Utilities spark protests by sticking ratepayers with the bill for risky energy projects
Consumer advocates are blasting the Georgia Public Service Commission's unanimous vote this week requiring ratepayers to bear the burden of cost overruns during construction of two new nuclear reactors at Plant Vogtle while protecting the profit margin of the Southern Company's largest subsidiary.
"This settlement is yet another example of the Public Service Commission caving in to pressure from Georgia Power and placing the financial interests of the utility above those of everyday hardworking Georgians -- including thousands of business customers who are Georgia Power ratepayers," said Georgia Watch Executive Director Angela Speir Phelps, a former public service commissioner.
On Tuesday, the PSC voted down a risk-sharing proposal that would have cut into the utility's profits if the project's costs went $300 million over budget. The estimated price tag of the two new reactors is $14 billion, with the utility responsible for $6.1 billion of that.
The commissioners defended the settlement -- which allows Georgia Power to collect its normal profit margin of more than 11 percent -- by making the case that they have the authority to deny any cost overruns they deem "unreasonable." The company is already collecting over $1 billion of early profit on the Vogtle project because of state legislation passed in 2009 that allowed it to begin adding a charge to ratepayers' bills.
In its criticism of the settlement, Georgia Watch pointed to the "notoriously risky nature" of building new reactors. The cost of the last two reactors built in the state was initially estimated at $600 million but ended up costing more than $8 billion.
Meanwhile, the Nuclear Regulatory Commission still has not issued the necessary construction and operating license for the Vogtle reactors, with Southern Company CEO Tom Fanning reporting recently that the license might not be granted until early next year. That's later than expected, calling into question the project's timeline and thus its cost estimate.
The Vogtle construction is also facing problems with the proposed reactor type -- the Westinghouse AP1000. Westinghouse is currently on its 19th draft of the design, with the NRC most recently turning up problems with the company's calculations for the concrete shield building that's supposed to protect the reactor from external threats like earthquakes, hurricanes, tornadoes and plane crashes.
In April, a coalition of environmental groups filed a legal motion asking the NRC to halt the design approval process because of numerous mistakes and omissions by Westinghouse. They also want the NRC to ensure that the lessons learned from the Fukushima nuclear disaster are incorporated into the final design.
Fighting Duke Energy's rate hike requests
Meanwhile, Duke Energy is expected to request a rate hike this week in South Carolina -- a move that comes shortly after the North Carolina-based utility asked for a residential rate increase of 17 percent in its home state. The North Carolina increase is expected to add about $19 to the average monthly home power bill of $97.
The South Carolina request comes as the company announced more than $440 million in second-quarter earnings this week due in part to earlier rate hikes.
Duke Energy wants to raise rates again to pay for a new coal-fired unit at its Cliffside plant in western North Carolina. While the company has been promoting the Cliffside plant as an example of "state-of-the-art" technology, it is in fact an ordinary pulverized coal-burning power plant. While Cliffside will have better air-pollution controls than the older plants it's replacing, that means it will produce more toxic coal ash waste. The plant will also emit about 6 million tons of greenhouse gases annually.
In North Carolina, environmental opponents of the Cliffside plant are calling on the N.C. Utilities Commission to hold hearings throughout the state on Duke Energy's proposed rate increase. The company's plan to raise rates is also sparking opposition from some North Carolina municipalities, with six of them joining forces to protest the increase. They include Conover, N.C., which is concerned that the cost-savings it's beginning to enjoy from switching to energy-efficient streetlights and thermostats will be wiped out.
"We could see an increase of $100,000 in fees for a small city with only a $10 million budget," City Manager Donald Duncan Jr. told WSOC-TV. He said the higher bills could necessitate staff layoffs, which would be a further blow to the local economy.
And in South Carolina, the AARP is among the organizations preparing to fight Duke Energy's proposed rate hike -- and it has a record of success. When the group asked its members to oppose a proposed rate hike by the energy company SCE&G last year, they generated some 600 protest letters to regulators. In the end, SCE&G ended up getting only half of what it asked for.
Sue is the editorial director of Facing South and the Institute for Southern Studies.