Tag Archives: Vogtle 3&4

Time For Southern
 To Face Facts:
 Vogtle Project
 Should Be Canceled

The mess at the Vogtle nuclear construction project just keeps getting deeper, and ever-more costly.

Earlier this month, Southern Company CEO Tom Fanning announced that the utility was raising Georgia Power’s share of the already-too-expensive and long-delayed project by $1.1 billion, upping the utility’s 45.7 percent stake in the plant to a mind-boggling $8.4 billion (and that doesn’t even include the $1.7 billion paid by Toshiba to resolve the Westinghouse bankruptcy, but that’s another story). While he continued to defend the company’s work at the roughly 2,234 MW project, Fanning said the company’s shareholders would eat the bulk of the additional cost increase to maintain the project’s “momentum” (if that description is even possible for such a trouble-filled construction effort).

Specifically, Fanning told analysts: “Although we believe the increased…costs are reasonable and necessary to complete the project we have made the judgment that it’s in the best long-term interests of investors, customers and other stakeholders that we not disrupt project momentum by seeking approval of the base capital cost increase so soon after receiving PSC [public service commission] approval to continue with the project. Therefore, when Georgia Power files the increased cost estimate with the PSC as part of VCM 19 later this month, Georgia Power will not request recovery of the $700 million in base capital cost increase.”

I am sure Georgia’s state regulators will take Fanning at his word, probably glad that they can continue to ignore the obvious, that the reactor project is no longer economic. But a much more likely explanation for Fanning’s unusual gesture—for years the company has used the Georgia PSC’s endorsement of the project in 2009 as the justification for each and every cost increase that has come down the pike—is that he and the Southern executive team know that if they sought further cost recovery the commission might finally read its staff analyses and determine that the plant isn’t in ratepayers’ interests nor needed to meet demand.

Consider that in the latest mandatory six-month review of Georgia Power spending at Vogtle, which covered the period from July-December 2017, commission staff concluded that completing the reactor project was only “slightly economic” and, here is the kicker, only “if the company meets its current cost and [commercial operating date] forecasts.” [Emphasis added, but probably not necessary]

That testimony, prepared by Philip Hayet, Tom Newsome and Leah Wellborn, was submitted in June 2018 (it can be found here)—two months before Southern’s latest cost increase announcement. In other words, the additional costs almost certainly render the plant uneconomic, if it wasn’t already, and would explain the company’s decision to soak shareholders for the new charges and not return to the commission.

Worse, more cost increases and delays may be in the offing.

In his early August announcement and subsequent Q&A with analysts (which can be found here), Fanning talked repeatedly about labor-related issues at the site. The company needs, he said, both to boost the size of its onsite labor force, particularly electricians and pipefitters, and to ensure that all these workers are being used productively.

“It really deals with what we’ve been saying for some time now,” he said. “And that is our ability to deploy labor productively onsite. That’s going to help us get to our schedule and that has certainly cost ramifications. We’ve got to keep productivity on the site up, and actually improve the amount of hours worked every month onsite as we get through this ramp-up process into November and then for the next 18 months.”

Whether the company will be able to do that is unknown, but its track record of living up to past promises is spotty, at best.

The degree of difficulty associated with Fanning’s projections for the work that must be done over the next 18+ months if the project is to be completed on time was underscored in testimony by Steven Roetger and William Jacobs as part of the last staff review of the Vogtle project (that testimony can be found here). It is worth noting here that Jacobs and Roetger have been vocal and correct critics of the company’s construction schedules and cost estimates for years (see my story here), and predicted two years ago (see here) that labor productivity issues inside the reactor containment vessels could be a major problem.

Discussing the company’s plan to have the reactors complete by April 2021 and April 2022, which would be eight months earlier than the PSC’s currently approved delayed startup schedule (which is in turn a whopping 69 months beyond the company’s initial announced completion date), the analysts said the staff is not confident the company can meet those targets. To hit those dates, they pointed out, the company would have to boost the amount of work completed each month “to levels never before achieved on this project.”

Later, they expanded on this: “The staff’s greatest concern and what staff identifies as the most significant risk to the project schedule at this time is the ability of SNC [Southern Nuclear Company] to increase construction production to the level needed to meet the target +21-month schedule.  Meeting the target monthly percent complete will require a significant increase in production by increasing craft personnel and by more efficient use of those personnel, i.e. improve the productivity of the craft. At present, the project is earning approximately 85,000 to 100,000 hours per week on the direct construction scope. This will need to increase to 140,000 earned hours per week by October 2018 to meet the current target +21-month schedule.”

In other words, the amount of work completed weekly will have to increase on the order of 50 percent, and be sustained for months, to meet the 21-month schedule.

Even meeting the approved startup dates of November 2021 and 2022 is likely to pose a serious challenge, the two wrote, noting that “improvements in productivity and the required additions of craft personnel must occur in the immediate future for the potential to meet [those deadlines].” Further, they noted, “gains in productivity must also be maintained over extended months.”

