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Georgia Power shouldn't profit from failure

Posted: March 6, 2013 - 1:01am

Should a business be rewarded for failure?

That’s the essence of a bill – HB 267 – that state Rep. Jeff Chapman, R-Brunswick, has introduced to try to hold down the costs of two nuclear reactors that Georgia Power is building at Plant Vogtle.

This is a construction project that will have a big impact on your wallet, whether you buy your electricity from Georgia Power or from one of the EMCs and municipal power companies that are also involved in this undertaking.

While the Vogtle project is a complex one involving arcane theories of nuclear engineering and exotic accounting laws, Chapman’s bill is very simple: it would prohibit Georgia Power from charging customers a profit margin of 11.15 percent on construction costs that exceed the $6.11 billion level authorized by the Public Service Commission.

If Georgia Power’s expenses go above that level, Chapman’s bill would allow the utility giant to recover from its ratepayers the actual costs of construction. The company would not be allowed to make an 11.15 percent rate of return on those added expenses, however.

Chapman is not some wild-eyed, anti-nuclear extremist. He’s a very conservative Republican from a coastal district who supports Georgia Power’s plans to add those two nuclear generators to the existing facilities at Vogtle.

As he explained in a legislative hearing last week, he does not think it’s fair to the company’s customers that Georgia Power should make a profit from any management mistakes that drive up the costs of those nuclear plants. There were numerous people who agreed with him at that hearing.

“Conservatives do not believe in incentivizing failure,” said Debbie Dooley, a leading figure in the Georgia Tea Party Patriots.

“Why should a business make a profit by going over budget?” asked Liz Coyle of the consumer organization Georgia Watch.

“My husband runs a body shop,” said conservative activist Kay Godwin of Blackshear. “When he gives a customer an estimate, he’d better make sure the work is done within that estimate.”

Chapman’s bill is basically being brushed aside by the leadership in the House of Representatives. Rep. Chuck Martin, R-Alpharetta, the chairman of the subcommittee handling the bill, made it clear he had no desire to wrangle with a corporation that is one of the most powerful lobbying forces at the capitol. The bill probably won’t get a House vote this year.

That is bad news for consumers, because just two days after the hearing on Chapman’s bill, Georgia Power filed the latest cost report on Plant Vogtle with the Public Service Commission.

Georgia Power disclosed that the projected cost of building the Vogtle facilities will now be $6.85 billion rather than the $6.113 billion initially certified by the PSC – a $737 million cost overrun. The completion of the project was also pushed back a year, to late 2017.

That’s only part of the picture. Georgia Power has a 45.7 percent share of the Vogtle project, with Oglethorpe Power Corp., the Municipal Electric Authority of Georgia (MEAG) and Dalton Utilities owning the rest of it.

The total cost of the project for all of the partners was first set at $14.5 billion. If the cost overruns for Georgia Power are $737 million, then the total overruns for all the partners is somewhere around $1.6 billion. When you add in the disputed construction costs that prompted a flurry of lawsuits between Georgia Power and the contractors, the cost overruns could be pushing towards $2 billion.

Bobby Baker, a former member of the PSC who has been watching the proceedings closely, said the Vogtle nuclear plants could end up costing as much as $18 billion by the time they are completed – assuming Georgia Power is actually able to get construction finished.

Chapman is trying to ensure that the burden of paying those extra costs will be shared by the folks who own Georgia Power (through its Southern Co. parent) and the utility’s customers.

“This is not an anti-nuclear bill,” Chapman said. “The intent of the bill is not to punish Georgia Power, either. It’s to protect the ratepayers.”

It’s hard to argue with that. If a business performs well, it should be rewarded. If a business messes up, it shouldn’t make a profit on its mistakes.

(Tom Crawford is editor of The Georgia Report, an Internet news service at gareport.com.)

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