Georgia Public Service Commission

1 BEFORE THE 2 GEORGIA PUBLIC SERVICE COMMISSION 3 4 IN THE MATTER OF: GEORGIA POWER COMPANY’S FIFTH SEMI- ANNUAL VOGTLE CONSTRUCTION MONITORING REPORT DOCKET NO.: 29849

5 6 7 8 PUBLIC DISCLOSURE 9 10

DIRECT TESTIMONY

AND EXHIBITS

WILLIAM R. JACOBS, JR., PhD.

11 12 13 14 15 ON BEHALF OF THE

16 GEORGIA PUBLIC SERVICE COMMISSION

17 PUBLIC INTEREST ADVOCACY STAFF 18 19 20 21 December 2, 2011

1 1PUBLIC DISCLOSURE 2Direct Testimony of William R. Jacobs, Jr., Ph.D. 3Docket No. 29849, Fifth Vogtle Construction Monitoring Period 4 5 1 2 3 4 5 Table of Contents 6 7 8I. INTRODUCTION 1 9II. DESCRIPTION OF CONSTRUCTION MONITORING ACTIVITIES 3 10III. PROJECT STATUS 5 11IV. OTHER ISSUES POTENTIALLY IMPACTING PROJECT SCHEDULE 12 AND/OR COST16 13V VERIFICATION AND APPROVAL OF COSTS 188 14 15 16Exhibits: 17 18STF-WRJ-1 Resume of William R. Jacobs, Jr., Ph.D. 19 20 21 22 23 24 25 26 27 28 29

6 i 1PUBLIC DISCLOSURE 2Direct Testimony of William R. Jacobs, Jr., Ph.D. 3Docket No. 29849, Fifth Vogtle Construction Monitoring Period 4

1 I. INTRODUCTION 2 3Q. PLEASE STATE YOUR NAME, TITLE AND BUSINESS ADDRESS.

4 A. My name is William R. Jacobs, Jr., Ph.D. I am a Vice President of GDS Associates, Inc.

5 My business address is 1850 Parkway Place, Suite 800, Marietta, Georgia, 30067.

6Q. DR. JACOBS, PLEASE SUMMARIZE YOUR EDUCATIONAL BACKGROUND

7 AND EXPERIENCE.

8A. I received a Bachelor of Mechanical Engineering in 1968, a Master of Science in Nuclear

9 Engineering in 1969 and a Ph.D. in Nuclear Engineering in 1971, all from the Georgia

10 Institute of Technology. I am a registered professional engineer and a member of the

11 American Nuclear Society. I have more than thirty years of experience in the electric

12 power industry including more than twelve years of nuclear power plant construction and

13 start-up experience. I have participated in the construction and start-up of seven nuclear

14 power plants in this country and overseas in management positions including start-up

15 manager and site manager. As a loaned employee to the Institute of Nuclear Power

16 Operations (“INPO”), I participated in the Construction Project Evaluation Program,

17 performed operating plant evaluations and assisted in development of the Outage

18 Management Evaluation Program. Since joining GDS Associates, Inc. in 1986, I have

19 participated in rate case and litigation support activities related to power plant

20 construction, operation and decommissioning. I have evaluated nuclear power plant

21 outages at numerous nuclear plants throughout the United States. I served on the

22 management committee of Plum Point Unit 1, a 650 Megawatts Electric (“MWe”) coal

23 fired power plant under construction near Osceola, Arkansas. As a member of the

5 1 1PUBLIC DISCLOSURE 2Direct Testimony of William R. Jacobs, Jr., Ph.D. 3Docket No. 29849, Fifth Vogtle Construction Monitoring Period 4 1 management committee, I assisted in providing oversight of the Engineering,

2 Procurement and Construction (“EPC”) contractor for this project. My resume is

3 included in Exhibit STF-WRJ-1.

4Q. DR. JACOBS, WHAT IS THE NATURE OF YOUR BUSINESS?

