More than a financial burden, Plant Vogtle a bad business decision for Georgia

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.

Michael M. Sizemore

Michael M. Sizemore

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.

Plant Vogtle, October 2017

The Georgia Public Service Commission has authorized the continued construction of Plant Vogtle, a nuclear power plant, despite cost overruns and construction delays. Photo dated October 2017. Credit: Georgia Power

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.

    solar power array

    Solar power and other renewable sources of energy offer viable competition to nuclear power. Credit: Bill Sublette

  • 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.

14 replies
  1. Robert Searfoss says:

    Thank you for this excellent report on the “Vogtle Vortex”. If tomorrow morning they found that they had to use their own money and not the free money taken in advance by the surcharge from most customers, they would have the Vortex construction stopped by noon.
    Yes, only “most” as some big customers get a pass on paying a fair share of the Vogtle surcharge. That’s yet another festering problem that needs reporting, along with a report on the millions of school tax dollars that are taken by the surcharge on schools.Report

    Reply
  2. James LittleJ says:

    Somewhat a naive and short sighted analysis. Investments in large energy infrastructure projects require long range planning. There is no mention of how baseload generation is provided with the intermittent nature of renewables or the loss of their subsidies and tax credits. Also, the facts are incorrect in that the Watts Bar plant was completed recently by Bechtel, the same contractor now in charge of the Vogtle project.
    In summary, this is a complex challenge and involves many factors and considerations over a very long period of time. It’s not the Olympics.Report

    Reply
    • Debbie Dooley says:

      Georgia Power chose the contractors and they mis-managed the project. It is obscene they are being allowed to profit from failure..Report

      Reply
  3. RT Smith says:

    Plant Vogtle will cost more than $27.1 billion, Georgia state budget for 2019 is $26 billion. GA Power rate payers are throwing away more than what the state spends in a year on education, law enforcement, roads on a big white elephant that might never be completed. The power produced by plant Vogtle will not competitive with power from renewable sources like wind and solar. Electricity from Solar costs less that 1.75 cents /KwH, Georgia Power charges its customer more than 15 cents/KwH. Plant Vogtle is worst than a bad business decision it’s robbing the poor to line the pockets of the rich, powerful and influential.Report

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  4. Arnie Gundersen says:

    These same problems were obvious ten years ago. I was a nuclear expert witness in Florida opposing the same AP1000 design proposed there as at Vogtle (Southern Alliance for Clean Energy was my client). The arguments I made, along with Dr. Mark Cooper and Peter Bradford, in Florida in 2009 and again in 2010 were similar to Mr. Sizemore’s and were considered divisive by FPL, Progress Energy and (incredibly) the Florida Public Service Commission. The fundamental problem is that the Public Service Commissions and State Legislatures have been coopted by utility donations and lobbyists, while the public interest was ignored. Now ten years later, those Florida nukes have been cancelled or indefinitely delayed for exactly the reasons Cooper, Bradford and I testified to back in 2009. The term in economics for what has happened is called “opportunity cost”. Those funds could have been put to better use by the public rather than enriching the utility. The term in politics is called “regulatory capture.” Politics trumped economics!Report

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  5. Torgen Johnson says:

    Southern California learned that nuclear power at San Onofre has a decommissioning cost in billions of dollars in addition to the power plant’s constructions costs. There are additional costs to contain, transport, store, and secure for thousands of years, the radioactive waste from the 30 years of operation which produced electricity at some of the highest rates in the country. During operation of San Onofre’s reactor units 2 and 3 Southern California Edison made huge engineering mistakes during the replacement of four new steam generating units costing ratepayers an additional 3.3 billion dollars. A captured public utility commission allowed the utility to charge ratepayers for the utility’s engineering blunders while the utility paid dividends to its shareholders. The final note at San Onofre is that Southern California Edison has decided to indefinitely store 3.6 million pounds of high level radioactive waste at sea level, in thin walled canisters, in a seismically active tsunami inundation zone, 108 feet from a public recreational beach where children play and the rate paying public is outraged. Beware of anyone who tells the public that rational, well researched criticism of the nuclear industry is naive and shortsighted.Report

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  6. Tim Echols says:

    With all due respect to another bow tie wearing writer, this was not a “hasty” “yes” from these 5 elected officials. It will be the voters who ultimately decide if we exercised poor judgement, not activists or NGO leaders, who lean left and are anti-fracking, anti-pipeline, anti-coal and anti-nuclear.Report

    Reply
    • Robert Searfoss says:

      Mr. Echols,
      While I’m not acquainted with Mr.Sizemore, I’m pretty sure he is not an “activist” unless you mean a thoughtful citizen with something intelligent to say. I don’t know if he is an “NGO leaders, who lean left and are anti-fracking, anti-pipeline, anti-coal and anti-nuclear.”
      It’s not about that or them anyway.
      It’s about large scale management failure and profit on that failure. It’s about your and the PSC’s large scale failure to protect customers from the massive financial burden that is The Vogtle Vortex.Report

      Reply
    • Arnie Gundersen says:

      I do not wear a bow tie and I was a former nuclear industry Sr.VP, but I support Mr. Sizemore. Mr. Sizemore’s comments were neither that of a “lefty” nor a “righty”. Money is an apolitical green, not blue or red. The Vogtle decision is a poor one because it makes no economic sense.Report

      Reply
  7. Glenn Carroll says:

    Public Service Commissioner Echols (up for re-election in only five years) has a HELL of a lot of nerve to push back on the point of whether the PSC was hasty in producing a YES vote to continue the Vogtle boondoggle. Let’s review. The Commissioner who resigned immediately after voting YES in December, led the Commission in truncating the Vogtle review process on whether Vogtle should continue by a whopping 45 days with no formal discussion or decision-making, they just issued an order! Then the Commission, especially Echols, proceeded to conduct illegal ex parte communication with Georgia Power, ignored its own staff and testimony from professionals experts, including a former Nuclear Regulatory Commissioner/Public Service Commissioner, and OH YES now face multiple charges in federal court brought by a consumer protection group and a faith-based energy policy group. Beware the Golden Rule, Commissioner Echols! If the earthly judge does not put handcuffs on you, what will you say to the Eternal Judge? Never too late for redemption!!! The Commissioners have the legal power in each moment to initiate decertification of an UNNEEDED POWER PLANT. Can we PLEASE get three commissioners with the backbone to stand up to Georgia Power and show some common sense, decency, and protection for the public iit is supposed to serve?Report

    Reply
    • Robert Searfoss says:

      If it is such a good idea to complete this plant then how about Georgia Power and Southern Company and the others use their own money to do it? I’m sick of them taking my retirement money and school tax money for free to build their new plant. They have money, stockholder money, and can borrow if needed.Report

      Reply

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