ATLANTA (AP) — Southern Co. said Friday that it expects to exceed its $6.1 billion construction budget by $87 million as it builds a first-of-its-kind nuclear plant in eastern Georgia.
The Atlanta-based utility did not ask state regulators to approve an increase in its construction spending, which is now estimated to rise to roughly $6.2 billion. However, the company signaled in a regulatory filing that it may ask Georgia's Public Service Commission for a formal budget increase in the future. The utility still faces commercial disputes worth hundreds of millions of dollars and supply issues that could increase costs.
Vogtle is the first nuclear plant approved for construction in a generation. It's being closely watched by a power industry that struggled years ago to build nuclear plants without badly blowing budgets. Even with increased spending, Southern Co. said finishing the two AP1000 reactors at Plant Vogtle is a better deal than the alternative of building gas-fired plants.
"We're building a nuclear facility," said Buzz Miller, executive vice president for nuclear power development at Southern Co. subsidiary Georgia Power. "Our primary focus when we're building it is to build it correctly, build it safely, build it with quality. So when we go about our chores, that is focus number one."
Georgia Power, the lead partner, owns just under half of the plant being built near Augusta. The other owners are Oglethorpe Power Corp., the Municipal Electric Authority of Georgia and the City of Dalton. The total project is estimated to cost around $14 billion.
Construction of the reactors will be delayed seven months, according to the filings. The first unit was supposed to be operating by April 2016 with the second coming online a year later. Georgia Power now says the first reactor will start producing power no sooner than November 2016. Utility executives publicly disclosed that schedule shift in May.
Company officials argued that even the increased spending estimate is cheaper than the $6.4 billion budget approved by the Public Service Commission in early 2009. State regulators later trimmed the construction budget to roughly $6.1 billion because Georgia passed a law making it cheaper for the utility to finance the project.
That new law allows Georgia Power to charge its customers now for the interest it pays on the borrowed money needed for the project. Under the old model, the utility had to wait until the plant was operating to collect those interest charges from its customers, a practice that meant the interest owed grew during the construction period.
It seems unlikely that Wall Street will penalize Southern Co. over its budget projections. So far, the cost overruns are relatively small, and financial analysts probably won't be surprised. Credit ratings agencies analyzing the company have said nuclear plants could be costlier and more complicated than expected.
Those concerns are partially offset by Georgia Power's position in the market. As a regulated monopoly, the utility can legally recover the entire cost of building the plant from its customers, reducing the odds that Southern Co. will be stuck paying the bill. Elected regulators on the state's Public Service Commission have the power to prevent the company from recovering construction costs deemed to be "imprudent," though that authority is rarely invoked.
Peter Bradford, who sat on the U.S. Nuclear Regulatory Commission from 1977 to 1982, said he was skeptical that a nuclear plant will prove cheaper for customers in the long-run than other alternatives. He noted that Exelon decided to cancel a nuclear plant in Texas this week because it said nuclear power cannot compete against low natural gas prices and other market factors.
"How can Georgia be all that different?" Bradford said. "The answer is, it can't."
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