5A. GDS Associates, Inc. (“GDS”) is an engineering and consulting firm with offices in

6 Marietta, Georgia; Austin, Texas; Corpus Christi, Texas; Manchester, New Hampshire;

7 Madison, Wisconsin; Augusta, Maine; and Auburn, Alabama. GDS provides a variety of

8 services to the electric utility industry including power supply planning, generation

9 support services, rates and regulatory consulting, financial analysis, load forecasting and

10 statistical services. My department, Generation Services, provides fossil and nuclear

11 plant monitoring, plant ownership feasibility studies, plant management audits,

12 production cost modeling and expert testimony on matters relating to plant management,

13 construction, licensing and performance issues in technical litigation and regulatory

14 proceedings.

15Q. WHOM ARE YOU REPRESENTING IN THIS PROCEEDING?

16A. I am representing the Georgia Public Service Commission Public Interest Advocacy Staff

17 (“Staff”).

18Q. WHAT IS YOUR INVOLVEMENT WITH THE VOGTLE 3 AND 4 PROJECT?

19A. I am the Commission’s Independent Construction Monitor (“CM”) for the Vogtle 3 and 4

20 Project (“Project”). As such, my duties are to assist the Staff in providing regulatory

21 oversight of all aspects of the Project. I have presented testimony in the First, Second,

22 Third and Fourth Semi-annual Vogtle Construction Monitoring (“VCM”) proceedings

5 2 1PUBLIC DISCLOSURE 2Direct Testimony of William R. Jacobs, Jr., Ph.D. 3Docket No. 29849, Fifth Vogtle Construction Monitoring Period 4 1 describing the construction monitoring activities, the status of the Project and any

2 concerns or significant issues that I identified.

3Q. WHAT IS YOUR ASSIGNMENT IN THIS PROCEEDING?

4 My assignment is to present the results of the Staff and CM’s Project oversight from

5 certification of the Project to the present with emphasis on the time period covered by the

6 Fifth Semi-annual Vogtle Construction Monitoring Report, January 1 through June 30,

7 2011. I will provide a description of the construction monitoring activities that have

8 occurred since my June 9, 2011 testimony in this docket and describe the current status of

9 the Project. I will update the Commission on issues that have the potential to impact the

10 schedule or cost of the Project that I have discussed in prior testimony in this docket and

11 identify any new issues that have arisen since the Fourth Semi-annual Vogtle

12 Construction Monitoring filing. Finally I will make a recommendation regarding the

13 costs submitted by Georgia Power Company (“Company”) for verification and approval.

14 II. DESCRIPTION OF CONSTRUCTION MONITORING 15 ACTIVITIES 16 17Q. PLEASE DESCRIBE THE CONSTRUCTION MONITORING PROGRAM THAT

18 THE STAFF AND INDEPENDENT CONSTRUCTION MONITOR HAVE

19 IMPLEMENTED TO MONITOR THE CONSTRUCTION OF THE VOGTLE 3

20 AND 4 PROJECT.

21A. The Staff and the CM continue to be very active in monitoring the Project. These

22 activities include monthly meetings with Company personnel to discuss Project status

23 and monthly trips to the Vogtle Project site to attend the meeting between the Company

5 3 1PUBLIC DISCLOSURE 2Direct Testimony of William R. Jacobs, Jr., Ph.D. 3Docket No. 29849, Fifth Vogtle Construction Monitoring Period 4 1 and the EPC contractor (Westinghouse / Shaw) and to observe construction activities and

2 progress. In addition, the CM team has continued its review of the Company’s

3 processing of Project invoices from Westinghouse and Shaw including review of the

4 controlling procedures and reviewing a sample of invoices processed. Other activities

5 conducted by the Vogtle construction monitoring team include:

6  Review of monthly Project status reports issued by the Company;

7  Review of monthly Project status reports issued by the Westinghouse – Shaw

8 consortium;

9  Review of the Company’s Semi-annual Construction Monitoring Reports;

10  Drafting discovery requests for additional information as needed following review of

11 the monthly status reports, semi-annual construction monitoring reports or meetings

12 with the Company;

13  Participation in NRC public meetings;

14  Review of public correspondence between the Company and the NRC via the NRC

15 website;

16  Review of trade articles and journals related to new nuclear power plant development.

17Q. HOW DO YOU KEEP THE STAFF INFORMED ABOUT THE CURRENT

18 STATUS OF THE VOGTLE 3 AND 4 PROJECT?

19A. I discuss the status of the Project and any issues or concerns that have arisen with the

