A Florida public power agency wants out of its contract to buy power generated by two nuclear reactors under construction at Plant Vogtle in Georgia because of higher cost estimates disclosed earlier this month.
JEA, formerly Jacksonville Electric Authority, wants the Municipal Electric Authority of Georgia to vote against continuing the project in an upcoming ballot by co-owners prompted by a $2.2 billion jump over eight months in the estimated cost to complete the reactors.
JEA has a 20-year power purchase agreement with MEAG for electricity generated by the new reactors, an agreement that requires JEA to pay debt service on a series of bonds designated as Project J.
MEAG owns 22.7% of the reactors, and to date has financed its share of the project with $2.9 billion of outstanding revenue bonds and $1.2 billion of loans guaranteed by the U.S. Department of Energy.
“It now is beyond reasonable debate that prudent utility practices and the interests of ratepayers require that MEAG and the other owners of the additional units vote no on continuing construction of the additional units,” JEA interim managing director Aaron Zahn said in an Aug. 17 letter to MEAG.
Zahn called the two reactors “economically obsolete.” His letter included a summary of a consultant’s report that said cancelling Vogtle Units 3 and 4 would be less costly to JEA than completing the project – a recommendation that was based on a $25 billion cost estimate in December.
Georgia Power Co., the investor-owned utility heading up the project, said earlier this month that it believes it will cost the co-owners an estimated $2.2 billion more to complete the new reactors.
GPC will file its 19th construction report with the Georgia Public Service Commission on Aug. 31, which will include a revised capital cost forecast.
MEAG and the other public power owners will share in the higher cost according to their ownership stakes. Oglethorpe Power owns 30% and the city of Dalton owns 1.6%.
“A decision to continue cannot be justified on any rational basis,” Zahn said. “The latest cost overruns add an estimated $10 million annual PPA expense to JEA's ratepayers that can be replaced at a fraction of the cost for power that may never be produced.”
If co-owners vote to continue construction, Zahan said JEA’s power purchase agreement should be assumed by another entity or the agreement should be modified.
In response, MEAG chief executive officer James Fuller said a vote to cancel the project based on JEA’s demand would be considered a demand to breach loan guarantee agreements, which would give the DEO the option to accelerate the debt. That, in turn, would lead to a cross-acceleration of the outstanding bonds, he said.
In an Aug. 24 letter, Fuller said JEA’s position threatens its compliance with the PPA and that could have a “deleterious effects” on the debt issued for the project as well as other interests involved in the project, including Georgia Power, Oglethorpe Power and the city of Dalton.
“We, and we believe [the other interests], will certainly hold JEA and its officers and board responsible for any damages occasioned by your actions,” Fuller told Zahan.
Letters between the two utilities were posted on the Municipal Securities Rulemaking Board’s EMMA filing system Friday.
Fuller said the input of JEA and others with agreements to off-take nuclear power would be considered when MEAG’s board decides whether to continue with the project.
“At this point we are still in the process of obtaining the necessary data to complete our analysis, which we plan to share with JEA and other off-takers so that we can get your input prior to the September MEAG Power board meeting at which we expect our board to make a decision,” Fuller said.
MEAG’s board meeting is scheduled for Sept. 20.
Georgia Power said an estimated $1.4 billion increase in its own base capital cost primarily resulted from changed assumptions related to finalizing contracts and management responsibilities for Bechtel Power Corp, which became the prime construction contractor after Westinghouse Electric Co. filed for bankruptcy in March 2017.
