Unlike many states, Georgia still tightly regulates its electricity sector. The Georgia Public Service Commission approves plans for new power plants and then adjusts electricity rates to ensure utilities receive a “reasonable” return on their investment.
In August, Georgia Power asked the commission to approve a revised timetable and bigger budget to finish the Vogtle reactors. The utility owns 45 percent of the project and estimated that its share of capital costs would need to rise to nearly $9 billion from $5.7 billion, not including financing. Regulators had to decide who should bear the burden — the utility’s shareholders or ratepayers. Georgia Power warned that it would not continue the project if it was forced to absorb a large share of the costs.
The regulators largely sided with Georgia Power, deeming its budget request “reasonable.” The utility will have to accept a small reduction in future profits and will face penalties for further delays. But it will likely be able to recoup the bulk of its increased costs from ratepayers. (About $1.7 billion will be covered by Toshiba, the parent company of Westinghouse, as part of the latter’s bankruptcy agreement.)
Georgia Power is also expecting Congress to extend a federal tax credit for nuclear power that is scheduled to expire by 2020. That extension was stripped from the final Republican tax bill this year, but lawmakers may take it up in separate legislation next year. If they do not, Georgia’s commission said it “may reconsider the decision to move forward.”
Georgia Power said in a statement that it would accept the new conditions and continue the reactors, which if finished would power up to 500,000 homes without generating greenhouse-gas emissions responsible for global warming.
Critics said the companies backing the Vogtle project would now stand to make more money than they would have if they had simply completed the reactors on time and under budget.
“Most people have to pay for their mistakes, but Georgia Power is still profiting from theirs,” said Kurt Ebersbach, a senior attorney with the Southern Environmental Law Center.
The state’s regulators were effectively grappling with the question of sunk costs. Georgia Power’s 2.5 million customers were already facing a 5 percent increase in their utility bills for the construction to date. Finishing the reactors was likely to raise rates another 5 percent. Abandoning them would mean the earlier increase was all for nothing.
This month, the commission’s staff produced a report arguing that the Vogtle project was “no longer economic” and that customers would ultimately save money by scrapping the project, sunk costs and all, and building a cheaper natural gas plant instead.
But the commissioners disagreed, arguing that the state could regret abandoning the Vogtle reactors if gas prices rose over the next few decades.
“We are in a difficult dilemma, no doubt about it,” said Chuck Eaton, the commission’s chairman, at the hearing Thursday. But, he added, the first two reactors built at Vogtle in the 1980s also went over budget and “are now considered the crown jewels of our fleet.”
Weighing on the commissioners’ minds was also the experience of South Carolina, where utilities abandoned efforts to build two similar reactors in July and now face a backlash from consumers who are seeing an 18 percent increase in their utility bills for plants that were never finished.
Proponents of the Vogtle project said it could help preserve America’s nuclear supply chain and expertise, which could pave the way for a new wave of smaller advanced reactors still under development that may one day prove less risky to build.
“This decision will keep alive our nuclear construction supply chain through some lean years until we have reactor designs that are more appropriate for the current U.S. market,” said Rich Powell, executive director of the ClearPath Foundation, a clean-energy group in Washington.