Fitch reaffirmed SO’s and Georgia Power’s (and Mississippi Power’s) ratings today after Southern Company backed off a week ago from risking losing the larger cost overrun request to GA PSC. Beware: SO will be back, when maybe fewer people are looking. Or maybe that tiger team will issue its summer report and the titanic Southern Company ship will finally change course towards distributed solar and wind power.

Jonathan Shapiro wrote for AP 31 July 2013, AP: Georgia Power To Waive Request for Extra Vogtle Costs

[Southern Company] CEO Thomas Fanning told analysts Wednesday that the Atlanta-based company reached a preliminary deal with Georgia officials.

Under the plan, the company would only seek right now to collect the $209 million that it spent building the two new reactors at Plant Vogtle from July to December.

The company would waive a separate request it made to regulators to raise its construction budget by $737 million to cover higher-than-expected costs.

WABE posted a copy of the preliminary agreement, which the Georgia Public Service Commission hasn’t yet approved. GA PSC could decide not to pass any cost overruns on to Georgia Power customers. Or it could even cancel Plant Vogtle 3 and 4 as a bad economic bet.

Fitch PR today Fitch Affirms Ratings for Southern Company and Subsidiaries,

Fitch Ratings has affirmed the Issuer Default Rating (IDR) and security ratings for Southern Company. In addition, Fitch has affirmed the IDRs and debt ratings of Southern Company’s subsidiaries: Alabama Power Company (Alabama Power), Georgia Power Company (Georgia Power), Gulf Power Company (Gulf Power), Mississippi Power Company (Mississippi Power) and Southern Power Company (Southern Power). The Rating Outlook for all of the subsidiaries is Stable except for Mississippi Power, which remains Negative. A complete list of rating actions is provided at the end of this release.

Fitch warned SO, however:

Regulatory risk has increased for Southern Company’s utility subsidiaries given the ongoing rate proceedings at Georgia Power and Gulf Power, return on equity (ROE) review proceedings at Alabama Power and higher regulatory scrutiny of Mississippi Power’s cost overruns associated with the 580 MW Integrated Gasification and Combined Cycle (IGCC) plant at Kemper. Favorable outcomes for Georgia Power and Alabama Power’s regulatory proceedings will be key to sustaining Southern Company’s current ratings given that the two subsidiaries account for approximately 84% of consolidated operating income.

Fitch acknowledges that the downside risk to ROEs is higher for both Georgia Power and Alabama Power given the national trend of declining ROEs. At the same time, Fitch recognizes the constructive regulatory regime in both Georgia and Alabama and low commodity prices that provide a favorable backdrop for rate negotiation. The last rate case outcome for Georgia Power in 2010 was quite constructive, which enabled the utility to embark on a heavy capex spend with strong credit metrics. Fitch believes Georgia Public Service Commission (PSC) will continue to be supportive of the financial health of the utility. Furthermore, the expected increase under the Nuclear Construction Cost Recovery (NCCR) tariff of approximately 1% per year through 2017 lowers the overall rate pressure on Georgia Power’s customers.

Did you catch that? CWIP for Plant Vogtle is what’s propping up Southern Company’s profit margin and stockholder dividends. And Fitch gave a much sharper warning about that than last year.

Georgia Power ratepayers and Georgia taxpayers: is the purpose of the Georgia Public Service Commission to prop up Southern Company’s monopoly profits, or to provide clean affordable power to Georgians? If the latter, maybe GA PSC should reject any more cost overruns for Plant Vogtle and ask to see that tiger team report on how SO is going to make a profit on offshore wind and distributed rooftop solar power.

-jsq

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