Georgia Power is in the midst of a prudence review of its spending at the Vogtle 3 and 4 nuclear project—a review that undoubtedly will be lengthy, comprehensive, and mind-numbingly dull, turning on such issues as whether given decisions were “reasonable given the facts and circumstances which were known or reasonably should have been known at the time the decision was made.”1The real question though isn’t whether Georgia Power has spent customers’ money (and believe you me it is customers, not the utility, that are paying for this long-delayed, much over-budget project) prudently, but where the hell the adults where when the decision was made to go ahead with construction in the first place.
A close review of Georgia Power’s own documents (the filing can be found here) in the case shows two things: First, there were red flags aplenty when someone, anyone in the decisionmaking process would have been justified in standing up and saying, ‘Hey, wait a minute, what are we thinking?” Second, executives at Georgia Power apparently are color-blind and can’t see the color red, and continue to insist that everything—and I mean everything—they have done during the past decade to build the two new Vogtle units has been appropriate. For example, writing in the introduction to the company’s 885-page filing to the public service commission, Paul Bowers, Georgia Power’s chairman, president and CEO, offered up this classic: “Every dollar, and every day, that has been invested has been necessary to complete these new units safely and correctly. Our reports will establish that the new units could not have been built for less money or in less time than it has taken.” That may be, but that kind of logic can justify almost any expenditure. If the utility had paid attention to the red flags hanging everywhere it might have more accurately estimated the project’s cost and required construction time in the first place, which in turn might have led to a different decision by the commission.
The problems with the project go back to the very beginning. For starters, what were Georgia Power and Westinghouse executives thinking in April 2008 when they signed an engineering procurement and construction (EPC) contract for the two new nuclear units that was essentially a fixed price affair—even though detailed design drawings for the reactor’s construction were still years from completion, meaning, for the clear-eyed, that the contract price was little more than an estimate scribbled on the back of a cocktail napkin.
To be fair to Georgia Power and Westinghouse, it is easy to understand their mutual interest in signing this type of deal. For Georgia Power, it represented cost certainty—a key issue following the debacle surrounding construction of the first two units at Vogtle, which ended up costing billions (yes, billions) more than projected and taking years longer to construct than initially forecast. For Westinghouse the motivation was even stronger—the contract with Georgia Power represented an opportunity to prove that its new AP1000 reactor was commercially viable.
So the deal was signed, even though a cursory review of past nuclear construction projects—projects that executives at both Westinghouse and Georgia Power undoubtedly were familiar with—would have raised stadium-sized red flags.
Fixed price contracts in the nuclear power business had essentially ceased to exist by the 1980s [the last period of major nuclear plant construction in the U.S.] because suppliers had lost so much money on previous construction projects, wrote Charles Huston, one of the nuclear power consultants hired by Georgia Power to evaluate the prudence of its Vogtle 3 & 4 spending in the current PSC review. The problem with fixed pricing, he pointed out, was that design changes and schedule delays frequently ran up the costs with no potential for recovery.
Nevertheless, donning the rosy-colored glasses apparently available for free in Georgia Power’s executive offices, Huston dubbed the utility’s ability to obtain a fixed price contract for Vogtle “a major achievement”—even though design changes and schedule delays for the new reactor were almost inevitable given its first of a kind status, absence of detailed construction drawings and lack of nuclear construction infrastructure. The only thing the fixed price contract really did was kick the cost can down the road, setting the utility and the construction team up for failure when the issues ignored in 2008 reared their ugly head, as they inevitably did. As Huston points out: “Accordingly, certifying that a design is complete for issuance of the COL [combined operating license] does not also mean that the design is complete from a construction point of view. All major construction projects experience continual design review as construction proceeds, which impacts schedule and cost. This risk is heightened with a FOAK [first of a kind] design in an industry that has been dormant for a generation with respect to construction.”
But no one at either the utility or Westinghouse said anything.
A key factor in the construction savings expected by Westinghouse was its modular design approach, whereby key components would be manufactured offsite and then transported to the construction site for assembly instead of being built one at a time at the site itself. It was all supposed to run like clockwork, except the clock quickly broke down.
In Westinghouse’s initial schedule, for example, construction of what it dubbed CA01, the most important module in the containment building was supposed to begin in June 2011 with the fabrication of the first of its 47 sub-modules. All of those sub-modules were supposed to be complete three months later in September and then CA01 and two other modules could be set in place and welded together by April 2012. Done and done in well under a year.
