Nuclear bailout, part three: No guarantees

Georgia Power customers will pay for Plant Vogtle whether it's built or not

No skin in the game: Georgia Power has no contingency plan for refunds.

This is the third and final installment of a series exploring the financial impact of expanding the nuclear facility Plant Vogtle. The first piece looked at the federal tax dollars being used to subsidize nuclear energy development. The second part explained the rate increase passed by state legislators to help Georgia Power finance the project.

Although Georgia Power is set to begin charging customers for the new construction starting in January 2011, there is still no guarantee the project will ever be completed on schedule or on budget, which means rate payers could pay indefinitely for reactors that will never be built.

The utility company may have found the billions of dollars necessary to double the generating capacity at Plant Vogtle, but there are still several hurdles to clear before the new reactors become reality.

After three years of re–designs Vogtle’s new nuclear reactors, the Westinghouse–Toshiba AP1000, are still not approved for use by the Nuclear Regulatory Commission (NRC).

For safety’s sake, the process a company must go through before being able to build a nuclear reactor is rigorous and exhaustive. Before any construction can start, the reactor design must be approved by the Nuclear Regulatory Commission (NRC), and thousands of pages of data on safety, operations, and materials must be submitted for review prior to consideration for a combined Construction and Operating License (COL).

Among the reactor’s issues currently under review, the Commission staff is not satisfied that the AP1000 shield building can properly withstand tornados or hurricanes. It is also not sufficiently reinforced to withstand the impact of a plane crash, and there are some questions about its computer systems and emergency sump.

“We needed technology that would meet our timeline for making more electricity for customers,” said Beth Thomas, a spokeswoman for Southern Nuclear, when asked why the AP1000 was chosen over other possible reactors. “The AP1000 design received NRC certification.”

Although a version of the AP1000 had been certified several years ago, in 2007, several revisions were made to the design of the reactor, “modifications that will aid in reducing the cost, schedule and risks for utilities,” according to expert testimony from Dr. Bill Jacobs given during hearings at the Public Service Commission.

Since those revisions were requested, the new design has yet to meet the NRC’s standards, and no one is sure how long the process will actually take.

“The short answer to how long this is going to take is ‘it depends,’” says Scott Burrell, a Public Affairs Officer for the NRC. “The basic idea here is to set the design in stone before you start pouring concrete.”

Under the old system, companies received licenses to construct reactors while still negotiating aspects of the design, prior to receiving their operating license. The two–part licensing process led to situations where reactors were built, or partially finished, but then abandoned after failing to receive an operating license.

“It’s a completely different licensing scheme now for the applications that we currently have in house and are reviewing, including the ones for Vogtle,” explains Roger Hannah, a Senior Public Affairs Officer for the NRC in Atlanta.

Although the new licensing process was created to help streamline things for utilities and staff alike, this is the first time that a company has tried to certify a reactor design and apply for a COL at the same time, explains Burrell.

Even if the NRC approves the reactor design and the COL, there are more question marks lining the path to Vogtle’s expansion.

No one actually knows how long construction will take because no one has ever successfully built an AP1000 reactor that is operational. There are currently four under construction in China, using a different design (the one approved in ’06), but they won’t be completed for several more years at the earliest.

“It is likely that problems will be encountered during the construction process that will require redesign and rework,” said Dr. Jacobs during his testimony to the PSC in December 2008. He went on to explain that although the expansion of Plant Vogtle is being carried out by a consortium of utility companies, he was uncertain about Georgia Power’s cost projections for the project.

“It is highly improbable that this very large and complicated project will be constructed with no additional cost to the company beyond the Engineering, Procurement and Construction (EPC) contract,” explained Jacobs.

The dilemma raised by an inflating price tag for construction is that Georgia Power’s shareholders have made it abundantly clear they will not pay for any overage of cost (For more on this, see Part One: “Nuclear Bailout”).

“It is my understanding that the company’s position is that, absent imprudence, all cost overruns will be allocated between the consortium and the ratepayer,” says Jacobs. “The company should be willing to bear a reasonable share of the risk of this project. To use a common phrase, the company should have ‘some skin in the game.’”

“We’ve said that we expect the project to be on schedule and on budget. That’s what we’ve been saying since the beginning,” says Jeff Wilson, a spokesman for Georgia Power.

But at the moment, the utility company seems to be the only one certain that this will be done on schedule and at the current budget.

In the EPC Contract , according to analysis by Jacobs, “the cost of certain materials and labors are indexed so that the final price of the units will not be known until they are completed.”

Quickly rising price tags for nuclear projects are no great surprise, even with the support of federal tax dollars. Potential nuclear reactor construction in Texas and Florida has been delayed recently, or scrapped altogether, because of multi–billion dollar cost increases combined with a decreased likelihood of available funding from the feds and ratepayers.

Regardless of the status of the project, the monthly charge mandated to Georgia Power ratepayers (see Part Two: “The Price of Power”) starts in January 2011, and if the project is delayed or never completes the license process with the NRC, then there is no mechanism in place to return the money customers have been charged.

If the project goes over budget, then ratepayers will be stuck footing the bill for an indefinite sum of money - paid over an indefinite period of time - that they have no chance of getting back.


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