Du­el­ing Nu­clear Law­suits

The Bond Buyer - - Front Page - BY SHELLY SIGO

Two pub­lic power agen­cies have sued each other to de­ter­mine the va­lid­ity of an agree­ment that sup­ports debt that was is­sued to fi­nance a por­tion of the twin nu­clear re­ac­tors un­der con­struc­tion at Ge­or­gia’s Plant Vogtle.

The Mu­nic­i­pal Elec­tric Au­thor­ity of Ge­or­gia filed a three-count fed­eral com­plaint con­tend­ing that JEA, for­merly Jack­sonville Elec­tric Au­thor­ity, breached its con­tract to buy elec­tric­ity that will be gen­er­ated by the project.

MEAG is seek­ing a declara­tory judg­ment in an attempt to force JEA to abide by its 20-year power pur­chase agree­ment, ac­cord­ing to the suit filed in U.S. District Court for the North­ern District of Ge­or­gia Tues­day.

JEA, also on Tues­day, filed a law­suit in the Fourth Ju­di­cial Cir­cuit Court of Florida seek­ing a declara­tory judg­ment to void the PPA be­cause it “pur-

ports to sad­dle JEA and its ratepay­ers with an unlimited obli­ga­tion to fund the ex­or­bi­tant and ever-bal­loon­ing cost of con­struct­ing units of a nu­clear power plant that JEA does not own.”

The com­plaint claims that the PPA, first ap­proved in 2008 and amended in 2014, should be va­cated be­cause it was never ap­proved by the Jack­sonville City Coun­cil as re­quired by Florida’s con­sti­tu­tion, and that it vi­o­lates the city char­ter as well as Florida’s pub­lic pol­icy.

“A fa­vor­able judg­ment from the court deem­ing the agree­ment void will have the added ben­e­fit of pro­vid­ing re­lief to ratepay­ers across north­east Florida from hav­ing to shoul­der the fi­nan­cial bur­den of this project,” said JEA in­terim CEO and Manag­ing Di­rec­tor Aaron Zahn.

The PPA re­quires that JEA pay cap­i­tal and other ex­penses as well as a por­tion of the debt ser­vice on $2.9 bil­lion of bonds MEAG is­sued to fi­nance its 22.7% own­er­ship in­ter­est in the re­ac­tors, and $1.2 bil­lion in loans backed by U.S. De­part­ment of En­ergy guar­an­tees, ac­cord­ing to MEAG’s three-count com­plaint.

JEA, which has a take-or-pay power pur­chase agree­ment with MEAG, is ob­li­gated to pay debt ser­vice on $1.42 bil­lion of Project J bonds. The Su­pe­rior Court of Ful­ton County, Ge­or­gia, val­i­dated the debt in 2008.

The le­gal chal­lenges are based partly on re­cent cor­re­spon­dence from JEA de­mand­ing that MEAG agree to can­cel the project in an up­com­ing vote by the co-own­ers. The vote, to de­ter­mine if work will con­tinue, was trig­gered by an an­nounce­ment last month that the cost to com­plete the re­ac­tors will in­crease by more than $2 bil­lion.

JEA also threat­ened to take le­gal ac­tion if con­struc­tion con­tin­ues, and MEAG doesn’t agree to dis­cuss terms that would al­low JEA to exit its agree­ment.

“This was not an ac­tion we wanted to take, but we filed this law­suit to pro­tect the in­ter­ests of the par­tic­i­pant com­mu­ni­ties that we serve,” MEAG Pres­i­dent Jim Fuller said Wed­nes­day.

The non­profit Ge­or­gia util­ity is a joint-ac­tion agency that sup­plies whole­sale elec­tric­ity to 49 com­mu­ni­ties across the state.

MEAG’s suit also con­tends that JEA has taken steps to un­der­mine its abil­ity to fi­nance its share of the re­ac­tors costs.

On Sept. 5, JEA told the USDOE that it wanted the project ter­mi­nated, ac­cord­ing to the com­plaint. Two days later, the USDOE wrote to MEAG say­ing that the fed­eral agency would “eval­u­ate the im­pact of JEA’s re­cent state­ments on MEAG’s ex­ist­ing DOE-guar­an­teed in­debt­ed­ness within the con­text of the pro­vi­sions of the ex­ist­ing loan guar­an­tee agree­ment.”

“JEA’s ac­tions have al­ready had their in­tended ef­fect: to in­ter­fere with and desta­bi­lize MEAG Power’s ac­cess to credit in or­der to force MEAG Power’s hand in the up­com­ing vote,” MEAG’s suit said.

A vote against con­tin­u­ing con­struc­tion on the re­ac­tors would be an event of de­fault un­der the loan guar­an­tee agree­ments, MEAG said.

Last month, Ge­or­gia Power Co., the in­vestor-owned util­ity head­ing up the project, dis­closed that it be­lieves it will cost the co-own­ers an es­ti­mated $2.2 bil­lion more to com­plete the twin re­ac­tor project.

GPC will pro­vide more de­tail on the ex­act com­ple­tion cost in a re­port to the Ge­or­gia Pub­lic Ser­vice Com­mis­sion Sept. 20, af­ter which the four own­ers will vote on whether to con­tinue with con­struc­tion. The project is about 67% com­plete.

MEAG and the other pub­lic power own­ers will share in the higher cost ac­cord­ing to their own­er­ship stakes. Oglethorpe Power owns 30% and the city of Dal­ton owns 1.6%. MEAG also has a power pur­chase agree­ment with Pow­erSouth En­ergy in Alabama, a co­op­er­a­tive that will buy elec­tric­ity pro­duced by the new re­ac­tors.

In an Aug. 17 let­ter, JEA’s Zahn called the two re­ac­tors “eco­nom­i­cally ob­so­lete,” and said a con­sul­tant for his agency had found that it would be less costly to JEA if the project was can­celed. He also de­manded that MEAG vote to ter­mi­nate the project.

If the re­ac­tors are not com­pleted, JEA would save be­tween $345 mil­lion to $727 mil­lion, ac­cord­ing to a draft ex­ec­u­tive sum­mary of an eco­nomic anal­y­sis by Chicago-based Nav­i­gant dated Sept. 12, 2017. The anal­y­sis was at­tached to Zahn’s let­ter and marked con­fi­den­tial.

The Nav­i­gant re­port ap­par­ently was pre­pared last year when own­ers of the re­ac­tors were de­cid­ing if the $25 bil­lion project should go for­ward. That amount, dou­ble that of the orig­i­nal cost es­ti­mate, was ap­proved by the Ge­or­gia PSC in De­cem­ber.

But in Au­gust, just eight months af­ter ap­proval of the $25 bil­lion cost es­ti­mate, Ge­or­gia Power said the cost had surged partly be­cause of changed as­sump­tions re­lated to fi­nal­iz­ing con­tracts and man­age­ment re­spon­si­bil­i­ties for Bech­tel Power Corp, which be­came the prime con­struc­tion con­trac­tor af­ter West­ing­house Elec­tric Co. filed for bank­ruptcy in March 2017. ◽

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