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Georgia Utility Update – July 2016

Posted on: July 12th, 2016

Southern Company/AGL Resources Merger Complete as of July 1 

The Southern Company acquisition of AGL Resources was completed as of July 1 making Southern Company the second largest utility in the country with a customer base of approximately 9 million and a projected rate base of approximately $50 billion.  Eleven electric and gas utility companies will serve customers in nine states.

The Georgia Public Service Commission approved the joint merger application of the companies on April 14, 2016, by adopting a Settlement Agreement between the parties.  As part of the Settlement Agreement the Commission conditioned the merger application by prohibiting the recovery of the merger transaction costs through a rate proceeding and the allocation of any transaction costs to Georgia Power or Atlanta Gas Light by either Southern Company or AGL Resources.  The merger Settlement Agreement also delayed the filing of Georgia Power’s rate case from July 1, 2016, to July 1, 2019.

 

Georgia Power Integrated Resource Plan (“IRP”) Provides for 1,600 MWs of Renewable Generation

The Public Service Commission will consider Georgia Power’s proposed IRP and Stipulation on July 28.  The proposed IRP provides for development of 1,200 MW (150 MW of distributed generation) through the Renewable Energy Development Initiative (“REDI”).  Two RFPs in 2017 and 2019 will each solicit 525 MW of renewable energy for development by 2019 and 2021.  The REDI program limits wind resources to no more than 300 MW.  The IRP also provides for 200 MW of self-build capacity by the Company and the possible development of a renewable commercial and industrial program that will be capped at 200 MW.     

The IRP contains several other significant provisions.  Five older coal and natural gas plants will be decertified and retired, and capital expenditures at five additional coal plants will be restricted pending anticipated retirement after 2019.  The Company’s High Wind Study and ash pond solar demonstration projects will be approved, and its planning reserve margin will be increased to 16.25%.

The Company’s request for $175 million for funding new nuclear development in Stewart County also will be decided by the Commission.  The PSC Staff estimated that between $131 to $153 million for financing costs through 2026 would have to be added to the $175 million.

 

$5 Billion Vogtle 3 & 4 Prudency Review Cloaked in Secrecy

Unlike the prudency review conducted in the late 1980s for Vogtle Units 1 & 2 where senior Georgia Power officers and others testified in public hearings there will be no witnesses, no public hearings, no opportunity for cross-examination and no record other than the comments filed by the Company and a few interveners regarding the Company’s request that approximately $5 billion in capital and financing costs be found prudent by the Commission.  In fact, it’s not known exactly how much Georgia Power is asking the Commission to certify as prudently spent on the Vogtle Project because no amount or cut-off date was included in the Company’s filing.  In response to an inquiry by the Commission Staff the Company indicated that they would like to have all of their expenses for the Vogtle Project up to the day of the Commission’s Order included as a prudent expense, which begs the question, how can you review an expense that is incurred the day it is approved?

The Commission’s procedural and scheduling order for the prudency review used the term “settlement” seven times which is a telling indicator what is expected from the Staff.  Should they not get the message, the Commission reserves the right “to extend the deadline if the Commission deems it appropriate to do so in order to allow further time for review or further negotiations.”  The Staff is scheduled to report to the Commission on October 19 the results of their negotiations with Georgia Power Company.

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