20 Staff in frequent conference calls, meetings and other written communication. In

21 addition, I submit two monthly reports to the Staff. At the beginning of each month I

22 submit a Construction Monitor monthly report that describes the current status of the

5 4 1PUBLIC DISCLOSURE 2Direct Testimony of William R. Jacobs, Jr., Ph.D. 3Docket No. 29849, Fifth Vogtle Construction Monitoring Period 4 1 Project and identifies any significant issues or concerns that are new or existing. In

2 addition, following each monthly EPC meeting, I submit a summary of the meeting and

3 my observations to both the Staff and the Company. In this report I also include

4 comments and clarifications provided by the Company to ensure that the report is

5 factually accurate.

6 III. PROJECT STATUS 7 8Q. PLEASE DESCRIBE THE PROJECT’S CURRENT STATUS?

9A. Significant progress has been made in the key area of licensing with imminent approval

10 of the Design Control Document (DCD) by the NRC and subsequent issuance of the COL

11 anticipated in December 2011 or early 2012. In addition, construction activities at the

12 site are generally progressing well. However, as described in more detail later in this

13 testimony, the Project faces significant challenges in achieving commercial operation of

14 Unit 3 in April 2016 and of completing the project within the certified cost. The

15 Consortium’s most recent monthly status report forecasts commercial operation of Unit 3

16 on September 6, 2016, some 5 months later than the Guaranteed Substantial Completion

17 Date of April 1, 2016. It is questionable whether the amount of schedule compression

18 needed to recover the April 1, 2016 date is achievable or the best course of action when

19 considering unknown productivity rates and the economics of such as decision. While

20 the Project is currently slightly under budget, several potential change notices with

21 significant cost impact remain unresolved.

5 5 1PUBLIC DISCLOSURE 2Direct Testimony of William R. Jacobs, Jr., Ph.D. 3Docket No. 29849, Fifth Vogtle Construction Monitoring Period 4 1 In addition, many of the issues and concerns that were identified and discussed in the

2 Second, Third and Fourth Semi-annual VCM proceeding have not been resolved at this

3 time. These issues include:

4  Design and fabrication of modules and sub-modules at the Shaw Modular

5 Solutions (“SMS”) facility as required to meet the Project schedule;

6  Production of Vogtle specific Certified For Construction (“CFC”) design

7 packages as required to meet the Project schedule.

8 While progress has been made in these areas during the last six months, the Consortium

9 has not yet demonstrated the ability to produce complete modules and CFC design

10 packages as needed to support the Project schedule. These challenges are discussed in

11 more detail in Section IV of this testimony.

12Q. PLEASE DESCRIBE THE STATUS OF LICENSING ACTIVITIES FOR THE

13 VOGTLE PROJECT.

14A. As estimated in my testimony in the 4th VCM proceeding, the COL for the Vogtle Project

15 should be issued in December 2011 or early 2012. An affirmative vote on the AP1000

16 DCD by the NRC Commissioners is anticipated in the near future which could lead to

17 issuance of the COL in December 2011 or early 2012. Technical issues described in my

18 testimony in the 4th VCM proceeding regarding shield building loading and containment

19 pressure analyses have been resolved. There are no outstanding contentions in the Vogtle

20 licensing proceeding. While interveners have requested that some previously filed

21 contentions be re-opened, it is unlikely that this will delay issuance of the COL.

22Q. PLEASE PROVIDE AN UPDATE ON THE PROJECT SCHEDULE.

5 6 1PUBLIC DISCLOSURE 2Direct Testimony of William R. Jacobs, Jr., Ph.D. 3Docket No. 29849, Fifth Vogtle Construction Monitoring Period 4 1A. The status of the Project with regard to schedule remains unclear at this time. Prior to

2 issuance of the Consortium’s October 2011 Monthly Status Report, the Project schedule

3 indicated commercial operation of Units 3 and 4 on April 1, 2016 and 2017 respectively.

4 These dates were achieved by compressing the schedule approximately 2 months to

5 recover earlier Project delays. In its October 2011 Monthly Status Report, the

6 Consortium revised the Project schedule to indicate commercial operation of Unit 3 on

7 September 6, 2016. The Company was not consulted and has not agreed to this revised

8 schedule.

