In case you haven’t heard, legislation has been introduced to allow Georgia Power to recover costs early, called “construction work in progress” or CWIP, for the construction of two new nuclear reactors at Plant Vogtle:
Georgia Power Co. could start billing customers for a planned nuclear plant expansion as soon as construction begins under legislation a Senate leader will introduce.
Current state law would only allow the utility to begin recovering its investment in the $14.4 billion Plant Vogtle project when the expanded facility goes into service.
Georgia Power officials say moving up recovery of the costs would save ratepayers $300 million because the company could begin paying off interest on the construction loans sooner.
Sen. Don Balfour, R-Snellville, compared the concept behind the bill he plans to introduce on Friday to a consumer loan.
“If you buy a car and put it on your credit card, you’re going to pay a lot of money,” said Balfour, chairman of the Senate Rules Committee. “If you save a little money and pay some of the cost up front, you pay a lot less.”
Not to pick on Sen. Balfour here, but the comparison to a car loan is not accurate. Would you send a check to a car manufacturer when they start building your car, essentially paying for it before you ever had the benefit of driving it?
Also, Balfour’s comment about “many other Southeastern states” with cost-recovery laws already on the books is true, but that’s only part of the story. He doesn’t mention the “buyer’s remorse” that legislators have. For example in Florida, Progress Energy has been pressed to suspend its cost-recovery plan due to the economic struggles of ratepayers. Progress Energy planned to add an extra $11.42 per 1,000 kilowatt hours.
In Alabama, a TVA project at the Bellefonte plant has had cost overruns that are more than double the estimate made the previous year. The original estimate at Bellefonte was $6.4 billion, which is coincidentally the same price tag Georgia Power has given for the two new reactors at Plant Vogtle.
Cost overruns, as noted above in the TVA project at Bellefonte, are significant when dealing in nuclear projects such as what is being undertaken at Plant Vogtle. A RAND Corporation study, cited by Tom Newsome during his testimony to the PSC, puts the average overrun for a nuclear power projects at 157%. Newsome also added that “[t]here is no direct evidence for [PSC] Staff to confirm the reasonableness of the Company’s in-service cost estimate of $6.4 billion.”
The Public Service Commission’s own staff has analyzed the bill and found that SB 31 not only takes all risk away from investors and shareholders, it “would force current customers to subsidize future customers.” PSC staff further added that “[w]hen ratepayers’ cost of money is taken into account, the pre-payments cost rate payers at least $218 million in net present value dollars over the life of the plants.” According to Jeff Pollock’s testimony to the PSC, ratepayers would pay $740 million more under SB 31.
Georgia Power and Sen. Balfour have both stated that early cost-recovery would save ratepayers some $300 million in interest, however, this figure can only be found by assuming that there is no cost of money, by ignoring the time value of money and it completely ignores the prepayment of state and federal income tax, which Lane Kollen testified and has quantified as at least $400 million during his testimony to the PSC. Additionally, PSC staff notes that it is “unreasonable to ignore” the pre-payment of taxes, adding that Georgia Power is “indifferent to the pre-paid taxes – they are a pass through for them.”
The PSC staff analysis also found that if this bill is passed that it ties the hands of the Public Service Commission “from changing the date that recovery would begin” as well as “[prohibiting] the Commission from changing the period of time over which the costs are recovered.” If things don’t turn out as advertised by Georgia Power, the PSC would be powerless. Since Sen. Balfour like using car analogies, this would be the equivalent to driving a car with no brakes. The legislature would have means to change the law, but that could take time and ratepayers would have to pray the lobbyists for Georgia Power call in sick during the session.
I’m not against nuclear energy, I’m against companies that give the appearance of rent-seeking by using the legislative power of government to take the burden off of investors and shareholders and put all the risk on ratepayers.
SB 31 will go before the Senate Regulated Industries and Utilities Committee sometime soon, as early as tomorrow afternoon.