Georgia Power CEO Provides Overview of Recommendation to Move Forward with Vogtle 3 & 4 Project to the Georgia PSC
Tuesday, November 7th, 2017
Georgia Power and the other Owners of the Vogtle 3 & 4 project (Oglethorpe Power, MEAG Power and Dalton Utilities) today presented their unified recommendation to continue construction of the project to the Georgia Public Service Commission. Georgia Power filed the recommendation to move forward with the Georgia PSC on August 31 as part of the 17th Vogtle Construction Monitoring Report. The recommendation was supported by all of the Owners and based on the results of a comprehensive schedule, cost-to-complete and cancellation assessment which was launched following the bankruptcy of Westinghouse in March.
Chairman, President and CEO of Georgia Power Paul Bowers delivered the following remarks prior to the start of scheduled public hearings at the Georgia PSC.
"Good morning. On behalf of the Vogtle 3 & 4 Owners – Georgia Power, Oglethorpe Power, MEAG Power and Dalton Utilities – we appreciate the opportunity to appear before this Commission to provide an overview of the recommendation to continue the Vogtle 3 & 4 expansion and answer any questions you may have about the project. As you know, project experts will take the stand throughout this week to discuss the 17th Vogtle Construction Monitoring Report filed on August 31 in more detail.
The 17th VCM Report included a recommendation, supported by all the Owners and their respective boards, to go forward with the project. This recommendation was based on the results of a comprehensive schedule, cost-to-complete and cancellation assessment that was prompted by the bankruptcy of Westinghouse and the subsequent rejection of the fixed-price contract. That is why we are here – to consider the impact of the Westinghouse bankruptcy.
The Owners are unified in our recommendation to move forward with construction and believe we have identified the risks upfront and provided the information necessary to support the recommendation. We also understand that this is a complex and difficult decision and it is ultimately the Commission's decision on whether or not we will move forward with this project.
Based on all factors considered, completing both units represents the best economic choice for customers and preserves the benefits of carbon-free, baseload generation for our state. Assessments of the project included a robust economic analysis; evaluation of various alternatives including abandoning one or both units or converting the units to gas-fired generation; and assumptions related to potential risks including future payments from Toshiba, availability of production tax credits and the extension of loan guarantees from the Department of Energy that reflect the new cost projections.
Since the filing, we have mitigated some of the risks that further strengthen the recommendation:
On September 29, we announced an agreement with the DOE for a conditional commitment of approximately $3.6 billion in additional loan guarantees – this illustrates continued federal support of new nuclear. Understand this is a loan through the Federal Financing Bank, it is not a grant. The federal government is allowing us to access a cheaper source of funding versus a commercial financing option.
On October 2, we announced the first payment of $300 million ($137 million for Georgia Power) from Toshiba and, on November 1, another $77.5 million was paid pursuant to the payment schedule. 100 percent of these funds will be used to benefit customers. This is a positive indication that Toshiba intends to fulfill its commitments to our customers by paying the $3.686 billion parent guarantee.
Construction has continued uninterrupted at the Vogtle site over the past six months with all the Owners working together to maintain the project's momentum following Westinghouse's bankruptcy. Southern Nuclear, the nuclear operating subsidiary which operates the existing units in Georgia, is now the project manager at the site. Global construction firm Bechtel is managing daily construction efforts. Progress is steady and evident, illustrated by multiple recent achievements such as the placement of the final steam generator for Unit 3 on October 10 and, at the end of September, more than 1,800 cubic yards of concrete was placed in the Unit 3 containment vessel – a 71-hour pour which illustrates significant efficiency improvements.
Let me close with specific Georgia Power comments:
As Chairman, President and CEO of Georgia Power, it is my responsibility every day to make sure that everything we do is in the best interests of the 2.5 million customers we serve. In addition to the Vogtle expansion, we're focused on making the investments necessary – including further diversifying our energy mix as well as investing billions of dollars in grid enhancements in order to provide clean, safe, reliable and affordable energy for our customers, today and in the future. The value of these investments was proven following the impact of Hurricane Irma when we restored power to nearly one million customers across the state in just four and a half days.
Based on the new expected operation dates of November 2021 and November 2022, the projected peak rate impact to Georgia Power retail customers is approximately 10 percent, with 5 percent already related to the project in rates – well below our original projections of approximately 12 percent.
Georgia Power will continue to fulfill our commitment to our customers and share in the financial risk of the project. Under the prudence agreement approved by this Commission, Georgia Power and our shareholders bear significant penalties as a result of the updated forecast, which will equate to almost half a billion dollars. Based on current projections, this agreement will also reduce the amount paid by customers for the project by approximately $750 million. As the commission envisioned in approving this agreement, the consequences are severe.
Finally, Georgia's constructive regulatory environment and forward-looking energy policy has enabled Georgia Power to maintain a diverse energy mix that allows us to deliver clean, safe, reliable electricity at rates 14 percent below the national average today – which includes 5 percent for the Vogtle project that is already in rates. We believe nuclear is a dominant solution in our long-term energy picture.
In conclusion, I want to thank the members of this Commission for your continued thorough and thoughtful oversight of the Vogtle 3 & 4 project. As you carefully consider the best path forward for the Vogtle project, we are confident you will make the right, long-term decision for the citizens of Georgia.
Before we answer any questions you may have, I would also like to make you aware of a letter that was sent to all of the Owner CEOs last week from former U.S. Senator Sam Nunn expressing his support for our recommendation to finish this project. I have a copy of that letter if you would like."
The Georgia PSC is expected to review the recommendation and make a decision regarding the future of the Vogtle 3 & 4 project as part of the 17th VCM proceeding. Read more here.
Final approval and issuance of additional loan guarantees by the DOE cannot be assured and are subject to the negotiation of definitive agreements, completion of due diligence by the DOE, receipt of any necessary regulatory approvals, and satisfaction of other conditions.