Southern cleared to finish delayed $25 billion reactors
Shares erased losses after commissioners voted in favor
Georgia regulators gave the go-ahead for Southern Co. to finish the only new nuclear power under construction in the U.S. after it fell years behind schedule and costs soared to more than $25 billion.
The Georgia Public Service Commission approved a revised plan by Southern’s Georgia Power and its utility partners to finish two delayed reactors at Plant Vogtle at higher costs with a unanimous vote on Thursday. The commission told Georgia Power it would have to agree to lower returns on the plant, a condition the company said it would accept.
“Today’s decision may or may not be the most important decision ever made by this body, but it could certainly be most impactful depending on how history judges any decision we make,” Chairman Stan Wise said at the meeting.
The ruling provides a way forward for the Vogtle project, the first U.S. nuclear power plant to be licensed in three decades. Southern, which owns 46 percent of the project, said its estimated costs had soared to $12.2 billion after the plant’s contractor Westinghouse Electric Co. declared bankruptcy earlier this year. The project represents the last, best hope for a nuclear renaissance that has failed to materialize in the U.S. following Japan’s Fukushima accident. It’s now scheduled to be completed in November 2022, more than five years later than an original estimate.
Southern erased losses on the decision before slipping back again to trade 0.5 percent lower at $49.71 as of 11:32 a.m. in New York. The stock is up 1.2 percent this year.
“The Vogtle expansion is key to ensuring that our state has affordable and reliable energy today that will support economic growth now and for generations to come," Paul Bowers, chief executive officer of Georgia Power, said in a statement.
The staff of the commission had earlier proposed that Georgia Power’s portion of the project’s cost be capped at $9 billion, the amount it would cost to cancel and replace its power with a gas-fired generator, according to a filing. The staff said its proposal would be $1.5 billion less than the company said it needed, including a penalty payment to Southern from Toshiba Corp. after its Westinghouse unit walked away.
Commissioners rejected a call to place a cap on costs for ratepayers and instead introduced a measure that would lower the return on equity earned by Southern on the project from 10 percent to 8.3 percent starting in 2020 and would be reduced further after that.
“All decisions regarding cost recovery from customers will be made later,” said Commissioner Tim Echols, who introduced several amendments including a provision that didn’t impose a cost cap.
Southern’s project doesn’t make economic sense beyond $9 billion, and a portion of the company’s proposed increased costs result from “mismanagement of the project”, the commission staff said earlier this week. Environmental groups had also lobbied the commission to pull the plug on the reactors.
“Today’s decision on the massive cost overruns and mismanagement of the Vogtle nuclear units is a sad day for electric power customers in Georgia, they clearly have been manipulated by Georgia Power and abandoned by the Georgia Public Service Commission,” Stephen Smith, executive director for the Southern Alliance for Clean Energy, said in a statement.
Southern had earlier said it would be forced to cancel the Vogtle reactors if its costs were capped at the amount the staff was recommending. Atlanta-based Southern co-owns the reactors with Oglethorpe Power Corp., Municipal Electric Authority of Georgia and Dalton Utilities.
The company said Thursday that the commission’s new penalties for delays and cost overruns for the project would cost shareholders about $750 million through November 2022.
Southern agreed to take over construction of the reactors after Westinghouse’s bankruptcy. Chief Executive Officer Tom Fanning has said that the project is vital to the country’s national security. In September, Southern and its utility partners secured $3.7 billion in additional U.S. loan guarantees, bringing the total to $12 billion.