The construction of Plant Vogtle units 3 and 4 is progressing to provide a safe, reliable, clean and cost-effective source of electricity that will provide stable prices and improve Georgia's communities for generations to come.
From the beginning of the Vogtle expansion, Georgia Power has worked to pursue all available benefits for customers and minimize the impact of the new units on electric bills. In addition to the agreement to receive 100 percent of parent guarantee funds available from Toshiba by Dec. 15, 2017, the company recently announced a conditional commitment of approximately $1.67 billion in additional loan guarantees for the project from the U.S. Department of Energy (DOE).
Today, after including anticipated customer benefits from federal production tax credits, interest savings from loan guarantees from the DOE and the fuel savings of nuclear energy, the projected peak rate impact to Georgia Power retail customers is approximately 10 percent, with 5 percent related to the project already in rates – well below original projections of approximately 12 percent.
Traditionally, utility companies recover financing costs for construction projects after the project’s completion. Utility companies either finance or absorb cost of materials and labor. During the long construction period, this requires a tremendous amount of investment and financing costs including interest expenses. The construction and financing costs are then added to customer’s rates over the life-cycle of the plant.
Under Georgia Power’s Nuclear Construction Cost Recovery (NCCR) plan with CWIP in Rate Base and the 2016 Stipulation, customers incur less “interest on interest” expenses. Recovery of financing costs during the construction period reduces the total return required over the life of the plant. CWIP in Rate Base also improves the credit ratings of utility companies, which often results in lower financing costs for the company overall. Better credit ratings equal lower interest costs to the company, directly benefiting customers’ rates.
Benefits of CWIP
- Reduces the total projected rate increases for Vogtle 3 and 4 by approximately one-third.
- Cuts financing costs hundreds of millions of dollars during the construction period, directly benefiting customers.
- Helps preserve the company’s credit ratings, which will reduce borrowing costs and save customers tens of millions of dollars annually for all company projects (not just nuclear).
- Eases the plant into rates in a way that does not cause “rate shock” by gradually increasing rates over several years during construction versus applying the full cost increase in just two years.
- Reduces the in-service cost of the plant by approximately one-third, saving customers additional financing costs over the life of the plant.
DOE loan guarantee
Georgia Power reached an agreement in September 2017 with the U.S. Department of Energy (DOE) for a conditional commitment of approximately $1.67 billion in additional loan guarantees for the Plant Vogtle nuclear expansion project near Waynesboro, Ga.
Georgia Power had previously secured loan guarantees of $3.46 billion for the construction of Vogtle units 3 and 4.
With a total of more than $5 billion in anticipated DOE loan guarantees, Georgia Power expects to be able to provide more than $500 million in present-value benefits to its customers.
Final approval and issuance of these additional loan guarantees by the DOE cannot be assured and are subject to the negotiation of definitive agreements, completion of due diligence by the DOE, receipt of any necessary regulatory approvals, and satisfaction of other conditions.
Toshiba parent guarantee
Georgia Power and the other Vogtle co-owners, Oglethorpe Power, MEAG Power and Dalton Utilities, have received a total of $3.68 billion in parent guarantee payments from Toshiba, the full amount owed by the parent company of former primary Vogtle contractor Westinghouse. Toshiba originally agreed to make monthly payments through January 2021 but, under a new agreement reached earlier this month, delivered all remaining installments in a single payment of approximately $3.225 billion on December 14. Georgia Power's proportionate share of the payment is $1.47 billion.
Parent guarantees were put in place to protect Georgia electric customers as part of the original contract for the Vogtle nuclear expansion. The payments will reduce the total cost of the plant for Georgia Power by approximately $1.7 billion with every dollar received from Toshiba being used to benefit customers.