Southern Co. has had a simple message for the past few years: The effort to build the country's first new nuclear power plant in a generation was on time and on budget. Now, that message is changing.
The $14 billion project to build two reactors at Plant Vogtle is trending hundreds of millions of dollars over budget and trailing more than a year behind schedule, according to a report from a state-hired construction watchdog. Now top-ranking utility executives are saying quality counts more than cost.
The report is nothing new for an industry with a history of cost overruns and project delays, but the news is concerning to the projects' partners, including the Municipal Electric Authority of Georgia, a consortium of local governments that run their own power systems. Covington is a member of MEAG and buys its power from the group.
The future of the project is of keen interest to Covington officials, who have pledged to invest $168 million in the expansion of Plant Vogtle. If costs increase, it's possible Covington's share could increase as well.
MEAG has 22.7 percent ownership in Vogtle, while Georgia Power has the largest share at 45.7 percent. The two new units were budgeted to cost approximately $14.5 billion to construct and will provide 1,117 megawatts of power apiece, slightly less than the 1,215 MW produced by existing units 1 and 2.
"I say this very carefully - we manage it so we keep costs the best we can," said Buzz Miller, executive vice president of nuclear development at Southern Co., who oversees the project. "But building it [right is] priority one. The absolute capital number here is not what's important. What's important is the overall project, economic and value to the customers for the next 60 to 80 years."
That first reactor was supposed to be finished in April 2016, followed by the second reactor a year later. While the company has not formally changed those dates, it said completion of the first reactor has been pushed to November 2016. Under questioning, an executive said the timeline might stretch to early-to-mid 2017. Now a state monitor reports that first reactor will be finished no earlier than June 2017. He estimated the cost of a one-year delay as in the range of hundreds of millions of dollars.
In a letter sent out to MEAG members, Bob Johnston, MEAG's CEO and president, said, "any delay to the schedule, regardless of fault, would result in additional financing costs to each of the co-owners.
"We are working closely with our agent Georgia Power Company, in an effort to minimize the impact of these issues upon the project's schedule and budget."
In a move that raised eyebrows of project critics, the company recently said that a contingency fee of 20- to 25-percent was normal for a project of this size. It did not request a contingency fee when state regulators approved the project.
Much rides on the project. Industry officials ranging from Fanning to U.S. Energy Secretary Steven Chu acknowledge it's a test for whether the nuclear industry can construct new plants without the chronic delays and cost overruns seen in the last round of construction decades ago.
"If this project goes forward and is built on-budget, on-time and on-schedule, that would be a very good thing," Chu told reporters during a February visit to the site. "A lot of other companies will say, ‘OK. We now know we can do this and it would be a good investment.'"
Robert Baker, a former utility regulator, said he planned to ask Georgia's Public Service Commission to adopt a plan that would trim the utility's profits if the project comes in over budget. Because the monopoly is guaranteed a profit on every dollar it spends, Baker said it has a disincentive to control costs.
"There is now no way that this project can come in on-budget and on-time as has been stated repeatedly," he said.
Several issues account for the delays. Southern Co. received its license to build from federal regulators months later than expected. The companies building the plant still have not agreed on an updated start-to-finish schedule.
Metal bars that will become part of the plant foundation were not installed exactly as required in plans, an error uncovered by federal inspectors. That required extra time and fixes. The Shaw Group Inc. in Lake Charles, La., experienced difficulty meeting stringent documentation and other quality rules required in the nuclear industry as it built parts for the facility.
Miller said Southern Co. knew that vendors might need to re-master nuclear norms since the industry had been dormant for years. He said the problems can be overcome.
"I think the big lesson and what we look at is you have to keep at it, keep at it, keep at it," Miller said.
