Nuclear facilities are progressing, but nuclear revival is not

Feb 21 - The Atlanta Journal and Constitution

When major construction started at Georgia Power's Plant Vogtle nuclear expansion project near Augusta, Ga., a year ago, all eyes were on what was supposed to be the rebirth of the nuclear industry after more than a generation without new plants.

The stakes were high for Georgia Power and its parent, Atlanta-based Southern Co., which became responsible for showing the nation that the nuclear industry could build two reactors without major technical problems, delays or cost overruns. Consumers already were on the hook, paying for Georgia Power's $6.1 billion portion of the project through a fee on their monthly utility bills.

The $14 billion Vogtle expansion is behind schedule, and the nuclear revival hasn't worked out the way the industry had hoped. Ample supplies of cheap natural gas and the sluggish economy are enemies No. 1 and 2. Widespread extraction of natural gas is making it the fuel of choice for utilities, which have little demand for new power plants in a weak economy.

And in August, seven months after granting Southern and SCANA, a South Carolina energy company, licenses to build from scratch the nation's first nuclear reactors in 30 years, federal safety regulators put a moratorium on future nuclear projects until a long-term waste storage plan was developed.

For now, utilities store the high-level spent radioactive fuel at their nuclear plants. But the government is under pressure to find a permanent solution for the fuel rods, which are so hot that they must be cooled in water before being moved to hardened casks made from massive steel and concrete. The unexpected roadblock from the federal government left the nuclear industry in limbo and has kept the focus solely on Georgia and its neighboring state.

"I can remember a few years ago with people thinking this is the beginning of a nuclear renaissance," said Chuck Eaton, chairman of the Georgia Public Service Commission. "All the eyes of the country are on it."

The PSC was one of several agencies that had to approve Vogtle's expansion. The panel reviews the project's cost and schedule every six months.

Though Southern Co. officials point to progress that has been made on the Vogtle project, there has been no shortage of controversies. Scheduling delays, lawsuits and looming cost increases colored Vogtle's first year. An independent project watchdog has signaled contractor delays in building modules -- parts of the reactor built elsewhere and then assembled at Vogtle's construction site.

Those delays -- over site preparation and initial construction work -- have triggered a $900 million lawsuit by Georgia Power and the municipal and cooperative utilities building Vogtle against the project's two major contractors. The contractors have filed a countersuit.

The lawsuits are two of four between the parties, and the suits are a sign of an escalating fight over who pays for cost increases. Georgia Power said it is not responsible for those delays or costs, which total $425 million for the utility, but consumers could wind up paying if the utility loses the lawsuit or settles. The PSC would have to approve any costs before they are passed on to customers.

The additional money would be on top of the $6.1 billion customers started paying in 2011. Part of that amount covers the financial costs until the reactors start producing power -- currently scheduled for 2016 and 2017 though delays may push back the schedule as much as a year. The rest will pay for the project's construction costs.

Georgia Power in August said delays have made Vogtle's cost rise to $6.2 billion, but the utility has not asked to collect any additional money from customers.

But critics worry that might change.

"We're seeing a lot of red flags," said Liz Coyle, deputy director for Georgia Watch, a consumer rights group. "It's the little guy in Georgia that will feel all of the pain."

A misalignment between a platform and a rail car temporarily stranded a 300-ton reactor steam vessel in December. The incident alarmed consumer activists, who already had been filling Georgia PSC meeting rooms and holding demonstrations to stop Vogtle because of safety and financial reasons.

Project skeptics feared a repeat of the past where the first two reactors at Vogtle, finished in the 1980s, ran over budget by $8 billion and took 16 years to build.

"Southern has said everything is safe, and it's not going to impact the schedule of the project, but if history is any indication, we know that's not true, so we're skeptical at best," said Courtney Hanson, spokeswoman for the grass-roots group Georgia Women's Action for New Directions, which promotes peace and environmental justice.

Analysts say Southern has done a good job of handling unexpected issues with the Vogtle expansion.

"Things coming up that weren't anticipated is par for the course with a project as huge and as unprecedented in size and scope," said Paul Patterson, a utilities analyst with Glenrock Associates. "It's too early to draw any conclusions on how the rest of the project is going to proceed."

From the point of view of Southern and Georgia Power, the past year has been a success: Construction is more than one-third complete, and the workforce is building up to 5,000. One of the containment vessels -- a shell that encases the nuclear reactor -- is finished.

"Construction of the plant is progressing beautifully," said Tom Fanning, Southern's president and chief executive officer. "We're moving forward on this very important project, and I'm hopeful that we'll build more."

Analysts say Southern was able to shepherd Vogtle's plans through a protracted regulatory process because of the company's size and financial stability. The gigantic energy company also had cushions from Georgia Power customers, in the form of the nuclear fee on their monthly bill, and from taxpayers, who are underwriting a total of $8.3 billion in federal loans for the project.

The U.S. Department of Energy awarded those loan guarantees to the Vogtle project in 2010, but Southern officials continue to negotiate the terms. Company executives include the federal loan guarantees as part of the long-term economic benefits for customers. But customers won't pay any more for the project should Southern's negotiations with the Energy Department fall though, the company said.

In South Carolina, SCANA's nuclear project faces similar challenges. Consumers are paying for the project's costs as they are spent and then approved by South Carolina utility regulators.

"We believe the project is going as reasonably as can be expected," said Dukes Scott, executive director of the South Carolina Public Service Commission's regulatory staff. "I don't think it's reasonable to not have some schedule updates and some budget issues."

The project in Jenkinsville, S.C., northwest of Columbia, is using the same reactor design and contractors as Georgia Power. Executives from SCANA and Georgia Power talk regularly, and officials from SCANA echo Scott's statements.

"With a project of this scale, it is not unusual to have some schedule challenges along the way for a variety of reasons," the company said.

It's likely Vogtle and SCANA's V.C. Summer projects will start producing electricity before any more nuclear reactors get off the ground. For Georgia Power, the timing is critical as the utility continues its shift away from coal to comply with federal environmental rules.

The utility wants to close more than 15 coal- and oil-fired units and said it will have enough electricity to power the grid in large part because of Vogtle. Georgia Power also will buy electricity from independent power producers.

Utilities, including Georgia Power, don't have to build major power plants as frequently because there are not enough new homes, businesses and commercial buildings that need the electricity. Still, industry officials say natural gas cannot be the sole way to power the nation going forward.

"Any nuclear renaissance in the United States probably depends on our success at Vogtle," said Georgia utility regulator Tim Echols.

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