DOE Approves Service Agreement Between Westinghouse and Georgia Power on Vogtle Expansion—With Conditions

The Department of Energy (DOE) has approved a new service agreement finalized by Westinghouse and Georgia Power for the Vogtle AP1000 units under construction in Georgia, though the agency reached a separate deal with Georgia Power on a loan guarantee agreement that will require the Southern Co. company to provide it with a solid cost assessment by the end of the year.

Georgia Power, however, told POWER that it expects to complete the cost-to-complete and schedule assessment by the end of August.

Under the amended and restated services agreement reached on July 20-and approved by the DOE on July 27-Westinghouse will support engineering, procurement, and licensing, and provide intellectual property needed for the Vogtle nuclear expansion. But Westinghouse, which served as primary contractor with oversight and responsibility for all construction activities at the project, will be replaced by Southern Nuclear, which is another Southern Co. subsidiary that operates the existing units at Plant Vogtle in Georgia.

The new services agreement allows the interim agreements reached with Westinghouse to expire. Westinghouse, meanwhile, has rejected the original engineering, procurement, and construction agreement as part of its bankruptcy proceedings.

An Amended Loan Guarantee Agreement

Notably, Georgia Power and the DOE on July 27 also agreed to amend a loan guarantee agreement finalized in February 2014. Terms of that agreement will mean Georgia Power cannot request any advances under the loan guarantee until it has completed cost assessments and made a determination to continue construction of Units 3 and 4. Georgia Power must also give the DOE an updated project schedule, construction budget, and other information. It also requires the DOE's approval of new agreements made with contractors with a primary responsibility for building the two AP1000 units.

A Southern Co. 8-K document filed with the Securities and Exchange Commission on July 28 meanwhile notes that under the updated loan guarantee agreement, if Georgia Power decides not to continue construction of the two units or fails to complete cost assessments by December 31, 2017, it will need to prepay the outstanding principal amount of all guaranteed borrowings over a period of five years.

The project's latest monthly status report filed by Georgia Power with the Georgia Public Service Commission on July 20 shows that, as of June 2017, total construction and capital costs are forecast to reach about $5.44 billion by December 2019. Total approved construction and capital costs are listed at $5.68 billion. Actual costs and schedules have been redacted from the publicly available report, however.

Georgia Power said in associated documents that pricing information is "considered confidential and proprietary by the Company and its contractors and not generally known by the public. Revealing these terms would compromise the Company's ability to procure the best cost resources from equipment suppliers or independent power suppliers in future solicitations."

In the monthly status report, Georgia Power noted that the "project represents the best economic value over available alternatives today for providing safe, reliable, clean, affordable electricity to Georgians for at least 60 years."

Looking Ahead

In a statement on July 28, however, Georgia Power emphasized that it is still working with project co-owners-Oglethorpe Power, Municipal Electric Authority of Georgia, and the City of Dalton-to complete a full-scale schedule and cost-to-complete analysis-and it should likely be completed by the end of August. "Once complete, Georgia Power will work with the Georgia Public Service Commission to determine the best path forward for customers," it said.

That report also lists a number of major milestones construction crews have recently achieved. Georgia Power says construction momentum at the project has "continued uninterrupted" since Westinghouse filed for bankruptcy protection on March 29.

"Over the last 30 days alone, progress includes new concrete placement within the Unit 3 shield building and nuclear island, placement of structural steel for the Unit 4 annex building and the first of four 85,000 pound accumulator tanks for the new units within the Unit 3 containment vessel," Georgia Power said.

"We are already in the midst of a seamless transition for the thousands of workers across the site, allowing us to sustain the progress we are making every day on both units," Mark Rauckhorst, executive vice president for the Vogtle 3 and 4 project said in a statement on July 28. "We remain focused on safety and quality as we complete this transition."

-Sonal Patelis a POWER associate editor (@sonalcpatel, @POWERmagazine)

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