9Q. WHAT IS THE BASIS FOR THE CONSORTIUM’S CURRENT SCHEDULE

10 ESTIMATE?

11A. This new projection by the Consortium of Unit 3 COD by September 6, 2016 is based on

12 starting installation of nuclear island rebar on November 28, 2011 and adding 3 months

13 for rebar installation and First Nuclear Concrete, 48 months for construction and 6

14 months for startup. Thus the Consortium, in effect, removed the schedule compression

15 and based the September 2016 date on the original schedule durations. I note that, as of

16 this writing, installation of nuclear island rebar did not begin on November 28, 2011 and

17 therefore the Project schedule will be further delayed as implied by the most current

18 Consortium Schedule unless steps are taken to recover this delay.

19Q. WHAT IS YOUR OPINION REGARDING SCHEDULE COMPRESSION?

20A. While it is possible that some of the current delay can be recovered through schedule

21 compression, I pointed out in my prior testimony that the Consortium has failed to meet

22 many of the schedule milestones to date and this trend has continued. Current critical

23 activities such as xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

5 7 1PUBLIC DISCLOSURE 2Direct Testimony of William R. Jacobs, Jr., Ph.D. 3Docket No. 29849, Fifth Vogtle Construction Monitoring Period 4 1 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx. Given the Consortium’s continued

2 inability to meet scheduled milestones to date leads me to question the Consortium’s

3 ability to complete a significant portion of the schedule faster than originally planned.

4Q. HAVE YOU OBSERVED A CHANGE IN THE COMPANY’S POSTURE

5 REGARDING THE SCHEDULE?

6A. Yes I have. Until now, the Company’s stated position has been that the Project is on

7 track to be completed on schedule by April 1, 2016 for Unit 3 and April 1, 2017 for Unit

8 4. When the Project schedule issued in October 2010 showed that commercial operation

9 of Unit 3 had slipped to June 2016, the Company’s position was that they had instructed

10 the Consortium to develop a compressed schedule to recover this delay. The Company’s

11 testimony in this proceeding reflects a change in their prior position that the current

12 schedule delay can and should be recovered. On page 6, lines 21 – 23 of their prefiled

13 direct testimony, Company witnesses Ivey and Leach state:

14 “ The Company continues to consider the possibility and 15 potential effect of the DCD schedule delay, and the issues 16 regarding compression of the construction schedule versus 17 the economics and consequences of any potential delay.” 18 19 In this statement, the Company recognizes that the risks and benefits of schedule

20 compression must be weighed against the consequences of schedule delay. Further,

21 during live testimony at the November 21, 2011 hearing on the Company’s direct case

22 Mr. Ivey stated:

23 “Regardless of these developments, the units remain on 24 track to achieve commercial operation in 2016 and 2017.” 25 (Transcript page 32, lines 9 – 11) 26 27 Later in his opening statement Mr. Ivey again stated:

5 8 1PUBLIC DISCLOSURE 2Direct Testimony of William R. Jacobs, Jr., Ph.D. 3Docket No. 29849, Fifth Vogtle Construction Monitoring Period 4 1 “We remain on track for commercial operation in 2016 and 2 2017.” (Transcript page 35, line 25 to page 36, line 1) 3 4 I believe that the omission of the month of commercial operation in these statements

5 represents a shift in the Company’s position from the Project is on track for Unit 3

6 commercial operation on April 1, 2016 to a position that the units will be in commercial

7 operation sometime in 2016 and 2017.

8 Further, in addressing the possibility that the April 1, 2016 date will not be met, Mr. Ivey

9 testified:

10 “We are considering the pros and cons of revising the 11 compression plan to return the Unit 3 COD to April 1, 12 2016. Depending on what actually transpires as we near 13 the finish line on our initial licensing, we must consider 14 how much compression is cost-effective and in the best 15 interest of our customers and our partners.” (Transcript 16 page 33, lines 11 – 16) 17 18 By these statements, the Company is acknowledging that commercial operation dates of

19 sometime in 2016 and 2017 are more realistic than the April 1st dates and that schedule

20 compression to recover the April 1st dates needs to be carefully considered, recognizing it

21 may not be the best option.

