Georgia Senate OKs Georgia Power Nuclear Plant Financing Plan

Phased-in approach will also reduce the in-service cost of the plant by nearly $2 billion

 - By Mark McFadden -

Georgia Power Co. would able to accelerate recovering the costs of a planned nuclear power plant project under legislation approved by the state Senate.  Georgia Power officials say early cost recovery would reduce Georgia Power’s investment in the project from $6.4 billion to $4.4 billion, generating massive savings for ratepayers.

“Georgia Power believes that Senate Bill 31 is in the best interest of customers,” said Georgia Power spokeswoman Lynn Wallace.  “The bill will allow the cost of the new nuclear units at Plant Vogtle to be phased in over a longer period of time and will save customers from paying $300 million in “interest on interest.”   This phased-in approach will also reduce the in-service cost of the plant by nearly $2 billion, which will save money for customers over the remaining life of the plant.”

Georgia Power supports SB 31 because it will:

  • Provide Georgia Power customers the same benefits of reduced interest expenses that customers of other utilities in the southeast and in Georgia can receive.
  • Reduce total increases required to recover the cost of the plant from 12 percent to 9 percent.
  • Help preserve the company’s credit ratings, which will save literally hundreds of millions of dollars for consumers.
  • Help put the plant in rates in a way that does not cause “rate shock” – by phasing in the cost over seven years versus putting all of the cost in two years.
  • Reduce financing costs by $300 million, directly benefiting consumers.
  • Reduce the in-service cost of the plant by nearly $2 billion, which will save money for customers over the remaining life of the plant.

The bill, which passed 38-16 and now moves to the House, would allow the utility to begin charging ratepayers for the expansion of Plant Vogtle near Augusta when construction begins in 2011.  Without a “construction work in progress” provision, the company couldn’t begin recovering costs associated with the $14 billion project until 2016, when it is due to go on line.

 “If we can help them reduce their costs, it helps us reduce our costs,” said Sen. Don Balfour, R-Snellville, the bill’s chief sponsor.

Traditionally, utilities are allowed to recover the cost of investments, such as power plants, after the plants begin to operate and serve customers.

  • During the construction period, utilities incur construction (“brick and mortar” and labor) costs – and related financing costs.
  • Because of the tremendous cost of investments such as power plants, utilities also incur additional financing costs to pay interest expenses during the construction period (“interest on interest”).
  • Traditionally, recovery of these financing costs is deferred during the construction period, added to the ultimate cost of the plant and recovered from customers over the useful life of the plant (40 - 60 years in the case of a nuclear generating plant).

“Demand for electricity continues to grow in the Southeast and in Georgia,” said Mike Garrett, Georgia Power president and CEO. “While we will continue to increase our emphasis on energy efficiency and renewable energy sources, we must also add large-scale base load generation to meet growing energy needs.  While nuclear power plants cost more to build, they now have lower fuel and operating costs than fossil fuel plants.  Nuclear energy would add needed diversity to Georgia Power’s fuel mix at a time when fossil fuel prices are increasing significantly.”

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