Georgia Power: Need That PTC for Nuclear (Hayet testimony on Vogtle)

“If Unit 4 does slip by more than six months, the Company would not be able to collect its current forecast of $522 million in nominal PTCs over the first eight years of the Unit 4 operating life that ratepayers would have otherwise received.”

IN THE MATTER OF: GEORGIA POWER COMPANY’S TWELFTH SEMI-ANNUAL VOGTLE CONSTRUCTION MONITORING REPORT (Docket No. 29849)

Direct Testimony and Exhibits of Philip Hayet on Behalf of the Georgia Public Service Commission, Public Interest Advocacy Staff, June 10, 2015.

IV. PRODUCTION TAX CREDITS (excerpt)

Q. DOES STAFF HAVE ANY CONCERNS REGARDING THE COMPANY’S PRODUCTION TAX CREDIT ASSUMPTIONS?

A. Yes, Staff points out two concerns that relate to the Company’s Production Tax Credit Assumptions. In their joint testimony, Dr. Jacobs and Mr. Roetger note concerns regarding the Company’s ability to meet its current schedule. First, given the Company’s current COD forecast of July 1, 2019/July 1, 2020, if the project slips another six months, the Company will be at risk that it will not be able to claim the PTCs on Unit 4.

The relevant tax code authorizing the PTCs has the requirement that new nuclear units must be in operation by January 1, 2021. Second, the Company’s recent filing in response to the EPA’s request for comments to the EPA’s proposed Clean Power Plan,[1] calls into question the Company’s estimate of generation it has assumed during the first few years of operation, which in turn may affect the Company ability to claim the full amount of PTCs that it has included in its economic evaluations.

Q. WHAT IS STAFF’S CONCERN RELATED TO THE IMPACT OF UNIT 4’S SCHEDULE ON THE COLLECTION OF PTCS?

A. In their joint testimony, Dr. Jacobs and Mr. Roetger note concerns regarding the Company’s ability to meet its current schedule. If Unit 4 does slip by more than six months, the Company would not be able to collect its current forecast of $522 million in nominal PTCs over the first eight years of the Unit 4 operating life that ratepayers would have otherwise received.

Q. WHAT IS STAFF’S SECOND CONCERN RELATING TO THE COMPANY’S ESTIMATE OF GENERATION DURING THE FIRST FEW YEARS OF OPERATION?

A. In developing its estimate of generation for the Vogtle Units, Georgia Power has used capacity factor assumptions that may be overly optimistic based on comments that the Southern Company filed in response to EPA’s Clean Power Plan rulemaking.

On page 137 of the comments, Southern Company stated that the EPA assumed that each year after 2020, the Units would be able to operate at 90% capacity factors. Southern Company’s comments dispute that and state that “Shutdowns for refueling, maintenance, and safety issues could lead these units to operate at capacity factors below 90 percent for sustained periods”.

While it is understandable that the Company may be concerned about the EPA’s intentions for using that assumption along with other assumptions in creating federally enforceable CO2 emission rate limits for Georgia,[2] it does raise concerns about the reasonableness of assuming that the Units will be able to achieve 90% or greater capacity factors during the initial years of operation.

Though it is not at all certain that the Company would not be able to achieve this capacity factor, there certainly appears to be a risk that it may not, which the Company acknowledges.

[1] EPA Docket ID No. EPA-HQ-OAR-2013-0602), Comments dated December 1, 2014, page 137, http://www.regulations.gov/contentStreamer?documentId=EPA-HQ-OAR-2013-0602-22907&attachmentNumber=2&disposition=attachment&contentType=pdf

[2] STF-71-45.