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Georgia Utility Update – July 2015

7/13/15

Hearing in Vogtle Review Provides New Information on Project’s Cost

 By: Bobby Baker

          At the June 23^rd hearing on the 12^th Vogtle Construction Monitoring Review the Public Service Commission (“PSC”) Staff expert witnesses provided new information regarding the actual financial impact of the current 39 month delay in the construction schedule for Vogtle Units 3 and 4.  While it is hardly newsworthy to report that the Project has fallen further behind schedule and the overall costs have increased, the PSC’s witnesses explained how the cost increases impact each residential ratepayer, quantified the total revenue requirement for the Project and refuted the Company’s claims regarding the alleged benefits of the Project.

          Staff Witness Philip Hayet testified that the current 39 month delay would add $319.00 or $6.26 per month to the average residential ratepayer’s bill beginning in April 2016 and continuing to June 2020 in the form of higher fuel costs and Nuclear Construction Cost Recovery (“NCCR”) tariff payments.  Of the additional $319.00 in costs, 59% of the increase or $187.00 would be through higher NCCR monthly charges.  The cost increase is especially significant to businesses because the $319.00 increase was for the average residential customer who uses 1,000 kilowatt hours per month.  Obviously, electric customers with higher monthly electric usage would be paying significantly more in fuel and NCCR costs.

          During cross examination concerning the current cost projection of $7.5 billion for Georgia Power Company’s share of the Project it was disclosed for the first time that the total revenue requirement just for Georgia Power’s share of the Project would be $30 billion.  Knowing that the total revenue requirement for the project is four times the construction costs gives consumers an ability to evaluate the total Project costs.  The current total revenue requirement for the Project is approximately $65 billion.

          In the past few Vogtle reviews it was revealed that the cost for every day of delay is $2 million.  This calculation was further clarified when it was explained that it did not contain payment of any taxes.  The gross up on the $2 million daily cost with taxes would be approximately $2.92 million.

          Finally, the PSC Staff witness refuted the Company’s claims regarding the alleged ratepayer benefits of the Project by testifying that the remaining $2.7 billion in alleged benefits claimed by the Company had shrunk down to no more than $208 million.  This figure would be further reduced to negative $300 million if 50% of the production tax credits were removed from the calculation.  Based on the Project’s current schedule it is highly unlikely that Unit 4 will be on line by December 31, 2020 to be eligible to receive $522 million in production tax credits.

          While the testimony at the June 23 hearing was not reassuring to ratepayers, it did provide a clearer financial picture regarding the true costs of Vogtle Units 3 and 4, and reaffirmed the fact that the Project would see more construction delays.