu­clear in­dus­try can con­struct new plants with­out the chronic de­lays and cost over­runs seen in the last round of con­struc­tion de- cades ago.

“If this project goes for­ward and is built on-bud­get, on-time and on-sched­ule, that would be a very good thing,” Chu told re­porters dur­ing a Fe­bru­ary visit to the site. “A lot of other com­pa­nies will say, ‘OK. We now know we can do this and it would be a good in­vest­ment.’”

Robert Baker, a former util­ity reg­u­la­tor, said he planned to ask Ge­or­gia’s Pub­lic Ser­vice Com­mis­sion to adopt a plan that would trim the util­ity’s prof­its if the project comes in over bud­get. Be­cause the mo­nop­oly is guar­an­teed a profit on ev­ery dol­lar it spends, Baker said it has a dis­in­cen­tive to con­trol costs.

“There is now no way that this project can come in on-bud­get and on-time as has been stated re­peat­edly,” he said.

Sev­eral is­sues ac­count for the de­lays. South­ern Co. re­ceived its li­cense to build from fed­eral reg­u­la­tors months later than ex­pected. The com­pa­nies build­ing the plant still have not agreed on an up­dated start-to-fin­ish sched­ule.

Metal bars that will be­come part of the plant foun­da­tion were not in­stalled ex- actly as re­quired in plans, an er­ror un­cov­ered by fed­eral in­spec­tors. That re­quired ex­tra time and fixes. The Shaw Group Inc. in Lake Charles, La., ex­pe­ri­enced dif­fi­culty meet­ing strin­gent doc­u­men­ta­tion and other qual­ity rules re­quired in the nu­clear in­dus­try as it built parts for the fa­cil­ity.

Miller said South­ern Co. knew that ven­dors might need to re-master nu­clear norms since the in­dus­try had been dor­mant for years. He said the prob­lems can be over­come.

“I think the big les­son and what we look at is you have to keep at it, keep at it, keep at it,” Miller said.

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