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 expected this week, consumer advocates said.
U.S. nuclear developer Westinghouse is the lead contractor building two nuclear reactors each in Georgia and South Carolina, both of which are billions of dollars over budget and years behind schedule.
Westinghouse was expected to file for bankruptcy protection as it struggles to limit losses that have thrown its Japanese parent Toshiba Corp into crisis, people familiar with Toshiba's thinking said.
If Westinghouse is unable to complete the reactors, it puts the states in an unenviable position. They would either have to go ahead with another contractor - which would cause delays - or stop work, and find another solution for growing power demand.
"Neither scenario sounds good for ratepayers. 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.
Rates were already anticipated to rise per the terms of the agreement with Westinghouse in coming years, as customers move from paying for the financing costs for the reactors to paying for construction costs when the plants go into service.
However, if the utilities - Georgia Power and South Carolina Electric & Gas (SCE&G) - elect to stop building, customers are still on the hook for what has already been spent on the unfinished reactors. In addition, whatever replaces that power generation will also need to be paid for.
"We���re getting briefings about what we���re facing and at this point I don���t think any of the options are terrific," said Stan Wise, chairman of the Georgia Public Service Commission (PSC), which regulates rates in Georgia.
The reactors at Georgia's Vogtle plant were expected to cost about $14 billion and enter service in 2016 and 2017. Now they are not expected to be finished until at least 2020, with expected costs around $19 billion.
The typical Georgia Power residential customer using 1,000 kilowatt hours pays about $122 per month. Of that, almost $7 is covering financing costs for Vogtle. Georgia Power, a unit of U.S. power company Southern Co, serves almost 2.5 million homes and businesses in the state.
Once the project is complete, rates are expected to rise by 6 percent to 8 percent as customers have to cover the project's capital costs. Coyle said cancelling or delaying the completion would likely end up boosting customer bills by more than Georgia Power's estimate.
The utility would have to go back to the Georgia PSC, which would determine whether to complete the project or stop work.
"Knowing what we know today, we might not choose to build the new reactors," the Georgia PSC's Wise said. Since the commission approved construction a decade ago, natural gas prices and renewable technologies have become less expensive.
Jacob Hawkins, a spokesman at Georgia Power, said the company is monitoring the situation and is "prepared for any potential outcome."
The reactors at South Carolina's Summer plant were expected to cost about $9.8 billion, excluding certain costs, and be completed in 2016 and 2019; current estimates are around $22 billion and completion in 2020.
SCE&G, a unit of Scana Corp, serves about 714,000 customers. A typical residential customer using 1,000 kWh per month pays about $148. Of that, about $27, or 18 percent, is for construction, according to the South Carolina PSC.
"The financing cost of the new reactors alone will account for over 25 percent of a typical customer's bill by 2020," said Tom Clements, director of Savannah River Site Watch, a public interest group monitoring energy and nuclear issues. He said he expects "big rate hikes" when the reactors enter service or if SCE&G stops work.
Rhonda Maree O'Banion, a Scana spokeswoman, would not comment on possible rate hikes, saying they are "preparing for a variety of possible outcomes."
(Reporting by Scott DiSavino in New York; Editing by Lisa Shumaker)