
          Money on the Mainline
          By Johnson, TimTim Johnson
          Vol. 5, No. 2, 1983, pp. 1-6
          
          Bob Scherer, Chief Executive Officer and Chairman of the Board of
the Georgia Power Company, believes that electric rates should not be
regulated. "Regulation isn't working," he explained recently to a
reporter from Industry Week magazine.
          "If we were deregulated tomorrow," he continued, "and we could
charge whatever we wanted, there would not be, in my opinion, a
disproportionate amount of socking it to the customer."
          Although Scherer did not explain what a "proportionate" amount of
socking it to the customer would be, his company has engaged in a
long-range strategy of persuading the Georgia General Assembly, one
step at a time, to remove authority from the state Public Service
Commission, steadily increasing rates and profits. After all, as
Scherer declares, "We found out that our fundamental purpose was to
raise a reasonable return for our investors."
          In 1980, an election year (Georgia legislators serve two-year
terms), Georgia Power pushed legislation that would have drastically
restricted the PSC: the cost of plant construction work in progress
would be placed into the rate base so that the Company would be
allowed to earn profits on plants that were not yet in operation:
consumers would be prohibited from intervening in rate cases; when the
Company earned state income tax credits, the PSC would pretend that
the taxes had been paid and charge consumers accordingly; rates would
be based on Company estimates for future costs. Several other
provisions would have also proven costly to the ratepayer. Dozens of
citizens, most of them turned out by Georgians Against Nuclear Energy,
lobbied furiously against the bill, and although versions of it
squeaked through both houses of the legislature, it failed to pass
both house and 

senate in identical form before time ran out.
          The Company vowed to return the next session. In the meantime, the
sponsor of the bill--Representative Bob Sise, a natural gas company
executive--was defeated at the polls. The only issue his opponent
discussed was "the Georgia Power Boondoggle," as the bill was
called.
          The next year, the Company was back. This time, it asked for much
less--legislation that would require that electric rates be based on
future costs and that state tax credits and deferrals be ignored in
rate cases (federal law already requires this for federal taxes). With
strong behind the-scenes support from Lieutenant Governor Zell Miller
(who had opposed the Company's legislation the previous year, when he
was running for U.S. Senate), the bill breezed through both houses and
was signed by the Governor almost before citizens could react.
          The sponsor of the bill, Senator Tom Allgood, was elected senate
majority leader in only his second term in the senate. Bob Scherer
sent out a fundraising letter to local business leaders for Miller's
reelection campaign.
          "Clearly, the Company is working toward deregulation of its rates,"
comments Neill Herring, an Atlanta activist. "Their construction
program is so out of hand that they have a choice between admitting
they were wrong and cancelling some of their plants, or intimidating
the state legislature into giving them more of the ratepayers'
money. And they won't admit they made a mistake." Herring is in a
position to know: since 1971, he has been involved with various groups
in opposing electric rate increases.
          In January of this year, Herring and forty-five other citizens
attended an "Energy Strategy Conference" at a Future Farmers of
America Camp near Covington, Georgia, (a campground given to FFA by
Georgia Power.) The conference was organized by the Southern Regional
Council, the Environmental Action Foundation of Washington, and
Georgians Against Nuclear Energy (GANE). Concerned about the same
issues for varying reasons, these groups hoped to bring together a
diverse coalition of citizens to discuss Georgia's energy future.
          "Everybody's affected by higher power bills," points out Sid Moore,
an attorney who has intervened in utility rate cases on behalf of poor
people (for Georgia Legal Services), all residential and small
business consumers (as the state-hired consumers utility counsel) and
retail businesses (on behalf of the Georgia Retail Association).
          Rising utility rates hit the poor hardest, but the middle class,
small businesses, industry and government also suffer when power bills
increase. And because utility rates are set by state agencies,
organizers have a forum for opposing unjustified increases.
