Georgia Power's Nuke-Sized Nightmare|
Georgia Online News Service
Every so often our lawmakers need to be reminded that what's good for the Georgia Power Co. isn't always best for Georgians. Now is one of those times.
With a platoon of lobbyists at its disposal, the state's largest utility is in the process of bulldogging Senate Bill 31 through the Legislature on the broad hips of Sen. Don Balfour (R-Snellville), who also chairs the Senate Rules Committee.
To be blunt, this bill is bad news that could result in costly, nuke-sized nightmare. Just ask state officials in Florida.
SB 31 would allow Georgia Power to pre-collect $1.6 billion in financing costs from customers prior to the construction and operation of a pair of nuclear reactors it plans to build at Plant Vogtle near Augusta. The total cost of the new units is an estimated $14.4 billion, with a heavy emphasis on "estimated."
The twist here is that Georgia Power could start getting that money from consumers by 2011 and then continue doing so for years before the reactors are expected to be up and running. Typically, ratepayers begin paying those costs after large-scale utility projects have been completed and are providing their energy needs, not before.
So why the change?
Utility officials claim this somewhat creative arrangement makes sense because it would shave $300 million in financing costs the company could use to retire construction loans on the project sooner rather than later. Those savings will accrue many times over to those of us who've paid for the plant and stand to benefit from the power it produces, Georgia Power officials promise.
Unfortunately for the customers in Florida, their state lawmakers have already been suckered into believing a similar promise by Progress Energy which, like Georgia Power, is also in the process of building a nuclear power plant. Several years ago, lawmakers there approved an "advance recovery fee" for a proposed nuke plant which was expected to raise electricity bills by about 11 percent. But when the advance nuke fees were added to separate fuel recovery charges Progress Energy's subsequently charged for the operation of its existing plants, customers saw their monthly electricity bills jump by a whopping 25 percent.
Florida lawmakers are now scrambling to suspend or eliminate the advance fees that Progress Energy is charging customers for its nuke plant, which probably won't be completed for a decade. But if SB 31 is approved, Georgians may not be so lucky; the bill's language expressly prohibits the state's Public Service Commission from even considering the impact of the proposed nuke surcharges when Georgia Power seeks to raise its rates on customers in the future, as it inevitably will.
But Balfour, who introduced the bill, has been chatting up SB 31 with simple-minded talking points Joe the Plumber could have written.
"If you buy a car and put it on your credit card, you're going to pay a lot of money," Balfour tells anyone willing to listen. "If you save a little money and pay some of the cost up front, you pay a lot less."
The hole in Balfour's logic is obvious: Anyone stupid enough to buy a car with a credit card at least gets to drive their shiny new debt-mobile off the parking lot and go wherever they please.
Conservative blogger Peach Pundit gently chided Balfour's misshapen metaphor by asking: "Would you send a check to a car manufacturer when they start building a car, essentially paying for it before you ever have the benefit of driving it?"
Of course not.
Balfour's backward analogy doesn't compute for several other compelling reasons:
-- The General Assembly is out-of-bounds for even considering this proposal. The state Constitution empowers Georgia's elected Public Service Commission to decide, among other things, whether this financing arrangement makes sense for Georgia Power and its customers. The five-member PSC was already reviewing the proposal before the Balfour bill was introduced. The Legislature, which already has its hands full trying to close a $2 billion budget gap, is setting a dangerous and unnecessary precedent by attempting to usurp the PSC's authority over such matters.
-- There's a good chance Georgia Power's math is all wrong. The nuclear reactors the utility wants to construct at Plant Vogtle have never been built before. Anywhere. Nuclear power plants are historically subject to huge cost overruns that are often more than double the original estimates. Yet there are no incentives in the current legislation for Georgia Power to control their costs or ensure that the reactors are completed on time and on budget. And why should there be if utility customers wind up paying the difference anyway?
-- Consumers will likely save much more money by paying for the plants on the back end rather than the front end. Lane Kollen, an expert witness, testified before the PSC that Georgia Power's numbers are way off and the utility miscalculated the true cost to ratepayers. Paying for the plants the old fashioned way - after they're built rather than before - will actually save consumers about $576 million, according to Kollen.
-- For reasons Georgia Power hasn't explained, some of the state's big, industrial companies would be exempt from the pre-payment plan. That means a majority of the upfront costs would be borne by residential and commercial customers already struggling to stay afloat in the midst of a seemingly-bottomless recession.
This bill reads like a blueprint for a costly debacle lawmakers would be smart to avoid. Georgia Power has made it known that it might forgo building the new reactors unless their pre-payment plan gets approved, an implied threat that's apparently intended to scare us stupid. Instead, our elected officials should take heed of what's happening in Florida and resist the impulse to cave-in to Georgia Power's unreasonable request.
Lyle Harris is a former member of the Atlanta Journal-Constitution editorial board. [full bio]