22Q. IS THIS NEW POSTURE APPROPRIATE?

23A. Yes it is for several reasons. To be an effective project management tool, a project

24 schedule must be considered realistic and achievable to all parties. In addition, both the

25 Consortium and the Company must agree on and fully support the Project schedule for

26 the Project to have a high probability of success. Given the delay in approval of the DCD

27 and subsequent issuance of the COL experienced to date, the likelihood of achieving the

28 April 1st CODs for Units 3 and 4 is becoming more doubtful. The Company is correct in

5 9 1PUBLIC DISCLOSURE 2Direct Testimony of William R. Jacobs, Jr., Ph.D. 3Docket No. 29849, Fifth Vogtle Construction Monitoring Period 4 1 acknowledging the impact that the current licensing delays are having on the Project

2 schedule. The Company is also correct in acknowledging that even if recovery of the

3 April 1st dates is possible through schedule compression, that might not be the best path

4 to select. There are risks as well as benefits to attempting a significant schedule

5 compression. It is appropriate for the Company to carefully analyze the risks and

6 benefits of an attempt to compress the schedule significantly before it determines a path

7 for the Project to follow.

8Q. PLEASE DESCRIBE THE POSSIBLE BENEFITS AND RISKS OF SCHEDULE

9 COMPRESSION IN MORE DETAIL.

10A. The benefits of successfully compressing the schedule to recover the Guaranteed

11 Substantial Completion Dates of April 1, 2016 and 2017 include lower financing costs

12 that would result from avoiding a schedule delay and lower energy costs due to the low

13 cost energy being available as originally planned. The risks of attempting a significant

14 schedule compression include the possibility of additional expenditures to fund additional

15 shifts with the inherent inefficiencies without actually achieving the desired schedule

16 compression. Given the first time nature of the Vogtle 3 and 4 Project, a significantly

17 compressed schedule could result in, among other risks, significant additional cost to staff

18 extra shifts of construction, support and oversight personnel, inefficiencies due to

19 working additional shifts with lower productivity, congestion and unplanned overlap of

20 construction activities, additional rework, and additional regulatory oversight due to

21 increased QA issues. The impact of these factors could significantly increase the cost of

22 schedule compression and reduce the probability for return to the original schedule for

23 COD.

5 10 1PUBLIC DISCLOSURE 2Direct Testimony of William R. Jacobs, Jr., Ph.D. 3Docket No. 29849, Fifth Vogtle Construction Monitoring Period 4 1Q. PLEASE DESCRIBE THE CURRENT CONSTRUCTION ACTIVITIES AT THE

2 VOGTLE SITE.

3A. Current construction activities at the Vogtle site include safety related activities that are

4 allowed under the Limited Work Authorization and non-safety related activities such as

5 construction of the cooling towers. These activities continue to generally progress well.

6 Significant construction activities initiated or completed since my testimony in the 4th

7 VCM proceeding include:

8  Completion of the Unit 3 MSE wall; 9  Completion of the center section backfill; 10  Completion of Unit 3 and 4 circulating water piping; 11  Began work on the heavy haul road; 12  Completed the Heavy Lift Derrick (HLD) concrete wall; 13  Initiated work on the HLD rail; 14  Began assembly of HLD components; 15  Initiated assembly of CR10; 16  Completed assembly of the CA20 platen; 17  Began assembly of the CR01 platen; 18  Initiated work on the River Water intake structure; 19  Initiated work on the 500 kV switchyard.

20Q. WHAT IS THE CURRENT STATUS OF THE PROJECT BUDGET?

21A. As reported in the Company’s 5th VCM report, as of June 30, 2011 Total Project Cost

22 was $xxxxxxxxxxxx budget with Total Construction and Capital cost $xxxxxxxxxxxx

23 budget and Total Financing Cost $xxxxxxxxxxx budget. The most recent data available

24 as of October 2011 shows Total Project Cost as $42 million under budget with Total

25 Construction and Capital cost $xxxxxxxxxxxxxx budget and Total Financing Cost $x

26 xxxxxxxxx budget.

