Nuclear

Spiraling costs of Vogtle nuclear project lead to lawsuit by venture partners

Spiraling costs of Vogtle nuclear project lead to lawsuit by venture partners
(Rising costs at the Vogtle Units 3 and 4 expansion project have resulted in a lawsuit among the project parters.)

A Georgia court is being asked to decide whether two partners in an increasingly expensive and long-delayed 2,200 MW nuclear power project can cap their exposure to rising construction costs and hand over at least a portion of their ownership stake in the venture.

The dispute pits Oglethorpe Power Corp. and the Municipal Electric Authority of Georgia (MEAG) against Georgia Power, a unit of Atlanta-based Southern Company.

The two claim that cost increases related to the new nuclear units have triggered clauses in a 2018 ownership agreement. Those clauses allegedly would shift construction cost responsibility above a certain level to Georgia Power. They also claim the right to give up some of their ownership stake in the Alvin W. Vogtle Units 3 and 4 project.

The lawsuit was filed June 18 in the Superior Court of Fulton County, Georgia.

A primary issue for the court is to determine the starting dollar amount used to figure cost increases that are subject to a shift in responsibility to Georgia Power. Also in dispute are ownership tender provisions and the extent to which COVID-19-related expenses impact cost calculations.

In a statement, MEAG Power said it believes that the construction cost increases and revised cost estimate to complete the nuclear units have reached threshold levels that also triggered the tender provisions agreed to in 2018 when the project partners voted to continue work on the nuclear power units.

Power Engineering reported on June 20 that Oglethorpe Power Corp. (OPC) elected to use its one-time option to freeze its capital costs for Plant Vogtle Units 3 and 4 construction costs.

In exchange, Oglethorpe said it would hand over to Georgia Power around 42 MW of its ownership share in the nuclear project. Oglethorpe’s original share was 660 MW, meaning that after the tender it would have a 28% share of the project, down from 30%.

In an email to Power Engineering, a Georgia Power spokesperson said that the utility and Oglethorpe “have a difference of opinion over the dollar amount” at which the tender option is triggered. “We continue to have a difference of opinion and Georgia Power does not believe OPC’s tender notice is valid,” the spokesperson said.

Cost overruns and construction problems have delayed the project, the first nuclear units to come online in the United States since 2016. Vogtle Unit 3 is currently expected to come online by the end of 2023 Q1, and Unit 4 is expected at the end of 2023. Each unit is rated at 1,114 MW.

Vogtle is jointly owned by Georgia Power, Oglethorpe Power, Municipal Electric Authority of Georgia and Dalton Utilities.

In 2018, coinciding with a vote to continue building the project, the four co-owners jointly agreed to a cost-sharing agreement designed to mitigate financial risk from future potential cost increases.

Under that agreement, if total sharable project costs rose by $2.1 billion from the time the agreement was executed, each co-owner, other than Georgia Power, could exercise a one-time option to freeze its capital investment in the project.

Since September 2018, the project budget has increased five times, and is now expected to total more than $30 billion.

In a filing with the U.S. Securities and Exchange Commission, Oglethorpe Power said that the Global Amendments “do not exclude” costs resulting from force majeure events (such as COVID-19) from calculation. It said that it told Georgia Power in March of the dispute, triggering dispute resolution procedures. Once those efforts ended, Oglethorpe and MEAG filed suit in a bid to enforce compliance with their interpretation of the agreement.

This article was updated June 23 to include a statement from Georgia Power.

Tags