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FMG Law Blog Line

Georgia Utility Update – March 2016

Posted on: March 30th, 2016

By: Bobby Baker

In a Surprise Move Georgia PSC Approves Prudency Review for $7.9 Billion in Vogtle Costs

          With little advance notice the Georgia Public Service Commission approved a complete prudency review of all costs for Vogtle Units 3 and 4 incurred to date at its February 18 Administrative Session.  On January 28 all the parties to the Vogtle construction monitoring review were expecting to discuss Georgia Power Company’s request to recover the $350 million in litigation settlement costs to its contractors, Westinghouse and Chicago Bridge & Iron, and an additional $69 million for costs associated with cybersecurity and onsite security, but instead a surprise motion by Commissioner Stan Wise expanded the review from just the $419 million to also include over $7.453 billion for the total costs of the project to date.  Including the $419 million, this represents an increase in Project costs of more than $1.8 billion above the original certified cost in 2009 of $6.113 billion.

          The Georgia Commission’s decision to initiate a full prudency review is highly unusual because normal procedures have been completely ignored.  Multiple hearings with the presentation of witnesses for cross-examination will likely not occur.  To complicate matters there is no budget for the additional staff and consultants needed to conduct a thorough review.  Additionally, the Georgia PSC has an extremely full agenda for 2016 with the Georgia Power Integrated Resource Plan filed in January, a full Georgia Power rate case scheduled for July, the review of the merger of AGL Resources with Southern Company and two semi-annual Vogtle construction monitoring reviews.

          Georgia Power is scheduled to file its responses to a set of questions regarding the litigation settlement and Project costs by April 5.  Parties will only have 30 days to file comments and the PSC Staff may conduct discovery and is “authorized to engage in any settlement talks with the Company and intervening parties . . .” over six months.

Atlanta Gas Light Company (AGLC) May File Rate Case in 2016

          Hank Linginfelter, President of AGLC, testified on March 15 that AGLC was considering filing a rate case before the end of 2016.  Mr. Linginfelter was testifying at the hearing on the AGL Resources merger with Southern Company.  It was also revealed that AGLC’s current earnings level is approximately 100 basis points (one percent) below its authorized return on equity of 10.75% and was expected to decline further.

          The possibility of AGLC filing a rate case in 2016 puts additional pressure on the Public Service Commission Staff that already has a full plate handling Georgia Power’s Integrated Resource Plan, the unexpected Vogtle prudency review, the 14th Vogtle Construction Monitoring Review and the Southern Company – AGL Resources merger review.  Additionally, Georgia Power Company is scheduled to file its next rate case on July 1, 2016 and Atlanta Gas Light will file its capacity supply case later this summer.

Georgia Power 2014 Earnings Exceed Limits – Customers Get Small Refund

          Based on Georgia Power Company’s Annual Surveillance Report for 2014, the PSC Staff determined the Company had an adjusted return on equity (ROE) of 12.14% that resulted in a refund of $11.308 million to customers.  In its 2013 rate case the Company’s ROE level was set at 10.95% with an earnings dead band between 10.00% and 12.00%.  Any retail earnings above 12.00% are shared with two-thirds being refunded to customers and the Company keeping the other third.  One percent of the ROE is approximately $81 million.

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