          A recent ally of those concerned about rising electric bills is the
environmentalist movement. In the past, many environmentalists
supported electric rate hikes because higher rates encouraged
conservation and conversion to renewable energy resources. However,
because the major cause of rate hikes is the construction of new power
plants, especially nuclear power plants, environmentalists have
increasingly joined forces with those concerned about the economic
impact of electric rate increases.
          "If we're going to stop Plant Vogtle (a two-unit nuclear plant
under construction by Georgia Power), we're going to have to cut off
the money," explains Pam Beardsley of GANE.
          The January Energy Strategy Conference drew representatives of
business, government and citizens groups for a weekend of workshops
and strategy sessions in six areas of concern: the economics of power
plant construction; alternatives to construction; organizing within
cooperatively-owned and city-owned power companies; intervening in
rate cases; the politics of electric utilities in Georgia, and
organizing around utility issues in the black community.
          "Everyone agreed that the major problem facing electricity
consumers in Georgia is Georgia Power's construction program,"
according to Debby Shepherd, the main coordinator of the
conference.
          In the late 1960's and early 1970's, Georgia Power--like other
utilities in the South--undertook massive construction programs
predicated on growth rates projected at ten percent or more per
year. Electricity consumption had grown at this rate through the
sixties, and, using a straight-line projection, utilities assumed that
this rate would continue.
          There were several fallacies in this assumption. As Sid Moore
points out, the utilities drew the straight line without looking at
the reasons behind the growth in the sixties.
          "Residences and offices installed air conditioning in the fifties
and sixties, causing the tremendous jump in summer demand," says
Moore. "But the market was saturated. To assume continued growth at
these levels would mean that poor people would be putting in air
conditioning, since they were the only ones without it."
          Electricity prices had actually declined in the sixties, further
encouraging consumption. The huge construction 

programs of the
seventies, coupled with fuel price increases in the seventies, further
dampening demand growth.
          Contributing particularly to higher prices for electricity was the
construction of nuclear power plants. Once glowingly touted as
offering the potential for electricity "too cheap to meter," nuclear
power turned out to be extraordinarily unreliable and expensive. By
the end of the 1970's, electricity produced by new nuclear power
plants exceeded the cost of electricity produced at oil-burning
facilities.
          "At this rate, it will soon be cheaper to burn money to produce
electricity than to use nuclear power," commented Danny Feig of
Atlanta, an antinuclear organizer.
          Another reason for the slackening demand for electricity was the
increasing share of the market taken by alternative energy
sources. "People are utilizing conservation techniques, wood, passive
solar water and space heating, low-head hydro, and cogeneration
(producing industrial process heat and electricity with the same
steam)," according to Jeff Tiller, an engineer who participated in the
conference.
          In those states where power companies failed to adjust their
construction program to the reality of growth in consumption, the
consequences have been severe. Consumers have usually been required to
pay for new plants whether the plants were needed or not, sharply
increasing rates and further dampening consumption. Georgia Power has
tried to solve this problem not by reducing construction, but by
selling plants to out-of-state utilities. However, these utilities
themselves are usually overbuilt, so only small percentages of Georgia
Power's "overcapacity" has been sold to out-of-state utilities.
          The overcapacity problem in Georgia is particularly severe: a 1978
report by the U.S. House Committee on Government Operations states,
"Georgia Power Company rated first (in annual cost to consumers of
excess generating capacity) with overcharges of $39 million." The
problem in Georgia has become much worse since that time, as several
more plants have come on line and growth has further declined.
          Yet, the construction program of Georgia Power continues.
          In West Georgia, on the Chattahoochee River, two hydroelectric
projects are under way at Goat Rock and two more at Bartletts Ferry
(Georgia Power already operates several facilites at those sites).
          In northwest Georgia, near Rome, the Company is building three
pumped-storage hydroelectric projects on Rocky Mountain. A
pumped-storage facility involves two dams, one at a lower elevation
where water is stored after it flows from the higher, electricity
producing dam during peak hours. During off-peak times, base-load
electricity is used to pump water back up to the higher dam for use
during the peak hours.
