PSC Approves Billions in Vogtle Expenditures and Cost Overruns With No Review
On December 20, 2016, the Georgia Public Service Commission unanimously approved the Stipulation between the PSC Staff and Georgia Power Company that increases the capital costs of the Vogtle Project for the construction of Units 3 and 4 from $4.418 billion to $5.680 billion, waives $1.552 billion in potential project cost disallowances, significantly reduces the chance that any prudency review of project costs will ever be done in the future and offers few or no protections to consumers all with no review of the Vogtle Unit 3 and 4 costs to date. The Commission’s decision creates the largest revenue requirement imposed on Georgia Power ratepayers based on the least amount of public review by the Commission in its history.
By approving the Stipulation the Commission waived any future review of $700 million in additional financing costs incurred due to the current 39-month construction delay, the $350 million in Georgia Power’s share of litigation settlement costs with its Contractor and $502 million in additional replacement fuel costs incurred by the 39-month construction delay. The Stipulation also increased the Vogtle Project’s forecasted capital costs by $1.262 billion to $5.680 billion that includes $2.380 billion in yet-to-be-spent capital costs.
The PSC Staff and Georgia Power claim the Stipulation provides $325 million in reduced rates for customers over the next four years based on a reduction to the company’s return on equity level used on the Project’s financing and a short-term deferral of financing costs that eventually will be paid by ratepayers. In reality the Stipulation only provides approximately $29 million per year for the next four years in direct cost reductions to customers. The remaining $210 million in savings is calculated based on $140 million in deferred financing payments and $70 million in tax savings based on the reduced earnings to Georgia Power.
Testimony from the only hearing on December 6th clearly showed that the PSC Staff was not focused on conducting a prudency review of the costs for Vogtle Units 3 and 4, but worked to develop information that could be used in settlement negotiations with Georgia Power. The PSC Staff produced no report, memorandum, audit or any document that contained their analysis or discussed the billions of dollars in capital and construction costs they were allegedly reviewing. In comparison, the prudency review conducted in the late 1980s for Vogtle Units 1 and 2 took weeks of public hearings, contained extensive testimony from senior Georgia Power officials, consultants and accounting experts and created an enormous public record on which the Commission based its decision.
Georgia Power Company’s share of the Vogtle Project costs has increased from $6.113 billion to over $8 billion and more construction delays beyond the 39-month delay are expected.
Atlanta Gas Light Company Files Application for Alternative Form of Regulation
Atlanta Gas Light Company (“AGLC”) filed an application for an alternative form of regulation that will end comprehensive rate case proceedings and replace them with annual accounting true-up reviews. AGLC’s application was filed December 1, 2016, and is on a very fast track for consideration by the Commission with a decision scheduled for February 21, 2017. This application was filed just seven months after the Commission approved the historic merger of Atlanta Gas Light Resources with the Southern Company combining Georgia’s largest natural gas utility with Georgia’s largest electric utility.
Prior to any public notice or hearing the PSC Staff and AGLC negotiated a Stipulation for the transition to the alternative form of regulation. The new form of regulation will eliminate any type of comprehensive rate case proceeding and severely limit review of the company’s operation. Replacing the current review process will be an annual accounting true-up that will be limited to evaluating the company’s costs and revenues.
The procedural and scheduling order for this case was not issued until December 29th and intervenors must pre-file their testimony by January 6, 2017. The speed and secrecy with which the PSC Staff and AGLC are handling this application should concern all ratepayers. A single hearing is scheduled for February 7, 2017.