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Georgia Utility Update – January 2016

Posted on: March 30th, 2016

PSC Witness Confirms Vogtle 3 and 4 Cost of $9.517 Billion for Georgia Power

          At the December 10, 2015, hearing in the 13th Vogtle Construction Monitoring Review the Public Service Commission’s financial witness, Philip Hayet, confirmed that Georgia Power Company’s share of the cost for Vogtle Units 3 and 4 had increased from $6.113 billion to $9.517 billion an increase of 56%.  The Project cost overruns have been driven by persistent construction delays that have pushed back the original commercial operation dates of April 1, 2016 for Unit 3 and April 1, 2017 for Unit 4 to June 2019 for Unit 3 and June 2020 for Unit 4.

        Testimony from the PSC’s Construction Monitor strongly point to more significant construction delays in the future.  Georgia Power reported that construction on the Project was 26.4% complete based on the total man-hours necessary to complete the Project.  While it won’t take another 15 years to complete the Project based on current man-hours expended, it is certain that the current commercial operation dates will not be met.

         Fluor Corp. took over management of the Project on January 4from Chicago Bridge & Iron and is the fourth construction manager for the Project.

Compromising the Regulators By Utility Companies Subsidizing The Regulatory Agency’s Budget

          Having enough funds to properly carry out a government regulatory agency’s duties and responsibilities has always been a challenge.  The Legislature is very reluctant to increase a government agency’s budget unless there is a serious pressing need or a major crisis forces them to act.  Government agencies respond by prioritizing their work load or trying to become more efficient.  But a disturbing new trend has arisen in which regulated companies are directly paying hundreds of thousands of dollars in consulting fees, subscriptions and travel expenses of the Georgia Public Service Commission.

          The most recent example of this new funding is associated with the acquisition of Atlanta Gas Light Resources (“AGLR”) by Southern Company.  Southern Company and AGLR will pay the Commission’s consultants fees.  AGLR has agreed to pay up to $119,000 for the consulting fees of J. Kennedy & Associates and Southern Company has agreed to pay up to $264,480 for the Accoin Group.  The consulting companies’ invoices will be “reviewed and approved” by the PSC, but the checks to the PSC’s consultants will be written by AGLC and Southern Company.

          Becoming dependent upon utility companies to pay for annual subscriptions, regular travel expenses and consulting fees rather than including those expenses in the agency’s state budget gradually erodes the agency’s independence.  The utility company goes from being the regulated entity to also being a very important source of agency funding.  This new funding source may reduce the demand for public tax funds provided through the legislative funding process, but the regulator becomes dependent upon the regulated entity and eventually the decision making process is completely compromised.

Maintaining A Competitive Natural Gas Market in Georgia After the Merger of Atlanta Gas Light Resources with Southern Company

          The merger of Atlanta Gas Light Resources (“AGLR”) with Southern Company should be completed this summer, but the Georgia PSC will be conducting a review of the merger and considering whether any safeguards should be implemented to protect the competitive natural gas market in Georgia.  The merger of the two largest utility companies in Georgia – Georgia Power Company and Atlanta Gas Light Company – could impact the natural gas market in Georgia.

          Today consumers benefit from numerous competitive marketing plans that provide a variety of programs and prices offered by large and small natural gas marketers.  Consumers benefit from having multiple providers of natural gas.

          When AT&T acquired BellSouth in 2006 the Georgia Public Service Commission imposed several restrictions on AT&T so that the combined market power of both companies would not negatively restrict or inhibit competition for local phone service in Georgia.  Most of the conditions were very general, such as, not giving any preference to affiliated companies.

          The same thing needs to be done with the Southern Company and AGLR merger.  Reasonable restrictions must be imposed to preserve the competitive natural gas market in Georgia after the two largest utility companies in Georgia are combined.

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