Item 8.01 Other Events.
On September 29, 2022, Georgia Power Company ( "Georgia Power") reached an
agreement (the "Settlement") with the Municipal Electric Authority of Georgia
and certain of its subsidiaries (collectively, "MEAG Power") to resolve its
dispute with MEAG Power regarding the proper interpretation of the cost-sharing
and tender provisions of the joint ownership agreements relating to Plant Vogtle
Units 3 and 4 (the "Vogtle Joint Ownership Agreements").
As described in more detail in The Southern Company's and Georgia Power's
Quarterly Reports on Form 10-Q for the quarter ended June 30, 2022 (the "Form
10-Q"), under the cost-sharing provisions of the Vogtle Joint Ownership
Agreements, Georgia Power agreed to bear responsibility for up to $180 million
of qualifying construction costs of the other owners (the "Other Vogtle Owners")
of Plant Vogtle Units 3 and 4 (or up to approximately $75 million with respect
to MEAG Power's ownership interest) in the event of certain increases in
qualifying construction costs for Plant Vogtle Units 3 and 4. In addition, under
the tender provisions of the Vogtle Joint Ownership Agreements, if the estimated
cost at completion of Plant Vogtle Units 3 and 4 is revised and exceeds a
certain level, each of the Other Vogtle Owners has a one-time right to tender a
portion of its ownership interest to Georgia Power in exchange for Georgia
Power's agreement to pay 100% of such Other Vogtle Owner's remaining share of
total construction costs in excess of the triggering level.
As described in the Form 10-Q, Georgia Power and the Other Vogtle Owners do not
agree on either the starting dollar amount for the determination of cost
increases subject to the cost-sharing and tender provisions of the Vogtle Joint
Ownership Agreements or the extent to which COVID-19-related costs impact those
provisions. Georgia Power believes the current project capital cost forecast
will exceed the cost-sharing provision threshold, but not the tender provision
threshold, while the Other Vogtle Owners have notified Georgia Power that they
believe the current capital expenditures have already exceeded the cost-sharing
thresholds and the current project capital cost forecast triggers the tender
provisions under the Vogtle Joint Ownership Agreements. In June 2022, Oglethorpe
Power Corporation
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("OPC") and MEAG Power each filed a lawsuit against Georgia Power seeking, among
other things, a declaratory judgment that the cost-sharing and tender provisions
have been triggered. In addition, OPC and the City of Dalton, Georgia ("Dalton")
each notified Georgia Power of their purported exercise of the tender option.
Under the terms of the Settlement, among other items, (i) MEAG Power will not
exercise the tender option and will retain its full ownership interest in Plant
Vogtle Units 3 and 4, (ii) Georgia Power will pay a portion of MEAG Power's
costs of construction for Plant Vogtle Units 3 and 4 as such costs are incurred
and with no further adjustment for force majeure costs, which payments will be
in an aggregate amount of approximately $76 million based on the current project
capital cost forecast, and (iii) Georgia Power will pay 20% of MEAG Power's
costs of construction with respect to any amounts above the current project
capital cost forecast, with no further adjustment for force majeure costs. In
addition, MEAG Power and Georgia Power agreed to dismiss the pending litigation
described above, including Georgia Power's counterclaims.
Based on the current project capital cost forecast, the Settlement will not
require any additional charge to income by Georgia Power in the third quarter
2022.
The Settlement does not resolve the pending litigation with OPC and Dalton
regarding the cost-sharing and tender provisions of the Vogtle Joint Ownership
Agreements. With respect to these disputes, based on the current project capital
cost forecast, Georgia Power has remaining potential exposure of up to
approximately $165 million of further pre-tax charges to income.
The ultimate outcome of these matters cannot be determined at this time.
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