          In Monroe County, near Macon, Georgia Power angered residents when
it condemned twelve thousand acres of land for construction of a
four-unit coal facility, the Robert Scherer Plant. Utility officials
once bragged that this would be the largest coal-fired facility in the
world, but became quieter when residents expressed concern rather than
gratitude.
          The state of Georgia is allowing Plant Scherer to be built without
air-cleaning scrubbers, saying that land clearing at the site
constituted the beginning of construction, making the facility exempt
from federal requirements under a grandfathering provision. The
result, according to Georgia Power's own environmental assessment,
will be the following emissions: 37,200 pounds of sulphur dioxide per
hour, 3,100 pounds of I articulates per hour, and 21,700 pounds of
nitrogen dioxide per hour. Such emissions have been associated with
various health problems (including lung cancer) and environmental
problems (including acid rain and crop damage). Plant Scherer is a
base-load plant (designed to operate around the clock) as opposed to a
peaking plant (used only when demand is at its highest), meaning that
the plant is scheduled to operate twenty-four hours a day, seven days
a week, year round.
          Georgia Power's repeated efforts to sell Plant Scherer to utilities
in other states has fueled the bitterness of Georgia natives. One
partial buyer is the Gulf Power Company, which, like Georgia Power, is
a subsidiary of The Southern Company. Gulf Power cancelled a
coal-fired plant it was building on the Crystal River in Florida to
buy into Plant Scherer. The reason? The State of Florida required Gulf
to put scrubbers on its plants, and the cost difference between the
Florida plants with scrubbers and Plant Scherer without scrubbers made
the cancellation economically attractive. Billy Lovett, a member of
Georgia's Public Service Commission who attended the Energy Strategy
Conference, expresses the sentiment of many Georgians when he refers
to the deal as "filtering Florida's air with Georgia's lungs."
          Molly Martin, and Zeke Williams of Macon were among those gathered
in January at the Energy Strategy Conference. They expressed concern
about the air pollution from the plant--one unit of which is
complete--as their primary reason for attending the conference. Also
present were homeowners whose land had been 

condemned for high-voltage
power lines from Plant Scherer.
          "I bought a home in a rural area to get away from environmental
threats to my family," says Rabun Tingle, a small business operator
and the father of six. "I'm not about to roll over and play dead when
they try to condemn my land for dangerous power lines from a plant
they don't even need."
          Tingle pointed out that during condemnation proceedings for Plant
Scherer, Henry Strozier, Assistant Vice-President and Manager of
System Planning for Georgia Power, swore that the plant would not be
sold to out-of-state utilities: "We only build for Georgia," he said
under oath.
          In the same 1974 proceeding, Strozier downplayed the significance
of energy conservation, saying, "The energy conservation kick has
little effect on demand."
          The overconstruction problems at all these sites are dwarfed when
compared with just one construction project: the Alvin W. Vogtle
Nuclear Plant, named after the current president of The Southern
Company. (Jeanne Shor house, a Southern Company stockholder who
opposes Plant Vogtle, once proposed at an annual meeting of the
Company that a currently operating plant be renamed after Alvin Vogtle
"so his ego won't be so tied up in this worthless nuclear plant.")
          Located across the river from the Savannah River Plant (where
plutonium and tritium are produced for the nation's nuclear weapons),
Plant Vogtle is the most expensive construction project ever
undertaken in Georgia. The Municipal Electric Authority of Georgia
(MEAG), a partner in the project, estimated in May of 1982 that its
17.7% share of the plant would cost $1.8607 billion, for total plant
cost of more than $10.5 billion (assuming that Georgia Power could
obtain capital as cheap as MEAG's tax-free municipal bonds, which it
cannot). This cost estimate includes only construction and interest
costs before the plant comes on line.
          In comparison, the Kings Bay Naval Submarine Station now under
construction at Kings Bay on the Georgia coast--the most expensive
peacetime construction project the Navy has ever undertaken--is
projected to cost $1.7 billion, less than one-sixth the currently
projected cost of Vogtle. The Atlanta airport, one of the largest and
busiest in the world, cost less than $500 million--one twentieth the
cost of Vogtle.
