“In Georgia and South Carolina, for example, the nuclear-related cost overruns are a good thing. Not only is rate base enlarged for assigned profits for decades, the CEOs can tell victimized consumers that they are avoiding emissions from much cheaper, cost-predictable conventional power plants. Bootleggers and Baptists all in one.”
Public utility regulation attempts to protect the public where one and only one franchised monopolist serves a certain geographical area. Such is the case with your local natural gas and electricity provider. But the alleged protection is actually the enemy of consumers on close inspection. To understand why, the fundamentals of rate base regulation must be explained.
The Formula
Regulated utilities are allowed to recover their cost to do business and earn a return on invested capital. Expressed as a formula this is the revenue requirement: R = Oc + (V-D)rr
where:
R = Revenue justified by cost and return
Oc = Operating cost including depreciation
V = Value, always first costs
D = Depreciation
rr = Rate of return allowed by regulators
(V-D) = Rate base, this is the current book value of assets and the un-recovered part of depreciable assets and other amortized capital.…
“As the magnitude of the Vogtle project disaster becomes clearer, the Public Service Commissioners are becoming less toleratant of criticism…. Steve Prenonvitz … heaps criticism on Georgia Power but also on the Commission itself…. Then there is Nuclear Watch South [whose] … assertions are painfully true and therefore irritating to the Commission, which is joined at the hip with Georgia power on the Vogtle project.”
Georgia Power has now provided details concerning the settlement with the Vogtle contractor. The total payout is $915 million of which Georgia Power’s 45.7% share is $350 million. Also agreed was a $69 million change order. This is a hit for customers, quite different from what the Company said for years: they expected to prevail in the litigation but were working on a possible settlement. (Ratepayers are protected unless the Commission orders a cost disallowance, which they should.)…
“The renaissance has gone bad. Nuclear power is repeating the construction cost disaster of the previous round of such building in the 1970s and 1980s.”
“The advanced designs and refined techniques [at Plant Vogtle] resulted in a mess of continuing cost overruns and schedule delays. Now Georgia Power says all the problems are to be expected in a first-of-kind project.”
Buzz Miller, executive vice president for nuclear development at Georgia Power, wrote in the Atlanta Journal Constitution back in 2010 (September 16) in regards to his company’s Plant Vogtle nuclear expansion:
…“The lessons learned at home and abroad have paved the way for a new generation of U.S. nuclear power plants that feature advanced designs, refined construction techniques, early engagement by state public service commissions, and licensing process geared to a mature technology.”