Settlement over Plant Vogtle cost overruns seen as positive development

By David Pendered

A settlement reached by the owners and contractors who are developing two nuclear plants at Plant Vogtle is expected to enable state utility regulators to certify the higher costs estimates and schedule announced earlier this year.

plant vogtle

The owners of two nuclear plants being built at Plant Vogtle have reached a settlement with contractors over cost overruns. File/Credit: Plant Vogtle website

Georgia Power and other owners of the two nuclear plants announced Oct. 27 that they have reached a settlement in three lawsuits that date to 2012. The deal includes a clarification of who’s to pay to comply with federal regulations as the regulations are developed, according to a statement by Moody’s Investors Service.

Conflict over compliance with new regulations resulted in the builders filing two lawsuits against the owners. One lawsuit alone was for $900 million in cost overruns. Georgia Power’s response included a lawsuit against the contractors.

Both Moody’s and Fitch Rating released statements describing the settlement agreement as a positive step in the construction project. Previously, Moody’s has cited the cost overruns at Plant Vogtle as one of the reasons it expects to downgrade the credit rating of Southern Co., parent of Georgia Power, according to a ratings statement issued Aug. 24.

If all goes as planned, the plants are to be substantially complete in 2019 and 2020 – three years behind the original plan.

Some details of the settlement are expected to be presented Tuesday by Georgia Power to the Georgia Public Service Commission. The deal involved the plants’ owners and the engineering, procurement and construction contractors [EPC].

Georgia Power has kept the GPSC informed of the negotiations and intends to formally submit the settlement agreement and related documents after the settlement becomes final and after a related transaction becomes final, according to a statement from Fitch Ratings.

The related action is fir Westinghouse Electric Co. to become the primary contractor and purchase one of the original subcontractors working on the plants. Westinghouse is to buy the Stone & Webster nuclear construction business from Chicago Bridge & Iron Co. Fitch noted that the deal diminishes concerns over Stone & Webster’s credit worthiness.

Westinghouse Electric Co. describes the AP 1000 being built at Plant Vogtle as the, "safest and most economical nuclear power plant available in the worldwide commercial marketplace." Credit: theconstrutionindex.co.uk

Westinghouse Electric Co. describes the AP 1000 being built at Plant Vogtle as the, “safest and most economical nuclear power plant available in the worldwide commercial marketplace.” Credit: theconstrutionindex.co.uk

Westinghouse also intends to bring in Fluor Enterprises, Inc. as a new construction subcontractor, according to the Moody’s statement that adds a caution noting the new subcontractor represents:

  • “[A] potential risk as another new party is introduced into each of these complex projects well into the construction process. Fluor is the third firm engaged since the projects began despite previous assurances from the project owners that both Stone and Webster and CB&I were up to the task. Both projects continue to face several “first of a kind” engineering and construction risks and are still roughly only half complete, and we expect continued challenges as construction proceeds.

Georgia Power customers already are paying higher utility fees to offset Georgia Power’s construction costs, in the form of a monthly fee. Georgia Power thinks the settlement will enable the rate increase to remain in the range of 6 percent to 8 percent. Customers already are paying 4.5 percent of the planned rate hike, according to Moody’s.

According to Moody’s statement: “We believe the settlement could open the door for the GPSC to certify the higher Vogtle project cost estimates and revised project schedule announced earlier this year, as litigation with the EPC contractors was a key rationale cited by the GPSC for not certifying the revised costs and schedule.”

The settlement ends three lawsuits filed in 2012.

The most significant of the lawsuits involved $900 million that contractors sought from Vogtle’s owners for additional work that was necessary to comply with design changes required by the federal government. This case was filed in U.S. District Court in Washington.

According to Moody’s, terms of the settlement include:

  • Georgia Power owns 45.7 percent of the Vogtle project and will pay about $350 million to the EPC. About $120 million of this amount has already been paid.
  • Oglethorpe Power Corp. owns 30 percent of the Vogtle project and will pay $230 million to the EPC. Of this sum, $80 million has already been paid.
  • Municipal Electric Authority of Georgia owns 22.7 percent of the project and is to pay about $174 million.
  • Moody’s statement did not mention Dalton Utilities is to pay into the settlement. Dalton owns the remaining 1.6 percent, according to Southern Co.’s website.

David Pendered, Managing Editor, is an Atlanta journalist with more than 30 years experience reporting on the region’s urban affairs, from Atlanta City Hall to the state Capitol. Since 2008, he has written for print and digital publications, and advised on media and governmental affairs. Previously, he spent more than 26 years with The Atlanta Journal-Constitution and won awards for his coverage of schools and urban development. David graduated from North Carolina State University and was a Western Knight Center Fellow. David was born in Pennsylvania, grew up in North Carolina and is married to a fifth-generation Atlantan.

There are no comments

What are your thoughts?