Customer-paid financing shifted too much risk away from the utilities building nuclear projects in Georgia and South Carolina to their customers, creating “debacles waiting to happen,” a former state and national utility regulator said Thursday.
Earlier this week, the two utilities building two new reactors at the V.C. Summer plant in South Carolina decided to shut down the project.
SCANA Corp. and Santee Cooper said the nuclear plant was no longer economic to complete, citing a cost estimate that had soared to $25 billion, and the late-March bankruptcy of Westinghouse Electric, the key contractor in the project.
Southern Company, whose Georgia Power unit is the main partner in the similar Plant Vogtle nuclear project near Augusta, disclosed fresh figures Wednesday that indicate its price tag also had risen to more than $25 billion — about double its original cost — in the wake of Westinghouse’s bankruptcy.
Southern also acknowledged the project’s completion date has been delayed more than two additional years, to 2023. The company so far is forging ahead with construction, but said it has not decided the plant’s fate. State regulators have the ultimate say.
Both the South Carolina and Georgia plants are using Westinghouse’s AP1000 reactors.
But Peter Bradford, former commissioner at the Nuclear Regulatory Commission and past chair of the New York and Maine state utility regulatory commissions, said Thursday in a press briefing that the methods used to finance both projects encouraged too much spending and risk-taking by the utilities.
Traditionally, most big power plants were financed by the utilities’ shareholders while they were being built. After it was completed, customers would then pay back the plant’s cost through an increase in their power rates approved by state regulators.
But the South Carolina project, like Plant Vogtle, is being financed up front by surcharges on customers’ bills that pay returns to the utilities’ shareholders and bond investors. So far, Georgia Power has collected about $1.4 billion from customers since 2011.
Another proposed plant in Virginia, Dominion’s North Anna 3 reactor, would also be financed by customers, said Bradford.
Georgia Power and officials at the Georgia Public Service Commission argue that the up-front finance charges lower customers’ costs in the long run.
Georgia lawmakers mandated the customer surcharges "because it’s the best way to finance the project for customers, said Georgia Power spokesman Jacob Hawkins. "Collecting financing costs during construction saves customers money by reducing financing and borrowing costs, while also phasing the plant into rates over time helping to avoid “rate shock” at the end of the project."
But the new financing method has been a “disastrous mistake,” Bradford said. It shifts the risk of project failure onto customers “instead of the investors and lenders who should properly bear them,” he said.
“Freed of responsibility for the consequences of their mistakes, utility executives too often plunge into ill-advised schemes to pad their rate bases and individual compensation” instead of selecting less costly alternatives, he said.
Hawkins did not answer questions about Bradford's assertions that up-front financing shifted the Plant Vogtle project's risk to Georgia Power's customers and caused the company to push the costly nuclear project rather than cheaper alternatives.
During a conference call with investors this week, Southern CEO Tom Fanning cited the customer surcharges as a a key protection for the company’s shareholders, along with the “generally constructive” relationship with Georgia utility regulators.
The surcharges “provide a rate of return during the (Vogtle) construction process, however long it is,” he said.
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