Georgia Cronyism: DSM, Nuclear Plague Public Service Commission

“Georgia Power says the Vogtle project creates lots of jobs and buys lot of building materials. The same could be said about the construction of a large pyramid. The question should be about the value of the costly project verses other things that might have used the labor and materials.”

Thanks to Jonathan Gruber of Obamacare fame, we now know all about behind-the-scenes development of government policies that override consumer wishes, hide the truth, and generally regard the public with contempt.

In Georgia, one Dick Spellman, a consultant for the Public Service Commission, is the sinister architect behind the PSC’s imposed Demand Side Management (DSM) program administered by the utility.

The premise of mandatory DSM programs is that consumers are too stupid to know what is good for them; but policy experts, like Spellman, do.

Deception is also a key element of the DSM program. Georgia Power itemizes a lot of riders and charges on customers’ bills; however, the DSM surcharge is hidden in the base rate costs.  Regulators don’t want the charge shown separately where it will be a source of customer scrutiny and questions.

After the disastrous round of DSM programs in the early 1990s, Georgia Power opposed charging customers and then giving a small part of the money back as efficiency rebates. Then along came Spellman who showed how DSM could be a real money maker for the Power Company.

Here’s how it works: contractors bring projects already initiated or completed by customers and claim rebates. The supposed idea behind rebates is to induce customers to invest in efficiency upgrades. However, most of the DSM money paid out so far is for measures the Company didn’t find out about until completed. The DSM program just takes credit for what would happen anyway while justifying hefty profits for the Company.

By throwing a couple of bucks into a project, the Company can claim all the calculated energy reduction is due to their action. It is assumed efficiency improvements would not occur in the absence of official DSM programs. It is also assumed that energy savings are not offset by increased use.

The alleged spokesmen for consumers sell out their constituency by calling for even more DSM spending and subsequent increased cost to consumers.  For each dollar the Company returns to customers, four dollars is collected under the DSM surcharge.  DSM is one of the Company’s most lucrative “services.”

Pyramid Vogtle Nuclear Plant

Georgia Power says the Vogtle project creates lots of jobs and buys lot of building materials.  The same could be said about the construction of a large pyramid. The question should be about the value of the costly project verses other things that might have used the labor and materials.

So how does a society choose between alternative uses of resources? Under market conditions with unhampered price signals, consumers decide with their spending what uses should be made of resources.

That’s not how the decision to build the Vogtle nuclear plant was made. Instead, the drivers were lobbying on the state and federal level for special government favors that would never be granted voluntarily by consumers. The academic term for this is rent-seeking; the more everyday term is cronyism.

Given all the special treatment from government for nuclear plants, it is doubtful they could be built under market conditions. Natural gas and coal, with far less up-front costs and competitive variable costs, are the capacity-of-choice for competitive markets.

Excerpts for PSC Staff Testimony on Vogtle

The veracity of Georgia Power is being strained by Vogtle. Consider the following:

The Company continues to state that it has worked diligently to obtain approximately $2.3 billion in additional customer “benefits” since original certification.  These benefits are the result of changes in certain Project variables since certification that in isolation have improved the Project’s economics. Staff reiterates its concern about the accuracy of the Company’s calculation of these benefits and the way the benefits are portrayed.  To the extent certain benefits are the result of Company management decisions or actions, Staff does not believe the Company’s efforts should be perceived as extraordinary.  The actions the Company has taken to secure these additional benefits were expected at certification. 

In order to provide the Commission with an accurate and complete picture, any discussion of additional “benefits” should also include consideration of additional detriments that have also arisen since certification.  These include increased replacement fuel production costs that will occur during Project delays, and higher pre- and post-Commercial Operation Date revenue requirements caused by the delays and the associated cost overruns.  Additional detrimental impacts will arise if further delays and cost overruns occur.

The PSC staff witness also says delays are costing the project $2 million per day. So far the Company has admitted to 21 months of delay. Stay tuned as the boondoggle continues to unfold, one bad announcement after another.