          At the end of 1981, the net value of all of Georgia Power's
operating equipment totaled $3.7 billion. Plant 

Vogtle would therefore
cost, at current estimates, nearly three times as much as all plants,
lines, poles, meters and other capital equipment in operation a year
ago combined.
          In 1972, Georgia Power told Moody's investment service that the two
units at Plant Vogtle would cost a total of $731 million and both
would be in operation by 1980. In 1983, the Company estimates that the
plants will be on line in 1988, and admits even this projection is
"optimistic." And MEAG projects that they will cost more than fourteen
times the 1972 projection.
          Environmentalists have long been concerned about nuclear power
problems such as plant safety, waste disposal and
decommissioning. Peace activists have traditionally opposed nuclear
power development because it provides a means for producing materials
for nuclear weapons. It is now clear that, at least in the case of
Plant Vogtle, continued construction is a major economic issue.
          "Plant Vogtle is an albatross," says Al Burrell, a founder of GANE
and editor of its newsletter, The Gainsayer.
          Burrell and the other citizens at the January Energy Strategy
Conference agreed that Plant Vogtle would be a major target of their
efforts.
          "We agreed that focusing on the economic aspects of Plant Vogtle
holds the most promise for stopping the plant," said Debby
Shepherd.
          If Plant Vogtle is completed and placed into the rate base it will
have a devastating impact on electricity consumers in Georgia. Sid
Moore calculates that electricity produced at Plant Vogtle will cost
more than twenty cents per kilowatt hour to produce (not including
distribution or administrative costs), compared with about three cents
per kilowatt hour for electricity produced in Georgia today.
          The cost of Vogtle electricity will be borne by virtually all
electricity consumers in Georgia, since cooperatives and city-owned
utilities own shares in the project.
          To estimate the direct impact on Georgia Power's retail residential
consumers, a relatively simple calculation produces frightening
projections. Placing Georgia Power's share of the facility into the
rate base--$5.5 billion--and paying the Company a 12.5% return on rate
base (less than they now are allowed), then doubling this for the tax
effect (any rate increase must be doubled for the effect of state and
federal income taxes; although Georgia Power does not pay this amount,
state and federal-laws require the PSC to pretend that no tax credits
or deductions were taken) indicates a $1.375 billion rate hike. This
does not include labor, operating costs, distribution costs or other
related costs. The residential consumers' share of this would be about
$460 million, divided among Georgia Power's 1.1 million residential
consumers. Thus, the average residential consumer would pay more than
four hundred dollars a year in higher power bills due merely to adding
Plant Vogtle to the rate base.
          Effects on other consumers--stores, industry, schools and
others--will be similarly startling. What will happen to marginal
businesses? Will industry locate in other states? Money put into
paying school systems' power bills cannot be spent increasing
teachers' salaries.
          "Plant Vogtle is an economic quagmire," says Carol Stangler, former
coordinator of GANE. "It's time to pull out."
          Especially in view of Georgia's glut of electricity generating
capacity (more than forty percent above peak demand with twelve more
plants under construction), it is in the best interest of the state's
economy to stop construction of the Vogtle plant. Experience in other
states similarly indicates that cancellation of Plant Vogtle would be
a wise action.
          It is also in the best interest of the Georgia Power Company to
stop construction of Plant Vogtle.
          As eletricity rates rise, consumers shift to alternative sources of
energy, including conservation. Many industrial consumers now use
their process heat (heat produced in the manufacturing process by
burning coal, oil, gas, wood or another fuel) to boil water, producing
steam which turns turbines, thereby producing their own
electricity. Industrial motors produced today are twice as efficient
as those produced just a few years ago. Residential consumers insulate
their homes and, as they replace appliances, purchase more efficient
ones (household appliance efficiency has quadrupled in the past ten
years). Passive solar energy for space and water heating is already
considerably cheaper than electricity. While few people have the
capital needed at the front-end for these alternatives, lending
institutions are proving more receptive.