5 11 1PUBLIC DISCLOSURE 2Direct Testimony of William R. Jacobs, Jr., Ph.D. 3Docket No. 29849, Fifth Vogtle Construction Monitoring Period 4 1 EPC capital expenditures continue to be under budget primarily due to the failure

2 of the Consortium to achieve certain milestones in accordance with the Project milestone

3 schedule. Owners’ capital expenditures are also under budget due to the timing of

4 Project oversight and non-EPC Project activities. These budget variances are due to

5 timing differences between actual expenditures and the budget and should not impact

6 Total Project Cost.

7Q. WHAT IS THE CURRENT STATUS OF THE TOTAL PROJECT COST

8 FORECAST?

9A. The Company’s current Total Project Cost forecast as of June 2011 is $6.095 billion

10 which is slightly under the estimate at certification of $6.113 billion. The most recent

11 forecast to complete the project as of October 2011 is unchanged from the June 2011

12 forecast.

13Q. DOES THE COMPANY FACE SIGNIFICANT CHALLENGES IN

14 MAINTAINING THE BUDGET FORECAST AT OR BELOW THE CERTIFIED

15 AMOUNT?

16A. Yes, as I discussed in my testimony in the 3rd and 4th VCM proceeding, the Company

17 continues to face significant challenges in maintaining the Project forecast at or below the

18 certified amount. A possible schedule delay as discussed above would impact the

19 financing cost of the Project. In addition, the Company’s forecast does not include many

20 potential change orders that could significantly impact the direct construction cost of the

21 Project. I identified some of these potential change orders in my testimony in the Third

22 and Fourth Semi-annual VCM proceeding. In addition to the list of potential changes

5 12 1PUBLIC DISCLOSURE 2Direct Testimony of William R. Jacobs, Jr., Ph.D. 3Docket No. 29849, Fifth Vogtle Construction Monitoring Period 4 1 provided in my testimony in the 4th VCM proceeding, the Consortium has submitted the

2 following additional Potential Change Notices:

3  xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx – Contractor identified a

4 potential change due to the xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx;

5  xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx – Contractor identified a potential change

6 due to implementation of the xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

7 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx.

8 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

9 xxxxxxxxxxxxxxxxxxxxxxxx. These potential changes are shown below:

10  Japan Earthquake – Consortium identified a potential change for impacts to 11 suppliers from the Japan earthquake; 12  xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx – Consortium identified a potential 13 change due to the xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 14 xxxxxxxxxxxxxx; 15  xxxxxxxxxxxxxxxxxxxxxx – Consortium identified a potential change for xxxxxx 16 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx; 17  xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx - Consortium identified potential cost 18 impacts for xxxxxxxxxxxxxxxx; 19  xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx - Consortium identified potential cost 20 impacts xxxxxxxxxxxxxxxx; 21  xxxxxxxxxxxxxxxxxxxx – Consortium has sent a potential change order to cover 22 xxxxxxxxxxxxxxxxxxxxxxxxxxxx; 23  xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx – Consortium has sent a potential change 24 order to cover xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 25 xxxxxxxxxxxxxxxxxxx; 26  xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx – Consortium identified 27 potential cost impacts for xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx;

5 13 1PUBLIC DISCLOSURE 2Direct Testimony of William R. Jacobs, Jr., Ph.D. 3Docket No. 29849, Fifth Vogtle Construction Monitoring Period 4 1  xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx - Consortium has sent a potential change 2 notice due to weather delays that affect excavation. 3 4 In addition, the Company has identified “xxxxxxxxxxxxxxxxxxxxxxxxxxxx” as a

5 developing issue for which there is potential for the Consortium to issue a change

6 request.

7Q. HAS THE COMPANY MADE PROGRESS SINCE THE 4TH VCM PERIOD TO

8 RESOLVE THESE POTENTIAL CHANGE NOTICES?

9A. The Company has made little progress in resolving the potential changes in the six

10 months since my last testimony. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

11 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx. When asked at the November 21,

12 2011 hearing to provide an update to the Commission on the status of these changes, Mr.

13 Ivey responded:

14 Progress has been slow, we don't have a great deal more 15 detail today on some of these potential changes than we had 16 at the time of the fourth VCM, indeed in the filing of the 17 fifth. (Transcript page 59, lines 1 – 4) 18 19Q. WHY IS IT IMPORTANT THAT THESE ISSUES BE RESOLVED?

