Is this the future for construction workers at Plant Vogtle? Lessons from South Carolina

Plant Vogtle units 3 & 4 under construction

When the decision was made to stop work on the two nuclear power plants in South Carolina, construction workers didn’t receive much notice of layoff, according to the following report first published in the Pittsburgh Post-Gazette. This may be the future for Plant Vogtle workers building Units 3 & 4 if Southern Company decides to end work on the costly and long-delayed project.

Westinghouse: Project canceled 'without warning' By Anya Litvak / Pittsburgh Post-Gazette

A week after efforts to build two Westinghouse power plants came to a screeching halt in South Carolina, the Cranberry-based nuclear firm chronicled the shock of the moment and began dealing with the aftershocks.

About 6,000 people worked at the V.C. Summer site where two utilities, SCG&E and Santee Cooper, had commissioned Westinghouse Electric Co. to build two AP1000 power plants nine years ago.

Westinghouse had hundreds of its own employees at the site last week when the South Carolina utilities decided to stop the construction project that already was years behind schedule and billions of dollars over budget. The decision stemmed in large part from Westinghouse’s March 29 bankruptcy, the utilities said. 

But their move came “without warning,” Westinghouse said in a document filed with the bankruptcy court Monday.

The project owners did not give Westinghouse any notice before dismissing its subcontractors and vendors on the job, telling them to “halt all shipments and suspend or demobilize all work in progress,” the nuclear company said.

The utilities also restricted Westinghouse’s access to the project, the company said, “escorting its employees off the site using armed personnel, and subsequently only allowing entry to a handful of Westinghouse’s representatives and subcontractors, preventing Westinghouse from generally accessing the site” and carrying out its responsibilities.

The same was true for other workers like Kenneth Blind, a nuclear construction technician with Fluor Corp., the Texas-based firm that Westinghouse brought in in late 2015 to get the troubled construction work back on track.

Mr. Blind echoed Westinghouse’s account of what it was like on the day the project was canceled.

He found it strange that the Friday before the dismissals craft workers suddenly were told to hand in their work packages — binders with work instructions necessary to do their jobs, he said.

But the day before, Scana Corp., which owns part of the VC Summer project, had announced that Westinghouse’s parent company Toshiba Corp. had agreed to a $2.2 billion guarantee for the power plants. Mr. Blind took that as a good sign.

So did Westinghouse, which wrote in its bankruptcy filing on Monday that negotiating Toshiba’s commitment sent the message of wanting the projects to continue.

On the morning of July 31, things at V.C. Summer continued as usual. Mr. Blind’s team was starting to pour concrete for one of the buildings near the reactor. Around 11 a.m., a security guard approached him and asked if he would be sent home, too.

Too? Mr. Blind asked.

He went to find his boss, who then called his boss — a scene that was playing out across the huge site where thousands of workers were grasping at rumors. Word of armed guards had started to spread.

At an “all-hands meeting” at 2 p.m., they were told it was their last day on the job and thanked for their contribution to the project, Mr. Blind said.

People were angry, he recalled, and some were crying.

They began hustling to collect their stuff. “If you couldn't fit it through the turnstiles, you just had to leave it,” he said.

Now begins the work of “demobilizing” and “stabilizing” the site, Westinghouse said, vowing in a court document to seek payment from the South Carolina utilities for its part of the winding down process.

On Monday, Westinghouse also asked the court to allow it to break thousands of contracts associated with the V.C. Summer project. The contracts cover everything from engineering services and security protection to scaffolding and urine testing.

Had the project owners negotiated with Westinghouse to take over control of the power plant construction, as Southern Co. did with the Vogtle project in Georgia, these contracts would have likely changed hands from Westinghouse to the South Carolina utilities.

Now, they will join the long march of unsecured creditors in Westinghouse’s mammoth bankruptcy.

Anya Litvak: alitvak@post-gazette.com or 412-263-1455.

Westinghouse & Southern Company: Good News and Bad News for Workers

Late on Friday, May 12, 2017, the Southern Company agreed to take over construction of the nuclear construction site at Plant Vogtle.

This means that the 6,000 workers on site in eastern Georgia will be able to continue building the reactors at least until June 3.

Southern Nuclear (a subsidiary of the Southern Company) and Georgia Power will become the main contractor for the Plant Vogtle expansion whose ownership is shared between Georgia Power, Oglethorpe Power, the Municipal Electric Authority of Georgia, and Dalton Utilities.