Fanning and his executive team are in a tough spot. Asking the commission again to raise the amount owed by ratepayers clearly is a non-starter, at least at the moment, but analysts were none too happy with the company’s decision to bill shareholders either, with Moody’s downgrading the company’s debt and stock analysts following suit on their recommendations regarding Southern shares. Given the company’s stubborn commitment to the project, and the failed Kemper gasification effort before that, it is almost inconceivable that Fanning would opt to cancel the Vogtle plants, but he should. It’s time.

–Dennis Wamsted

New Analysis
 Begs The Question:
 Is Vogtle Project
 Too Costly To Complete?

Last week’s headlines focused on Georgia Power’s newly signed agreement with Toshiba committing (recommitting?) the Japanese parent of bankrupt Westinghouse to pony up $3.68 billion to fund the completion of the long-delayed Vogtle 3 & 4 nuclear power plants. While that is clearly good news (at least for the moment) for Georgia ratepayers, who could otherwise have been stuck with the bill, it has obscured the real news—that no one knows how much it is going to cost or how long it is going to take to complete the two reactors.

The day before Georgia Power’s headline stealing news, staff and the independent construction monitor filed testimony at the Georgia Public Service Commission covering the latest six months of activity at the site (from July 2016-December 2016, with rollover analysis through April 2017). Their conclusion? The project has been a mess since the beginning, and there are still no signs of improvement (although admittedly couched in far more diplomatic/technical language, to which we now turn).

At the macro level, much of the problem can be traced to the absence of a credible integrated project schedule or IPS, an absolute must in a project as complex as this, William Jacobs, Jr., and Steven Roetger told the commission. Jacobs has served as the project’s independent construction monitor since 2009; Roetger is the commission’s lead analyst for the project. They have been highly critical of the Southern/Westinghouse work at Vogtle for years and have warned consistently that the stated completion dates bore no relationship to reality; see my stories here and here.

Continue reading New Analysis
 Begs The Question:
 Is Vogtle Project
 Too Costly To Complete?

Do You Hear That?
 It’s The Fat Lady Singing;
 Nuclear Revival Ends
 Almost Before It Starts

Five years ago almost to the day (Feb. 9, 2012, actually), the Nuclear Regulatory Commission voted 4-1 to issue a construction and operating license to Southern Company for the 2,234 megawatt Vogtle 3&4 project—the first of the new generation of reactors that was touted as the beginning of the industry’s long climb back from 30 years of dormancy.

At the time, Marvin Fertel, then president and CEO of the Nuclear Energy Institute, the industry’s trade association, sounded almost euphoric: “This is a historic day. [The NRC decision] sounds a clarion call to the world that the United States recognizes the importance of expanding nuclear energy….” Fertel’s optimism was hardly unique: A year earlier, Jim Miller, CEO of Southern Nuclear, the company’s operating subsidiary, told Scientific American: “The nuclear revival is under way in Georgia.”

My, how much has changed in just five years. Today, we are waiting for the other shoe to drop in the Westinghouse-Toshiba fiasco, which is expected later this month. When that happens it will serve as the end point of the revival that never really took place—five years from start to finish, not quite the long-running blockbuster the industry had hoped for.

Continue reading Do You Hear That?
 It’s The Fat Lady Singing;
 Nuclear Revival Ends
 Almost Before It Starts

Time For A Reality Check:
 More Delays Are Coming
 For Georgia Power’s
 New Vogtle Reactors

Georgia Power executives certainly won’t say it and Georgia’s utility regulators certainly won’t acknowledge it, but the reality is there are going to be additional delays at Vogtle 3&4—the already delayed and over budget new nuclear project being built by Westinghouse for the Southern Company subsidiary and a consortium of Georgia municipal utilities south of Augusta.

In a process that resembles a Kabuki dance, every six months Georgia Power is required to file a construction monitoring report with the Georgia Public Service Commission detailing its progress and justifying its expenditures in the last reporting period. (Georgia Power filed its 14th such report, covering the six months from June-December of 2015, in February 2016; it is now pending before the PSC.) Intervenors get to comment during this process, but once that is done, like clockwork, the commission signs off on the report, the utility gets to charge ratepayers for the approved expenses and the whole process starts anew. However, when you look closely it is clear that all is not well with the long-running Vogtle production.

In particular, it is worth taking a long look at the testimony presented by Dr. William Jacobs and Steven Roetger, who represent the Georgia PSC’s public interest advocacy staff in overseeing construction activities at Vogtle. Jacobs is the project’s independent construction monitor and has raised questions about the plant’s construction schedule virtually since the first dirt was turned (see this story). Roetger is the leader of the staff’s oversight team and has been involved with the project since the beginning. We will get into the details of their testimony below, but their conclusion is striking:

“We conclude that the company has not demonstrated to staff that the current CODs [commercial operation dates] have a reasonable chance of being met.  It is our opinion that there exists a strong likelihood of further delayed operation dates for both units.”

Continue reading Time For A Reality Check:
 More Delays Are Coming
 For Georgia Power’s
 New Vogtle Reactors

What Is Prudent?
 Red Flags Clearly Ignored
 In Vogtle 3&4 Project

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.

Continue reading What Is Prudent?
 Red Flags Clearly Ignored
 In Vogtle 3&4 Project