20A. Some of these potential change orders could have a significant impact on the Project cost.

21 The forecast cost provided in the Company’s testimony does not include the possible cost

22 impact of these potential change notices. Until the magnitude of the costs associated with

23 these potential change orders and the responsibility for these costs is known, the forecast

24 cost for the Project is uncertain. Uncertainty in the Project cost inhibits Staff’s ability to

25 conduct the meaningful economic analyses that Staff and the Commission require. In

26 addition, until these commercial issues are resolved, it will be difficult for the Company

5 14 1PUBLIC DISCLOSURE 2Direct Testimony of William R. Jacobs, Jr., Ph.D. 3Docket No. 29849, Fifth Vogtle Construction Monitoring Period 4 1 and Consortium to agree upon and fully support the Project schedule. The cause for

2 Project delays, the responsibility for the delays and the cost of the delays need to be

3 resolved before all parties can agree on a schedule.

4Q. THE COMPANY HAS INDICATED IN THE 5TH VCM REPORT THAT THE

5 BUDGET FOR OVERSIGHT WILL BE INCREASED BY $xxxxxxxxxx. WHAT

6 IS YOUR OPINION OF THIS INCREASE?

7A. As I have reported in my monthly reports to this Commission, the Company has been

8 actively involved in providing oversight of the Project. The Company has provided its

9 expertise to the Consortium in certain areas. Company personnel have held the

10 Consortium accountable for their commitments. However, the Company has indicated in

11 this reporting period that additional oversight is needed due to gaps in the Consortium’s

12 performance. In addition, 10CFR50, Appendix B, which specifies the quality assurance

13 requirements for construction of a nuclear power plant, is clear that the Company is

14 ultimately responsible to ensure that the quality assurance requirements specified in

15 Appendix B are met. In my opinion the Company is in the best position to determine the

16 amount of oversight needed to meet these requirements.

17Q. IF ADDITIONAL OVERSIGHT IS REQUIRED BECAUSE OF POOR

18 PERFORMANCE BY THE CONSORTIUM, WHO SHOULD BEAR THE COST

19 FOR THIS ADDITIONAL OVERSIGHT?

20A. The Staff believes ratepayers should not pay for additional Company oversight that is

21 required due to continuing poor performance by the Consortium. Although the Company

22 may determine that additional oversight is warranted for it to fulfill its duty under NRC

23 regulations to successfully execute the Project, responsibility for payment for the

5 15 1PUBLIC DISCLOSURE 2Direct Testimony of William R. Jacobs, Jr., Ph.D. 3Docket No. 29849, Fifth Vogtle Construction Monitoring Period 4 1 additional oversight is yet to be determined. The Company should avail itself of all

2 recourses and legal remedies outlined in the EPC agreement to recoup these additional

3 costs from the Consortium. The Company has indicated that this is their intent.

4IV. OTHER ISSUES POTENTIALLY IMPACTING PROJECT 5 SCHEDULE AND/OR COST 6 7Q. PLEASE PROVIDE AN UPDATE TO THE COMMISSION ON THE ISSUES

8 RELATED TO QUALITY ASSURANCE, DESIGN AND FABRICATION OF

9 MODULES AND SUBMODULES AT THE SHAW MODULAR SOLUTIONS

10 FACILITY.

11A. Issues related to quality assurance, design, material and fabrication problems at the Shaw

12 Modular Solutions (SMS) facility were discussed in my 3rd and 4th VCM testimony. SMS

13 has been the subject of significant management attention by both Consortium and

14 Company senior management. Corrective actions have been identified and progress has

15 been made in resolving the issues that delayed the design and fabrication of modules.

16 However, the ability of SMS to provide complete high quality modules to meet the

17 Project schedule remains a significant concern. According to the module delivery

18 schedule as of November 11, 2011, xxxx of xx scheduled modules have been delivered to

19 the site. However, the schedule for module deliveries shown in a prior Consortium

20 Monthly Status Report dated August 31, 2011 indicates that xx modules were scheduled

21 to be delivered to the site. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

22 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

5 16 1PUBLIC DISCLOSURE 2Direct Testimony of William R. Jacobs, Jr., Ph.D. 3Docket No. 29849, Fifth Vogtle Construction Monitoring Period 4 1 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx . However, now that DCD approval and receipt

2 of the COL are imminent, SMS must meet the required production rate of high quality

3 modules or the Project schedule will be impacted.

