Here’s how off-track we’ve gotten in Georgia Power’s attempt to build two new nuclear plants:
If we stopped construction of the two half-built nuclear plants immediately, writing them off as a complete loss, then started from scratch with construction of brand new natural-gas plants, we would be able to generate the same amount of energy promised by those two abandoned nuke plants, while saving $1.6 billion.
Moreover, that estimate from the professional staff and consultants at the Georgia Public Service Commission probably underestimates the potential savings, and by a large margin. It assumes that Georgia Power will be able to meet its promised new construction deadlines of November 2021 and November 2022. Based on its long history of blown deadlines, that is a very large assumption indeed.
It becomes even more unlikely given that Southern Nuclear Co. — a sister company to Georgia Power — has now been forced to take over construction management of the project. Southern Nuclear is good at operating nuclear plants, but it has no experience in building them. As credit analysts for Moody’s warned, “We view nuclear plant construction as an activity well outside of Southern’s core competency of operating regulated electric and natural gas utility businesses.”
So if we add another two years to the latest construction schedule — a conservative estimate, given history — then the savings generated by instead abandoning the nuke plants and going to other power sources would double to $3.3 billion, according to the PSC staff analysis.
Georgia Power, of course, wants to finish the plants anyway, assuring us that investing another $6 billion as its share of the completion costs would still be cheaper in the long run for its customers. Again, it’s impossible to put much faith in that pledge, given how poorly its previous assurances have fared.
One thing we do know: Completing the plants would be good for Georgia Power, which is guaranteed a percentage of the total cost as its profit. The longer the project takes to build, the more expensive it becomes, the more profit that Georgia Power makes.
The PSC staff report lays it out pretty plainly:
“Due to the delays in the project, the company will collect considerably more in profit over the entire lifecycle of the units from ratepayers than it would have had the project been completed under the original schedule. The profit the company will collect will increase from approximately $7.4 billion to approximately $12.6 billion.”
That’s a $5 billion increase in profit over the life of the plants, all of which is attributable to delays and cost overruns. No, Georgia Power and its partners didn’t do that on purpose. Nobody is even suggesting such a thing. On the other hand, it also hasn’t had a strong financial incentive to bring the project in on time or on budget. In fact, the PSC staff report is pretty harsh in its assessment of the project:
“The company failed to manage the project and its contractor in a reasonable manner … the company’s failure to manage the project in a reasonable manner resulted in repeated schedule delays and increases in actual and projected costs …”
It’s also important to note that when Georgia Power first brought the nuclear proposal to the PSC seeking permission to proceed, “the company emphasized that it would be an active manager of the project.” Now that it has all but collapsed, the company insists that it bears no responsibility for its failure, and will take no responsibility for any future failure.
So kill it.