Judge rules in MEAG Power's favour on Vogtle PPA

19 June 2020

A US district judge has ruled that the power purchase agreement (PPA) signed in 2008 between JEA and Municipal Electric Authority of Georgia (MEAG Power) for electricity from the AP1000 units under construction at the Vogtle site in Georgia is "valid and enforceable". JEA, together with the City of Jacksonville, Florida, launched a series of legal and regulatory cases in 2018 in an attempt to have the agreement invalidated.

The construction site of Vogtle units 3 and 4, pictured earlier this month (Image: Georgia Power)

Vogtle units 3 and 4, scheduled to enter service in November 2021 and November 2022 respectively, are co-owned by Georgia Power (45.7%), Oglethorpe Power (30%), MEAG Power (22.7%) and Dalton city (1.6%). Following reactor vendor Westinghouse's March 2017 bankruptcy filing, the owners decided to continue with the project, and work has gone ahead under the project management of Southern Nuclear.

Under the terms of the PPA between MEAG Power and JEA, which was amended and restated in 2014, JEA committed to purchase all of the electricity generated by the new Vogtle units during their first 20 years of operation, as well as to pay for approximately 41% of MEAG Power's share of the construction cost for the new units during those 20 years.

The project was originally expected to cost USD9.5 billion in direct costs (USD14.8 billion total, including indirect and financing costs). The total cost of the portion attributable to JEA was USD1.4 billion. The project cost was capped under the 2008 agreement. However, by 2018, the project's total cost-to-completion estimates had increased to more than USD30 billion. JEA claimed a new unlimited cost-plus reimbursement agreement was implemented without its approval in June 2017 after Westinghouse declared bankruptcy. The amended agreement increased JEA's liability to more than USD2.9 billion.

On 11 September 2018, JEA - the eighth-largest community-owned electric utility in the USA - and the City of Jacksonville launched a series of legal and regulatory challenges against the validity of the amended PPA in an attempt to have the agreement invalidated. On the same day, MEAG Power filed counterclaims against JEA accusing it of a breach of contract that threatened the future of the Vogtle plant expansion project.

Judge Mark Cohen of the US District Court for the Northern District of Georgia yesterday ruled in MEAG Power's favour, saying the PPA remains "valid and enforceable". He also said the PPA "unconditionally requires JEA to pay MEAG for capacity and energy at the full cost of production of Project J, including debt service on the bonds and DOE-guaranteed loans".

"From the beginning, we have simply argued that the PPA is valid and fully enforceable, and that the suit brought by JEA and the City of Jacksonville was meritless," said MEAG Power President and CEO James Fuller. "Judge Cohen's ruling was very thorough and perfectly clear - JEA and the City of Jacksonville knew what they were doing when they entered into this agreement, and they have to honour their commitment." He added, "We look forward to Vogtle units 3 and 4 coming into service as planned in 2021 and 2022, respectively. We will continue to honour all of our commitments, as we always have, and are hopeful that this ruling puts this matter behind us."

Researched and written by World Nuclear News