Westinghouse, which had filed for bankruptcy in March, appears ready to walk away from the project if it can receive approval from the bankruptcy court, leaving the future of the two reactors in the hands of the utilities and the Georgia Public Service Commission.

Georgia Power still has not committed to completing both reactors.

Options include completing one or both reactors, converting one or both reactors to natural gas, or giving up on the project entirely.

The role of the Georgia Public Service Commission is becoming extremely important as discussions continue on how to pay for the two new reactors, which are billions of dollars over budget.

E&E News reports that

"Georgia Power has a settlement with the Public Service Commission on how to handle Vogtle's costs going forward. The utility and the PSC staff negotiated the agreement, in part, after the project's costs rose 30 percent from when it started.

The settlement includes the utility absorbing an amount through a lower rate of return on equity if the reactors are not online by 2020. Consumers would shoulder the rest.

Southern stated in filings earlier this month that the project is not likely to meet that deadline. Georgia Power executives confirmed the same in a routine hearing about the project's cost and schedule last Thursday.

Georgia Power has already hinted that it will want to revisit that settlement, which was put in place months before Westinghouse filed for bankruptcy protection. The PSC staff has held firm that the agreement remains in place, according to emailed statements obtained by E&E News (Energywire, May 5)."

The PSC took comments from the public at last Thursday’s meeting, and many were not pleased that Georgia utility ratepayers have been paying for the plants since 2009 when Georgia Power began charging customers for the project’s costs years before the plants would come actually generate electricity.

WSAV-TV (Savannah, Ga.) has nicely captured the current situation and you can watch their report here.

Atlanta Progressive News reports that the next public hearing on Vogtle will be June 29, 2017, when the construction monitors on PSC staff will testify. 

Westinghouse Plant Vogtle bankruptcy will cost Georgia ratepayers and workers

Westinghouse's bankruptcy will be very costly to the owners of Plant Vogtle -- Southern Company (through its subsidiary Georgia Power), Oglethorpe Power Corp., the Municipal Electric Authority of Georgia (MEAG Power), and Dalton Utilities -- but Georgia electricity users and workers will ultimately foot the bill.

On March 29, 2017, Plant Vogtle’s lead contractor, Westinghouse Electric Co., filed for Chapter 11 bankruptcy.

The contractor, which is a subsidiary of Toshiba Corp., continues to deal with large cost overruns in its building of two nuclear reactors in Georgia, and it is unclear whether Westinghouse will be able to proceed with the project.

Now Westinghouse is in the hands of a Federal bankruptcy judge who may void previous agreements with the utilities, allow contractors to renegotiate contracts for higher payments, and may allow Westinghouse to abandon the project altogether.

The judge has tentatively approved Westinghouse’s access to $800 million in debtor-possession financing so it can continue some work during the bankruptcy proceedings but raised questions during the hearing about whether some of those funds would go to support the company’s foreign operations that are not involved in the bankruptcy proceedings instead of only financing Westinghouse's U.S. operations.

The implication is that Westinghouse may use some of that $800 million to prop up their non-American projects and leave the Georgia and South Carolina projects starved for cash.

If Westinghouse is preparing to abandon Plant Vogtle, which may be the case, the utility owners have only a limited number of options, each of which involve large unexpected costs.

The utilities can attempt to bring in another contractor to take over construction of the two nuclear reactors, choose to turn the nuclear reactors into gas-fired plants, or close down construction and leave the site unfinished.

Southern Company's CEO Tom Fanning has asked Toshiba to continue work on Plant Vogtle, but Toshiba is under pressure from its stockholders to pull out of Georgia and South Carolina. 

What’s at Stake

The Plant Vogtle project employs more than 5,000 well-paid construction workers at the site, most of whom are working under union contracts.

If the site is abandoned, it will be a blow to those workers as well as all of Eastern Georgia. Plant Vogtle is located in Burke County near Waynesboro, Ga., and the Augusta, Ga. metro area, both of which have benefited from the influx of workers and money, as has nearby Aiken, S.C.

Even a temporary halt to construction will cause large layoffs and loss of a skilled workforce who will scatter to find comparable paying jobs.

Higher Electricity Bills are a Real Possibility

For customers of Georgia Power, Oglethorpe Power Corp., the Municipal Electric Authority of Georgia (MEAG Power), and Dalton Utilities; the threat is even higher electricity rates to cover the increased costs.