Unfortunately, it didn’t quite turn out that way.
As Huston points out in his review, no work at all had been done on the CA01 sub-modules as of December 2013—18 months after it was all supposed to be completed. Worse, he wrote, “I received a site tour of the nuclear island for Vogtle Unit 3 on February 1, 2016. Work had not been completed on module CA01 in the containment building to allow the setting of modules 2 and 3.” [Emphasis added, although perhaps not necessary.]
Going on four years and counting, so what happened? The obvious, and the predictable, if anyone had wanted to look. A warning about potential problems was even included in the original Georgia Public Service Commission reactor certification process by Dr. William Jacobs, the expert hired by the PSC to evaluate Georgia Power’s proposal. “As no AP1000 units have been built, it is likely that problems will be encountered during the construction process that will require redesign and rework,” Jacobs wrote.
The problems showed up almost immediately, as Huston pointed out: “The main problem was that SMS [Shaw Modular Systems, the manufacturer responsible for building the modules that would then be assembled onsite] had difficulty finding management personnel with the required level of expertise in quality control of fabricated modules for a nuclear plant. These personnel did not exist because no fabricator in the United States had ever fabricated modules for a nuclear plant on this scale.”
But no one at Westinghouse or Georgia Power could have foreseen that being a problem?
Similarly, the modular design, by definition, would require a lot of welding to put the various pieces together. Just to stitch CA01 together, Huston said, would require 47,000 linear feet of welding. “This is a staggering amount of welding that clearly was not fully appreciated by the consortium when the decision was made to use a modular approach for the construction for Vogtle Units 3 and 4,” Huston wrote.
How could Westinghouse and its construction partners not have appreciated how much welding would be involved in their own damn design?
And then, surprise, surprise, the partners found that it was hard to find welders capable of meeting nuclear standards—even though construction on the last nuclear reactor had been wrapped up at least 15 years earlier. Don’t you think that someone, anyone at Georgia Power or Westinghouse or one of the other partners might have thought to ask: Where are we going to find the specialized construction workers needed to pull this off?
But no one asked, because no one wanted to know.
Regardless of the red flags, Westinghouse and Georgia Power went forward with the 57-month construction timetable for the new reactors, a schedule that Huston noted was “extremely aggressive…based on the actual schedule durations of the nuclear plants completed in the 1980s at the end of the previous generation of nuclear construction.” For comparison’s sake, Huston pointed to Wolf Creek, a project that he worked on, that entered commercial operation in 1985. Construction on that plant took 98 months, he wrote, even though it did not encounter any significant licensing delays and it was a standardized nuclear design.
Why, after 20-plus years of essentially no construction activity, Westinghouse assumed it could slice more than three years from the new reactors’ timeline is a good question. Why, after having been through the painful Vogtle 1&2 construction process, no one at Georgia Power asked Westinghouse about its schedule is an even better question.
Sadly, there undoubtedly will be more questions to answer in the years to come. Huston’s review notes that “no significant mechanical, piping, and electrical work had started in the containment building” as of his February 2016 site visit, and there had been only limited progress in the auxiliary building. The original schedule called for piping and electrical work to begin in the containment building in April 2012—meaning this part of the project is now 48 months behind schedule. Whether some of that time can be made up is uncertain, but past history would say no, as Huston points out: “The previous generation of nuclear plants generated a large number of fabricator and construction design changes for nuclear island pipe, pipe supports, cable tray supports, conduit supports, and instrumentation fabrication and erection. Since the erection of bulk pipe and electrical work has not yet begun in the nuclear island, the amount of additional design changes for Vogtle Units 3 and 4 is unknown at this time.”
What is known, Huston added, is that the “nuclear islands for Vogtle Units 3 and 4 have very tight working spaces that are conducive to interference and design changes.” In addition, there is that welding issue, which Huston said is “likely to continue to be a problem when the welding of nuclear island piping and pipe supports increases in the future. “
Despite the questions he raises about the project, Huston comes down squarely on Georgia Power side: “I find that GPC’s actions in managing the project and the cost of the work performed by the EPC contractor have been prudent and as a result, all costs on the project have been prudently incurred.”
In regulatory speak Huston may well be correct, but that misses the larger question: Where were the adults willing to ask the hard questions and challenge the easy assumptions?
1 Georgia Power Company’s supplemental information report, page 26, citing an earlier decision by the Georgia Public Service Commission concerning prudence.