After investor-owned Georgia Power and cooperative Oglethorpe Power Corp. spent hours eye-ball-to-eyeball over Oglethorpe’s push for a cost cap on the $27 billion, two unit nuclear project, Georgia Power blinked.
The owners of the project agreed Wednesday afternoon to a new cost-containment deal, which would spread the impact of future cost increases, after Georgia Power denounced Oglethorpe’s Tuesday conditional agreement to proceed only with a cost cap in place.
Shortly after Oglethorpe announced its reluctance to give a complete green light to continuation of Vogtle, the IOU blasted the public power system for demanding that Southern Co. shareholders (Southern is Georgia Power’s parent) “and ultimately Georgia Power customers accept Oglethorpe’s risk in the project even though all four co-owners fully understood and voluntarily accepted their own risks when they sought to become an owner at the project’s inception. Even though Georgia Power is under no obligation to do so, the company provided several proposals to Oglethorpe Power to help give them additional financial support and certainty for their ratepayers.
“Instead of taking a long-term view, Oglethorpe Power is using the vote to try to burden others with its obligations and extract unreasonable concessions.”
Oglethorpe extracted concessions, although whether they are “unreasonable” is certainly not clear. The new deal is outlined in a Securities and Exchange Commission 8-K filing Wednesday afternoon.
Under the terms, Georgia Power will be responsible for 55.7% of any costs that exceed the latest “estimate cost of construction” by $800 million to $1.6 billion. This, says the filing, would “result in $80 million of potential costs to Georgia Power.” The three other Vogtle partners – Oglethorpe (30%), Municipal Electricity Authority of Georgia (22.7%) and the City of Dalton utility (1.6%) – would be responsible for 44.3% of those cost increases, less than their 55.5% ownership.
If construction costs exceed the “estimated cost of construction” by $1.6 billion to $2.1 billion, Georgia Power would eat 65.7% of the cost overrun. If the new cost estimate exceeds the stipulated cost estimate by more than $2.1 billion, “each of the other Vogtle owners would have a one-time option to tender a portion of its ownership option to George Power in exchange for Georgia Power’s agreement to pay 100%” of the overrun. “In this event,” says the SEC filing, “Georgia Power would have the option of cancelling the project in lieu of purchasing a portion of the ownership interest in any other Vogtle owner.”
The Vogtle co-owners said in a joint statement after the deal, “We are all pleased to have reached an agreement and to move forward with the construction of Vogtle Units 3 & 4 which is critical to Georgia’s energy future. While there have been and will be challenges throughout this process, we remain committed to a constructive relationship with each other and are focused on reducing project risk and fulfilling our commitment to our member-consumers.”
Indeed, challenges remain for the project, which is about 50% completed. They include dueling lawsuits by Jacksonville, Fla., seeking in state court to void a power purchase agreement with MEAG, and a countersuit by the Georgia municipal public power joint action agency in federal court to bless the power agreement.
— Kennedy Maize