          As Georgia Power's electricity becomes more expensive, it will make
even more economic sense to switch to alternative energy
sources. Within a few years--before Plant Vogtle is scheduled to come
on line--electricity produced from solar cells is expected to be
cheaper (including battery storage) than the electricity produced at
Plant Vogtle. As consumers conserve and switch to other sources,
Georgia Power will either have to lower prices in order to be more
competitive with the alternatives (in which case, unless they cancel
some of their construction, they will lose money) or to raise prices
to its remaining customers to pay for idle power plants--an option
likely to drive away even more customers.
          "Georgia Power apparently doesn't plan to stop Plant Vogtle anytime
soon," says Pam Beardsley. "Not if they can get the money the plant
requires." But Beardsley believes that, by drawing attention to the
detrimental effects on the state's economy of high utilty rates and

overconstruction of power plants, new allies will be drawn into the
battle.
          Within the last few weeks, a remarkable coalition has emerged to
challenge the Power Company's latest legislative
maneuverings--attempts to allow rate hikes to go into effect before
full PSC proceedings are completed. Such legislation would provide
Georgia Power with an extra hundred million dollars or more during
each rate case.
          The organized elderly have voiced their opposition through the
Georgia chapters of the American Association of Retired Persons, the
National Retired Teachers Association and the Council on
Aging. Organized labor is represented by the Communication Workers of
America, the United Auto Workers and the Machinists. Residential
consumer advocates are working through Ratewatch, Georgia Action/ACORN
and others. The attorney who represents major commerical consumers on
rate design issues has lobbied extensively, as has John Lewis, former
SNCC organizer, long-time civil rights activist and member of
Atlanta's City Council. All five Public Service Commissioners oppose
such legislation as do the current and two former Consumers' Utility
Counsels (a state office established to represent consumers). The two
Atlanta newspapers, usually advocates for Georgia Power, have, of
late, taken the consumers' side as have several other newspapers
around the state. Two chemical companies have joined the
coalition. And citizens from all over Georgia have phoned and written
legislators to express their opposition.
          The coalition has named itself the Campaign for a Prosperous
Georgia; "It has a Republican ring to it," explains organizer Doug
Teper in explaining the attempt to show that fighting utility rate
hikes is not a subversive activity. A full-time coordinator has been
hired, a small grant has been obtained from the Janet Lowe Memorial
Fund, and more fundraising efforts are under way.
          "The fight is between truth and money," says Rabun Tingle. "We'll
see who wins."
          The Co-Owners Of Plant Vogtle
          Currently, Plant Vogtle is jointly owned by:
          Georgia Power  50.1% Oglethorpe Power Corporation  30.0%
Municipal Electric Authority of Georgia (MEAG) 17.7% City of
Dalton 2.2%
          Georgia Power is an investor-owned utility
serving the majority of Georgia's electric consumers. It is wholly
owned by The Southern Company, which also owns Alabama Power, Gulf
Power (in Florida), and Mississippi Power.
          Oglethorpe Power Corporation consists of rural
electric cooperatives which serve a majority of the land area (though
a minority of the population) of Georgia. It was established in the
1970s to buy into Georgia Power's construction projects and has been
able to obtain extremely cheap money from the federal Rural
Electrification Administration (meaning that taxpayers are subsidizing
the construction with their tax money as well as their electric
rates).
          MEAG was created by the State of Georgia and
consists of 46 city-owned electric systems and one county-owned system
representing about 8. 6% of the state's population. It was created in
the 1970s exclusively for the purpose of buying into Georgia Power's
construction projects, thereby providing lower cost capital for the
construction. This is due to the tax-free nature of bonds it issues
(another taxpayer subsidy).
          The City of Dalton opted to stay out of MEAG but
bought into Plant Vogtle on its own.
          
            Tim Johnson, who has worked for the Georgia Public
Service Commission and the Consumers' Utility Counsel of Georgia, its
an Atlanta writer and organizer.
          
        