Any delays, including if a new contractor must be brought on site, will only increase costs in the project that is already more than $3 billion over budget.

In addition, Bloomberg reports that “U.S. taxpayers have already financed $6.5 billion in loan guarantees for Southern and its partners that were awarded in 2014 to build the Vogtle plant. The Energy Department followed up in June 2015 with an $1.8 billion loan guarantee for the project.”

"We think there is a lot of risk," said Autumn Hanna, a senior program director for the Washington-based watchdog group Taxpayers for Common Sense, a group that has been critical of the loan guarantees. "We are really afraid this puts the $8 billion on line even more for taxpayers."

“If Southern’s contract with Westinghouse is terminated and the project is abandoned, the Energy Department could require repayment of its investment over five years, according to Moody’s Investors Service analyst Michael Haggarty.”

Georgia is a "Utility-friendly" State

No doubt if the utilities must pick up extra costs stemming from Westinghouse’s inability to meet its obligations, they will be asking the Georgia Public Service Commission to pass along those costs by raising electricity rates.

Traditionally, the Georgia PSC is seen as very "utility-friendly" in allowing utilities to pass along higher costs to ratepayers, even for plants not yet producing electricity.

Ratepayers in Georgia have already contributed about $3,9 billion for the reactors, while the utilities are guaranteed a 10% return in profits, even in the case of cost overruns, according to Facing South.

Reuters quoted one advocacy group as stating that “electric bills in Georgia and South Carolina could rise more than customers expect if state utilities are left stranded by a Westinghouse Electric Co. bankruptcy filing.”

“People will either be forced to pay for something they never got or pay more to complete something that does not make economic sense,” said Liz Coyle, executive director of consumer advocacy group Georgia Watch.

Of course higher electricity rates will impact businesses in both states and discourage companies from moving or expanding in both Georgia and South Carolina, thus damaging economic development efforts.

South Carolina faces a similar problem because Westinghouse is the lead contractor for the V.C. Summer nuclear facility presently under construction in Jenkinsville, S.C.

The Aiken Standard recently editorialized that in their opinion the Westinghouse bankruptcy should not become a burden on ratepayers: “Ratepayers [in South Carolina] may wind up paying more in the long run should SCE&G raise rates. It's wrong to force power customers to pay higher rates for a facility that's years behind schedule and billions of dollars over budget.”

The Westinghouse-Plant Vogtle bankruptcy is getting relatively little local news coverage in the Atlanta media.

Bond Rating Services Are Negative

The Street.com says that “Fitch Ratings put the majority stakeholders of Westinghouse's Georgia and South Carolina projects on "negative watch." Those stakeholders are Municipal Electric Authority of Georgia, Oglethorpe Power Corp. (Ga.) and South Carolina Public Service Authority."

Moody’s Investor Service has issued a statement saying: “Westinghouse’s Chapter 11 bankruptcy filing and Toshiba’s ongoing financial weakness have raised new questions over their ability and willingness to complete the Summer and Vogtle nuclear projects under the terms of the fixed price contracts, placing additional financial pressure on the project owners.

“Our negative outlooks for these entities incorporated our expectation that a Westinghouse bankruptcy filing could occur, and reflect the likelihood that the projects won’t be completed under the current time and cost arrangements. We anticipate the project owners will evaluate alternatives for finishing construction, which in all likelihood would result in higher risk and additional costs.”

Oglethorpe Power, one of the partners in the project, has said that "the revised in-service dates of December 2019 and September 2020" for the two reactors "do not appear to be achievable."

Utility Owners of Plant Vogtle

Ownership in the two nuclear reactors under construction at Plant Vogtle is shared among several utilities in Georgia:

Georgia Power, a for-profit subsidiary of The Southern Company, serves 2.4 million customers in all but four of Georgia's 159 counties.

Oglethorpe Power Corporation is a nonprofit cooperative owned by 38 electric membership corporations.

The Municipal Electric Authority of Georgia (MEAG Power) is a nonprofit, statewide generation and transmission organization providing wholesale electricity to its 49 member communities, who own their local distribution systems.

Dalton Utilities provides electricity to the City of Dalton since 1898.

Bankruptcy Case

The case is Westinghouse Electric Co., 17-10751, U.S. Bankruptcy Court, Southern District of New York (Manhattan).