Imagine a business that oversees massive construction projects but doesn’t have to worry about completing them on time or within budget. Hard to believe a company like that could stay in business, right?
Then imagine that same company actually earning a profit from schedule delays and cost overruns. Sound too outrageous to be true? Well, it’s true and is happening right here in Georgia. And, unfortunately, it’s Georgia Power Company’s consumer and small-business ratepayers who are footing the bill for this unbelievable business model.
That’s right. Georgia Power and its parent, Southern Company, have no skin in the game for cost-effective construction of two new nuclear reactors at Plant Vogtle. In fact, the longer it takes to complete the project and the more costly it becomes, the more Southern Company stands to gain. The two nuclear units originally scheduled for completion in April 2016 and 2017, respectively, already are running tens of millions over budget and more than a year behind schedule.
How did this happen? In 2009, the General Assembly, in adopting Senate Bill 31, allowed Georgia Power to side-step the Public Service Commission, which has been given “exclusive power to decide what are fair and reasonable rates for services under its jurisdiction.”
Instead of allowing the commission to fulfill its responsibilities and protect the public interest, the General Assembly, having been told by Georgia Power that ratepayers would avoid paying $300 million in “interest on interest” during construction, took the company at its word. However, the reality is that the promised savings vanished, and ratepayers now are being forced to pay dearly for cost overruns for the Vogtle nuclear plants.
But here is the real kicker: Georgia Power will continue to receive a guaranteed 11 percent rate of profit even when the company exceeds the budget and misses deadlines for project completion.
Ratepayers also will pick up the tab for financing costs that result from any delays or additional construction capital expenses, which will allow Georgia Power to further gain from cost overruns.
In order to remedy this unacceptable situation, I asked Georgia Power in writing to voluntarily forego the profit that the company stands to make on the cost overruns. I did receive a response to my letter but did not receive an answer to my question.
As a result, I have filed legislation — House Bill 267 — which, if enacted, would amend the 2009 law so that Georgia Power cannot collect the full 11 percent profit on construction capital costs that exceed the originally certified $6.4 billion cost to complete the project. This legislation is simply a precautionary measure that would only come into play if additional cost overruns materialize, which Georgia Power has suggested won’t be the case. It will not negatively impact the safe construction of the nuclear power plants or deny the company a reasonable rate of return on its investment, but it will prevent Georgia Power from profiteering on cost overruns at the expense of consumers.
Unfortunately, Georgia Power has responded by answering questions not raised by my bill or my letter. For the record, my question to Georgia Power is a simple one: Should the company be allowed to earn a profit on cost overruns that exceed the maximum amount that it initially claimed the reactors would cost? I am not saying Georgia Power cannot recover or profit from the construction costs originally certified, and I am not disputing the potential benefits of the Vogtle plants.
Lastly, I want to make it perfectly clear that I’m not against nuclear energy; I am opposed to Georgia Power using the legislative power of state government to socialize its cost overruns in order to subsidize its profits at the expense of the hard-working people of Georgia.
Chapman, R-Brunswick, can be reached at 404-656.0126.