By David Pendered
Additional construction delays expected at Plant Vogtle could cause its customers to face higher electricity rates than currently envisaged, according to three credit rating actions released on Monday by Moody’s Investors Service.
Moody’s analysts made the observation as Georgia Power begins the five-month process to justify its newly submitted request for a rate hike to utility regulators. The Georgia Public Service Commission has said it will issue a decision on the request on November 2. The power company is asking an additional $ 235 million a year from taxpayers.
Also on Monday, the Nuclear Regulatory Commission ad he opened a “special investigation” into what led to the need to repair the cable trays that carry the electric cables in Unit 3, the first of two nuclear units to open. There is no risk to public safety as there is no nuclear fuel in the reactor, according to the NRC statement.
The trigger for the credit rating measure was the planned July sale of a total of $ 260 million of bonds for the Vogtle project by the Municipal Electrical Authority of Georgia. The money is used to help pay construction costs, pay off some existing debt and accrued interest, and cover other costs. The actual dollar amount could change by the date of issue, depending on the rating.
The credit score cites construction delays expected in a June 7 report an independent monitor. Delays could add costs and delay revenue, paving the way for potential borrowing, the costs of which would be passed on to consumers. The rating action notes that the project has some reserve funds, but not enough to cover the prolonged delay expected by the monitor. The use of these reserves would have the following effect:
- “[S]somewhat alleviating the fear of additional cost increases that may require additional debt financing and the resulting higher rates being passed on to customers.
The credit rating action released on Monday shows analysts view Plant Vogtle favorably for investors. Bonds are rated as moderate to low credit risk, which means investors can expect to be repaid, at a profit.
Analysts expect homeowners, investors, and the Georgia Public Service Commission to complete Plant Vogtle and the facility to generate revenue. This is the bet behind favorable credit scores.
Analysts said so when they identified in each rating action “Factors that could lead to a downgrade:”
- âNegative action could result if there was a significant decrease in the currently strong regulatory, political, public and co-owner support for the Vogtle project;
- âAny other significant construction delay in the Vogtle project that significantly increases project costs leading to a depreciation or abandonment decision by the co-owners. “
Getting back to consumers, the prospect of higher electricity rates is cited in credit ratings due to potential construction delays predicted in a June 7 report by an independent construction monitor who is monitoring the project.
The Monitor noted that Plant Vogtle’s two nuclear power plants are not expected to be commissioned until mid 2022 and mid 2023, at the earliest. That’s at least six months behind the schedule presented by Georgia Power in a February report.
Written testimony was presented by Donald Grace, an industry veteran with over 50 years of experience in fossil and nuclear power generation facilities. The PSC hired Grace in 2018 to independently assess the construction process.
The delays Grace predicted resulted from “poor productivity and production” in the construction being processed, according to her report.
Moody’s analysts took Grace’s report and other information into account to estimate that such a delay could add $ 2 billion to construction costs. The money could be needed to cover additional construction costs, forcing homeowners to seek more money to pay the additional costs and cover other financing needs, analysts reported.
In the meantime, a few outliers could help reduce the amount of borrowing and the resulting costs to consumers. One is the reserve fund. Another is the drop in interest rates for outstanding loans. The interest rate is 3.57% instead of the projected rate of 5.91% originally expected, according to a calculation of numbers in the report.
The credit rating measure does not address how the rate hike would be implemented.