Timeline for U.S.’s newest reactor stretches into 2019

By Kristi E. Swartz | 01/30/2015 08:44 AM EST

The schedule for Georgia Power’s nuclear expansion project has slipped another 18 months and faces escalating costs in the hundreds of millions of dollars, the company said yesterday in a filing with the U.S. Securities and Exchange Commission.

The schedule for Georgia Power’s nuclear expansion project has slipped another 18 months and faces escalating costs in the hundreds of millions of dollars, the company said yesterday in a filing with the U.S. Securities and Exchange Commission.

The new delays mean Unit 3 is expected to start up around the second quarter of 2019, and Unit 4 one year later. The reactors originally were projected to start producing power in 2016 and 2017 when Georgia Power’s parent company, Atlanta-based Southern Co., won approval to build the nation’s first nuclear reactors from scratch.

That was in 2012. Regulatory delays and problems with the contractors soon pushed the Plant Vogtle project behind by 21 months. Independent project analysts have been warning of more delays for months, to the point that yesterday’s joint filing from Georgia Power and Southern was not a surprise, officials said.


"Our staff has been warning about it for I think a couple of years, and they were very specific about it in the last hearing," said Chuck Eaton, chairman of the Georgia Public Service Commission. "It’s not a complete shock."

Southern’s 2014 earnings call is scheduled for Tuesday, and Georgia Power eventually will have to face utility regulators in upcoming hearings about Vogtle. The ripple effect will go beyond what could be a few rounds of heated questions from analysts and regulators, however.

"How these perform and how these go will have ramifications throughout the industry as far as the appetite goes for new nuclear plants," said Paul Patterson, a utility analyst with Glenrock Associates Inc.

Besides Georgia Power, SCANA Corp.’s South Carolina Electric & Gas is also building twin nuclear reactors. Its project is using the same reactor design and contractors — and also faces its share of delays (EnergyWire, Oct. 31, 2014).

More delays equal more uncertainty for investors and the industry.

"If anyone else is thinking about doing this, it will probably give them pause," Patterson said. "They’ll want to see what happens before they start on such an endeavor, and you’re not going to know, now, for at least another 18 months."

Who pays for delays?

Georgia Power’s filing is based on a new and much-anticipated construction schedule the utility said it has received from contractors Westinghouse Electric Co. and Chicago Bridge & Iron and a subsidiary.

The lack of a detailed project schedule was the main topic of a December hearing about Vogtle. An attorney for Georgia Power challenged the analysts’ assertion that the utility wasn’t working hard enough to get the detailed schedule from the contractors (EnergyWire, Dec. 17, 2014).

In the filing, Georgia Power made it clear that it hasn’t agreed to any changes to the "guaranteed substantial completion dates" because it doesn’t think the contractors have done everything they can to mitigate the situation.

Georgia Power is already tied up in a lawsuit with Westinghouse and CB&I’s Stone & Webster subsidiary over who’s responsible for costs stemming from earlier delays. As it has said previously, Georgia Power maintains it is not responsible for costs associated with this new set of delays, either.

"The contractor is responsible for the contractor’s costs related to the contractor’s delay," the documents said.

Georgia Power and the group of municipal utilities and electric cooperatives that own Vogtle are entitled to recover liquidated damages for the contractors’ delay beyond the "guaranteed substantial completion dates of April 2016 and April 2017," according to the filing.

There will be additional capital costs for Georgia Power, however. The utility now faces more property taxes and costs for compliance and operational readiness, according to the document.

The utility estimates this to be approximately $10 million a month until Units 3 and 4 start producing power.

Additional financing costs will run approximately $30 million a month, as well, the document said.

‘Ongoing challenges’ with contractors

Plant Vogtle has faced challenges with the contractor and subcontractors from the start. Components weren’t being shipped on time and pre-foundation work, such as installing reinforcement bar, or rebar, had to be redone and reset before the concrete could be placed.

Chicago Bridge & Iron Co.’s purchase of the Shaw Group in early 2013 significantly improved the quality of the work on the reactor components, executives from Georgia Power and SCE&G have said.

But Georgia Power warned of more problems in yesterday’s filing.

"In addition, as construction continues, the risk remains that ongoing challenges with the contractor’s performance including additional challenges in its fabrication, assembly, delivery and installation of the shield building and structural modules … or other issues could arise and may further impact project schedule and costs," the company said.

Georgia Power stands behind Vogtle, saying it is needed for future demand.

"The expansion at Plant Vogtle will fuel a growing Georgia for at least 60 years. Building it correctly, and safely, is more important than building it quickly," said Georgia Power spokesman Jacob Hawkins in an email to EnergyWire.

"Plant Vogtle Units 3 and 4 continue to offer benefits which outweigh short-term costs. Although the revised forecast may add short-term financing costs to the project, we estimate that $2.3 billion in customer benefits will reduce the overall cost to customers associated with building the country’s first new nuclear facility in more than 30 years," he said.

Georgia Power is responsible for 45.7 percent, or $6.1 billion, of the costs of Vogtle, which are roughly $14 billion. Costs already have escalated beyond that "certified" amount, however.

In the filing, Georgia Power said it expects to further address the matters related to cost and schedule in its next semiannual construction filing with the PSC, which will be in late February.

"It’s still a cost-effective project," Eaton at the PSC said. "There most likely will be a time that they come to us with cost increases due to this, and that will be the time that this gets addressed. And it will be given a high level of scrutiny."

Southern’s Mississippi Power subsidiary is building a next-generation coal plant that also has faced serious delays and significant cost overruns. A settlement has capped the amount Mississippi Power customers will pay, prompting some environmental advocates to urge the Georgia PSC to do the same.

"Now that Vogtle overruns are getting into the billions of dollars, it’s time for the Georgia Public Service Commission to consider what the Mississippi Public Service Commission did, doing something to protect the ratepayers and taking some action," said Mark Woodall, legislative chairman for the Sierra Club’s Georgia Chapter.

Georgia Power maintains that Vogtle is going to continue to have less of an impact on customer rates than originally anticipated, Hawkins said.

This is because the project was originally certified assuming a 12 percent increase in customer rates. Between financing and other benefits as well as fuel savings, that impact is closer to 6 to 8 percent.

"This is not expected to change with the revised forecast," Hawkins said.