The owners of the Vogtle nuclear project in Georgia reached an agreement Tuesday to continue building the sole nuclear plant under construction in the United States.
Lead owner Southern Co. agreed to shoulder an increasing share of future cost overruns at the plant, which is which is years behind schedule and billions of dollars over budget. If costs increase past a certain point, other owners may sell a portion of their stakes to Southern.
Minority owner Oglethorpe Power had pushed Southern to assume full responsibility for any future cost increases before agreeing to the deal Wednesday afternoon. Failure to reach an agreement would have meant termination of the project.
The decision to continue construction of the Vogtle plant is a win for Southern and a boon for the fragile U.S. nuclear industry. The Department of Energy warned last week that cancelation of the project would strike a blow to the teetering sector and prompt the repayment of billions in federal loans.
The two-reactor expansion at Vogtle, proposed in 2008, is more than five years behind schedule and forecast to cost a total of $27 billion — almost double its original price tag.
Last month, Southern announced that costs for the plant would be $2.3 billion more than it expected when it took over construction from bankrupt contractor Westinghouse in May. That cost overrun triggered a clause in the ownership agreement where 90% of the owners had to agree to continue construction.
Southern, which owns 45.7% of Vogtle, quickly said it would stick with the plant, as did Dalton Utilities, with less than a 2% share.
The Municipal Electric Authority of Georgia (MEAG), which owns 22.7%, voted to continue on Monday, but Oglethorpe Power, with a 30% ownership share, held out.
The Georgia municipal utility said Southern shareholders should shoulder any future cost increases, since they own Southern Nuclear Corp. (SNC), the construction subsidiary completing the plant.
Unlike Southern, an investor-owned utility, Oglethorpe and MEAG are publicly owned power companies, meaning their ratepayer-owners have to bear the full brunt of cost overruns.
Southern balked, saying that Oglethorpe was trying to “avoid obligations that it undertook when it became an owner of the project," and the two entered into negotiations over cost-sharing.
The utilities set a 5 p.m. (EDT) deadline on Tuesday to reach an agreement, but extended their negotiation period three separate times, reaching an agreement Wednesday afternoon that they said “helps mitigate financial exposure for each of them.”
Under the agreement, Southern subsidiary Georgia Power would pay 55.7% of cost overruns up to $1.6 billion beyond their current price estimate.
If costs increase above that, Georgia Power would pay 65.7% of the costs up to $2.1 billion over the original estimate. Beyond that figure, minority owners could sell a portion of their ownership stakes in Vogtle in exchange for Georgia Power paying “100% of such Vogtle owner’s remaining share of construction costs.”
In that situation, Georgia Power could also elect to walk away from the project entirely.
The agreement also includes provisions to address a lawsuit from the Jacksonville Electric Authority, which wants to exit a power purchase agreement for Vogtle it signed with MEAG. If that happens, Georgia Power would provide MEAG with up to $250 million in loans to finance the plant’s completion, subject to approval by Georgia regulators and the DOE.
“We are all pleased to have reached an agreement and to move forward with the construction of Vogtle Units 3 & 4 which is critical to Georgia’s energy future,” said the co-owners. “While there have been and will be challenges throughout this process, we remain committed to a constructive relationship with each other and are focused on reducing project risk and fulfilling our commitment to our member-consumers.”
This post has been updated to include details of the Vogtle cost-sharing agreement.