By Guest Columnist MICHAEL M. SIZEMORE, founding principal of Sizemore Group and a Fellow of the American Institute of Architects
What makes a good business decision? After running a successful architecture firm for decades, I’ve learned a thing or two about what guides good business judgment, and the importance of making sound decisions in the best interest of one’s clients.
In the 30 years since I founded the Sizemore Group in Atlanta, we have developed an approach to sustainable design that has served as our guiding business model for projects large and small. In executing projects such as the master plan for the 1996 Centennial Olympic Games, we have worked to ensure that stakeholders have a substantial voice in the planning process. A project cannot succeed without a strategic plan that defines and balances the need, scope, and budget.
And that is why I can say with confidence that the decision to continue the Plant Vogtle nuclear expansion, despite a near doubling of its original price tag and more than five years of delay, appears to be bad business, pure and simple.
Georgia Power is a regulated monopoly, which means that it has a regulator: The Georgia Public Service Commission. That body of five elected officials is tasked with the legal and ethical responsibility to determine if the utility’s proposed business project is viable and is sufficiently secure to put the people’s money behind it. When it works, regulation of public monopolies like Georgia Power produces outcomes that mimic the efficiencies and benefits of free markets – in other words, good business decisions.
The answer to that question may have been “yes” 10 years ago when the project was first approved, but as the schedule has slipped and the costs have soared, the commission was called upon to revisit that decision. And if the commission had looked at it strictly as a business decision, members would have said “no,” difficult as that might have been.
Instead the commission issued a hasty “yes,” which was a disservice to our entire state and good only for Georgia Power’s bottom line.
Georgia Power has now illustrated why its peers will not touch this type of high-risk endeavor. While the utility continues to take pains to convince Georgians that the project is now on track, we’ve heard those assurances before.
In reality, the project is now riskier for customers, who will be expected to pay for any further cost increases. Following the bankruptcy of Westinghouse Electric Company, the project’s former lead contractor, Georgia ratepayers have lost the fixed price contract that has heretofore helped limit their exposure to cost overruns. The arrangement is now cost-plus, which as any project owner knows, can get out of control in a hurry, as the contractor no longer has any incentive to control costs. As the deadline continues to be extended, cost overruns become a profit opportunity for Georgia Power.
It seems highly unlikely that the commissioners would front their own money on such a risky venture. “I wouldn’t bet my house on it,” is how former PSC Chairman Stan Wise put it when asked during a radio interview (recorded the day after his long tenure at the PSC ended) if the project would meet the revised schedule. Not exactly the ringing endorsement weary Georgia Power customers are looking for.
Before investing in anything, whether it’s a multi-use development or the single most expensive capital project in state history that will impact Georgians for decades to come, I believe the following guidelines should be considered:
- Do not produce when there is no market: “If you build it, they will come,” sounds nice as a movie slogan, but it makes for poor business. The reality is that electricity demand growth has slowed dramatically in Georgia, and Vogtle is an increasingly costly route to power we don’t and won’t need.
- Consider competitors’ prices: Solar, energy efficiency and gas already cost less, while clean, renewable energy can deliver the same product cheaper, faster, safer, and with moreeconomic benefits for Georgia.
- Take note of changes in the marketplace: No utility in the country has built a nuclear project in the past 35 years – all 29 planned nuclear reactors intended to revive the industry have been cancelled or delayed indefinitely due to soaring costs. One would think that the delays and cost overruns that caused state regulators to pull the plug on the similar V.C. Summer nuclear project in South Carolina would have at least inspired increased caution and scrutiny here.
- Beware of a history of poor project management: Criticism from the commission’s own staff deemed it “unreasonable” for customers to bear financial responsibility for Georgia Power’s “failure to manage the project in a reasonable manner.” Rewarding past mistakes is hardly a recipe for fixing management problems going forward.
- Bill for work only after it is completed: Customers are paying for this project long before its completion, and if it is ever finished, they will continue to pay higher electric bills for decades as a result. Georgia Power’s threats to abandon the project if its shareholders were forced to absorb any of the cost overruns should have been a clear signal to the Commissioners that this is a bad deal for customers. No business should be rewarded for consistently failing to deliver on time and under budget.
It is apparent that none of these guiding principles factored into the Commission’s decision, and the result is a further erosion of the public treasure and trust. If the only beneficiaries are the monopoly’s shareholders, it is bad business for the rest of us.
Note to readers: Michael M. Sizemore led the master planning of the Atlanta Olympic Games and served as the architect for the Metro Atlanta Chamber of Commerce Addition, as well as other major projects in Atlanta and beyond. Sizemore is an elder at Central Presbyterian Church and serves on Georgia Interfaith Power and Light’s Energy Efficiency Grants Committee.