The decision by the Georgia Public Service Commission in the closing days of 2017 to allow the Georgia Power Co. and its partners to continue constructing two new nuclear reactors at Plant Vogtle may have the greatest impact on the state’s future of any it made during the year.
All five members of the commission, which is to exercise its authority and influence to ensure that consumers receive safe, reliable and reasonably priced telecommunications, electric and natural gas services from financially viable and technically competent companies, approved the decision.
The project had been plagued by delays and escalating costs for years. Georgia Power estimates the reactors will cost $12.2 billion and won’t be finished until 2021 and 2022 with Georgians having to assume the costs.
The new reactors on the Savannah River near Waynesboro were initially expected to cost the company about $6 billion and be completed last year. The cost has ballooned to about $4.3 billion for construction and capital costs with $2 billon in financing costs.
With the project only about 40 percent complete, the original contractor, Westinghouse Electric Co., declared bankruptcy in March 2017 after its parent company, Toshiba Corp., wrote off more than $6 billion in losses from its nuclear business including the V.C. Summer plant in South Carolina. Westinghouse also was responsible for that new reactor project, which was dropped by its owners in July due to its high costs of completion.
Tim Echols, who won reelection as a member of the Georgia Public Service Commission to another six year term in 2016, has been in the middle of the decision concerning the Georgia reactors and responded to Global Atlanta’s inquiries about the future of the project as well as the recent announcement that the Canadian investment firm Brookfield Business Partners has entered into an agreement with Toshiba to purchase Westinghouse. The purchase for $4.6 billion marks Brookfield’s first investment in the nuclear industry.
According to published reports, the transaction is subject to bankruptcy court approval, and is expected to close in the third quarter of this year.
Global Atlanta: As a member of the Georgia Public Service Commission, you were in the middle of the decision to allow Georgia Power to continue building two new nuclear reactors at Plant Vogtle. For this reason, we wonder what is your reaction to the announcement that the Canadian investment firm Brookfield Business Partners has entered into an agreement with Toshiba Corp. to purchase Westinghouse Electric Co.
Tim Echols: Having Westinghouse a part of a North American firm is exciting to me. Canada is a great partner for the United States in so many ways, and I believe this acquisition will help more Westinghouse reactors eventually be built throughout our country.”
Global Atlanta: Since Georgia Power has hired Southern Nuclear to take over construction and management at the plant could there be some confusion as to the future development of the plants.
Commissioner Echols: Westinghouse is still vital to our work at Vogtle because they own the technology. We want to see them robust and financially healthy so that they have the resources and staff to honor their existing agreements.
Global Atlanta: What is interesting to us is that Brookfield has no other nuclear businesses and that it would invest more than $4 billion at a time when new nuclear power plants globally are being built at the lowest level in a decade following renewed safety concerns after the Fukushima disaster in Japan in 2011.
Commissioner Echols: Brookfield is acquiring Westinghouse at a bargain price, so I understand their speculation. With our commission giving a new expanded cost and schedule, Brookfield probably believes the Georgia reactors will get built which will in turn spur more states to follow Georgia’s lead. I only wish we had negotiated some sort of royalty where Georgia ratepayers would benefit from future builds across the continent.
Global Atlanta: What were the main reasons for all the cost overruns and delays in the completion of the reactors?
Commissioner Echols: First, I think it was a mistake to have three large nuclear-oriented jobs going simultaneously as we did at the Summer Plant, Vogtle Plant and the Savannah River Site. The new Westinghouse AP1000 design had an enormous learning curve–especially in the condensed nuclear island–and concrete and welding issues threw the schedule behind, therefore interest costs were much higher than anticipated because of the delays.
Global Atlanta: What is your opinion of the competence of the Westinghouse managers and engineers involved in the project?
Commissioner Echols: Westinghouse has been building nuclear reactors for a long time and have the smartest engineers and scientists on staff anyone could ask for. I am very confident that we can finish this new design.
Global Atlanta: Brookfield has operations around the world in projects such as pipelines, wireless towers, power generation, ports and toll roads. Some explain its business as shoring up the backbone of the global economy. The company’s focus on infrastructure projects has been praised as being especially smart because of the long-term need for these investments. But they haven’t been involved in nuclear.
Commissioner Echols: Canada has been a world leader in public-private partnerships as a way to build infrastructure, so I do believe Brookfield brings a unique perspective. Their experience and patience will be valuable as we move forward to finish our project by 2022.
Global Atlanta: Is it your view that nuclear generation will be a global phenomenon in the future and that Brookfield is being farsighted and financially astute in its support of Westinghouse? In short, do you think that Brookfield in making a wise purchase by acquiring Westinghouse?
Commissioner Echols: The Nuclear Renaissance that so many of us had hoped would happen is on life support–at least here in the United States. Brookfield is strategically stepping in after seeing Georgia commissioners give their unanimous support to not only finishing the Georgia project, but granting a new cost and schedule that will enable Southern Nuclear to realistically be able to finish it.
Global Atlanta: Is it possible that Westinghouse could reclaim that project in view of this change in ownership?
Commissioner Echols: Westinghouse stands to benefit if we finish our reactors. In 2022 when our plant comes on-line, other states who were looking skeptically about the project will probably decide to build new nuclear–especially in light of the constraints we are seeing with natural gas during extreme weather events like we have experienced recently.
Global Atlanta: Will the Brookfield purchase have any implications for the development of the new Vogtle reactors?
Commissioner Echols: Brookfield’s purchase of Westinghouse can only help us here in Georgia. Their focus on infrastructure is exactly what Westinghouse needs to finish this project–which the whole world is watching.
Global Atlanta: You have stated that the development of nuclear reactors in Russia and China will enable these countries to develop technologies that they will sell around the world. Meanwhile the U.S., by limiting its commitment to nuclear, will find itself behind in these technological developments. Do you continue to feel this way?
Commissioner Echols: China is building several types of reactors including one of their own–which I understand they would like to market worldwide eventually. Russia is doing the same in Belarus, just to name one instance. The success of these projects can be parlayed into other projects with other nations who desperately need reliable base-load power.
Global Atlanta: What sort of research did the Georgia Public Service Commission undertake before making its final decision concerning the go-ahead for the new reactors?
Commissioner Echols: We conduct lengthy and detailed hearings every six months on our nuclear project looking at mostly financial scenarios. Clearly, this was the first hearing where our staff believed that the project had become uneconomic. Obviously, commissioners believed that there were other reasons to move forward despite that forecast.
Global Atlanta: What kind of response from Georgia Power customers who will be billed for the development of the two new reactors has the Georgia Public Service Commission received?
Commissioner Echols: From a grid perspective, Georgia ratepayers have enjoyed high reliability and low rates for many years, and that has manifested itself as a certain degree of trust. If we are wrong and these reactors don’t get built, we certainly risk losing that trust and confidence.
Global Atlanta: Please provide the time-frame in which you foresee the two nuclear reactors being completed?
Commissioner Echols: With our new cost and schedule, I expect we’ll see one unit come online in 2021, and the other in 2022. Brookfield obviously has a lot riding on this now and I expect we’ll see increased productivity with them at the helm of Westinghouse.
Global Atlanta: Once they are completed, how will the state and Georgians benefit generally?
Commissioner Echols: These reactors are enormous producing 1100 megawatts of power each. We expect them to be in service for 80 years providing some of the cheapest electricity in the state.
The Pendleton Group is the presenting sponsor of Global Atlanta's Economic Development Channel. Subscribe here for monthly Economic Development newsletters.
