Plant Vogtle project to continue
As one deadline after another passed on Tuesday, utility providers across the state sat on the edge of their seats waiting to see if a deal could be reached to continue the multi-billion-dollar Plant Vogtle, located in Waynesboro.
Finally, on Wednesday the partners announced that the deal would move forward with the terms of that agreement still under negotiation.
Georgia Power, the Municipal Electric Authority of Georgia and Dalton Utilities had already voted in favor of moving forward with units 3 and 4 at the nuclear power plant, but Oglethorpe Power, who holds a 30 percent stake in the project, wanted Georgia Power to place a price cap on how much Oglethorpe and other stakeholders will be asked to spend on the project, which just saw a $2.3 billion budget increase. Oglethorpe had veto power on the project.
“Georgia Power announced there were $2.3 billion in additional costs that were added very shortly after the public service commission approved the project,” said Patrick Bowie, the LaGrange utility director and one of nine members of MEAG’s board at a LaGrange City Council work session on Tuesday. “It was very embarrassing for them. They had just taken over the project, and my interpretation is that they just missed a lot of the costs. Some of these costs had already been incurred, but they just didn’t include them in their estimates. They missed it as they were taking over management from Westinghouse and sorting through all the documents and all the subcontracts.”
The vote had the potential to have a major impact on the budgets of MEAG cities like LaGrange and Hogansville because while the higher construction costs were not ideal, Bowie said there were concerns that creditors for the project could ask for immediate repayment of loans for the project if it was canceled.
“The ramifications of cancellation if Oglethorpe [had decided] not to move forward [would be], we would have cancellation costs,” Bowie said. “… There is a significant amount of money that they have to spend to cancel the project and to demobilize all the crews, to get everything buttoned up. There are just some expenses that would have to be incurred. The department of energy has basically threatened that they will accelerate repayment of the loans. They lent billions of dollars to all parties to build this plant. They have a right under the contract to — if we cancel the project — call for immediate repayment of that money.”
LaGrange City Council members asked if the city had adequate financial reserves to weather the storm if the loan was called. City Manager Meg Kelsey said the city would be OK, but it would knock out the city’s reserves.
“Despite all the increases, despite the delays, despite the problems, believe it or not, the unit price out of these Vogtle units is still relatively close to the original budget back in 2008,” Bowie said. “It has gone up a little bit, but not as much as you would think given the news media. Economically, we see this as a hedge against future gas prices. What makes this project break even again is if gas prices go up. They don’t even have to go up much. If they go up to a level less than 2008, when we decided to pursue the project in the first place then the project breaks even.”
Vogtle units 3 and 4 will be the first new nuclear units build in the United States in more 30 years. The new units will generate enough emission-free electricity to power approximately 500,000 homes and businesses for an estimated 60 to 80 years, according to project information. The new units are also expected to provide 7,000 additional jobs, and many urged Oglethorpe to negotiate based on those jobs.
However, critics pointed to many of those jobs as temporary and worried about the long-term impact of rising costs, especially for Georgia Power customers since the company agreed to absorb the cost of part of the increase. The conditions for MEAG, and the cities it represents, will likely mimic Oglethorpe Power’s terms, though MEAG already faces less risk in the project due to a pre-agreed upon sale of power to other groups. MEAG cities will still face some risk though.
“Oglethorpe and the city, we don’t have stockholders, so our customers are the ones that ultimately have to pay the additional costs. For Georgia Power, it is the stockholders that are going to eat that,” Bowie said. “Now out of $2.3 billion, $800 million of it is contingency money, so about $1.5 billion is the actual bricks and mortar.”
The major price change triggered a contractual requirement where Oglethorpe Power, MEAG Power and Georgia Power all needed to vote in order to move forward with the project. The terms of the agreement changed when Westinghouse went bankrupt in February, so all the major partners in the project had veto power on the project if there was a major cost increase.
The situation was further complicated when Jacksonville Electric Authority filed a lawsuit against MEAG and the City of Jacksonville alleging that the contract to purchase power from MEAG was null and void. MEAG planned to sell power from Vogtle to Jacksonville for 20 years to mitigate some of the risk, according to Bowie.
The project has a parent guarantee from Toshiba of $3.68 billion for construction, and U.S. Congress extended production tax credits for the project, which will would be worth an estimated $5.61 million when production begins.
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