The fate of the long-troubled Vogtle nuclear plant construction project in Georgia, the only new nuclear units being built in the U.S., could now rest with the courts. Jacksonville’s municipal utility JEA has sued in Florida court to overturn what the city believes is a ruinous 20-year take-or-pay power purchase agreement with the Municipal Energy Agency of Georgia, signed in 2008, for power from the Vogtle project.
MEAG, in response, has filed a suit in federal court in the U.S. District Court for the Northern District of Georgia claiming JEA has breached the power purchase agreement, seeking an order to make the city abide by the deal. MEAG owns 22.7% of the two-unit, Westinghouse AP1000 project at an existing Georgia Power nuclear site, where Southern Company subsidiary Georgia Power is the lead project sponsor.
If JEA were to win its case, it could kill the project. MEAG needs the contract with the Florida muni to justify its participation in what has become a more than $27 billion project, double the original estimates for the project. That has increased MEAG’s financial exposure and faced JEA with vastly more expensive power than when they signed the deal with MEAG.
If MEAG were to prevail, the project likely would continue. The partners in the project, Georgia Power (45.7 %); MEAG; Oglethorpe Power Corp., a cooperative generation and transmission utility (30%), and the city of Dalton, Ga. (1.6%), are scheduled to meet Sept. 24 to decide whether to go forward with Vogtle construction. The deal among the owners requires a 90% positive vote to continue construction, and MEAG could feel forced to pull out if JEA is no long obligated to buy the power, regardless of its price.
JEA’s suit argues that the power purchase agreement was faulty from the start. JEA interim CEO Aaron Zahn said, (the previous CEO stepped down as a result of the Vogtle dispute), “It has become clear that this purchase agreement should be considered ‘ultra vires’ [unenforceable] since it was implemented without the approval of the City Council, which violates Florida law. A favorable judgment from the court deeming the agreement void will have the added benefit of providing relief to ratepayers across northeast Florida from having to shoulder the financial burden of this project.”
In its complaint in federal court, MEAG says, “Despite the fact that there has been no vote yet and not all the facts are known, JEA has indicated a clear intent to breach its contract, abandon its obligations, undermine MEAG Power’s ability to perform, and attempt to force MEAG Power’s hand in the vote.”
Should the two courts split their decisions, it could set off a state-federal jurisdictional dispute. And regardless of the outcome, appeals are likely.
In the meantime, S&P put JEA on a negative credit watch, citing its MEAG suit. “In our view,” said S&P, “JEA’s assertions that its board acted beyond the scope of its authority raises qustions about the quality of the utility’s internal controls; moreover, we question why JEA is now asserting a lack of an ownership interest in the Vogtle plants. In our opinion, the utility’s legal claims seeking to repudiate the board’s actions after a decade call into question the utility’s willingness to meet its contractual financial obligations.”
— Kennedy Maize