4Q. PLEASE DESCRIBE THE ISSUE RELATED TO DESIGN FINALIZATION.

5A. Finalization of the detailed Vogtle specific AP1000 design culminating in issuance of

6 Certified For Construction (CFC) design packages for the Project remains a concern. As

7 described in my prior testimony, the plan for the Project is to have all engineering

8 deliverables (construction drawings, specifications, etc.) for construction available xxx

9 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx.

10 In October 2011, xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

11 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

12 xxxxxxxxxxxxxxxxxxxxxxxxxx. For example, the cumulative number of CFC packages

13 planned for completion in October 2011 as shown in the September 2011 Consortium

14 Monthly Status Report of xx was xxxxxxxxxxxx planned CFC packages in the

15 Consortium’s October 2011 report. As with production of modules, development and

16 issuance of CFC packages has received significant attention from Consortium and

17 Company management. Progress has been made in resolving the issues that have been

18 xxxxxxxxxxxxxxxxx of the CFC packages. However, the required production of CFC

19 packages increases rapidly from xxxxxxxxxxxxxxxxxxxxxxxxxxxxx to approximately xx

22 xxxxxxxxxx.

5 17 1PUBLIC DISCLOSURE 2Direct Testimony of William R. Jacobs, Jr., Ph.D. 3Docket No. 29849, Fifth Vogtle Construction Monitoring Period 4 1

2 V VERIFICATION AND APPROVAL OF COSTS 3 4Q. WHAT IS STAFF’S RECOMMENDATION CONCERNING VERIFICATION

5 AND APPROVAL OF THE COSTS REQUESTED BY THE COMPANY?

6A. Subject to the recommendations of other Staff witnesses, Staff recommends that the costs

7 requested by the Company in this Fifth Semi-annual Review be verified and approved by

8 the Commission.

9Q. DOES THIS CONCLUDE YOUR TESTIMONY?

10A. Yes it does.

5 18 1

1 EXHIBIT STF-WRJ-1 2 3 Resume of William R. Jacobs, Jr.

2 1 1William R. Jacobs, Jr. GDS Associates, Inc. 2Vice President - Generation Support Services Page 1 of 6 3 4 1EDUCATION: Ph.D., Nuclear Engineering, Georgia Tech 1971 2 MS, Nuclear Engineering, Georgia Tech 1969 3 BS, Mechanical Engineering, Georgia Tech 1968 4 5ENGINEERING REGISTRATION: Registered Professional Engineer 6 7PROFESSIONAL MEMBERSHIP: American Nuclear Society 8 9 10EXPERIENCE: 11 12Dr. Jacobs has over thirty-five years of experience in a wide range of activities in the electric 13power generation industry. He has extensive experience in the construction, startup and 14operation of nuclear power plants. While at the Institute of Nuclear Power Operation (INPO), 15Dr. Jacobs assisted in development of INPO’s outage management evaluation group. He has 16provided expert testimony related to nuclear plant operation and outages in Texas, Louisiana, 17South Carolina, Florida, Wisconsin, Indiana, Georgia and Arizona. He currently provides 18nuclear plant operational monitoring services for GDS clients. He is assisting the Florida Office 19of Public Counsel in monitoring the development of four new nuclear units in the State of 20Florida. He provides testimony before the Florida Public Service Commission concerning the 21prudence of expenditures for these nuclear units. He has assisted the Georgia Public Service 22Commission staff in development of energy policy issues related to supply-side resources and in 23evaluation of applications for certification of power generation projects and assists the staff in 24monitoring the construction of these projects. He has also assisted in providing regulatory 25oversight related to an electric utility’s evaluation of responses to an RFP for a supply-side 26resource and subsequent negotiations with short-listed bidders. He has provided technical 27litigation support and expert testimony support in several complex law suits involving power 28generation facilities. He monitors power plant operations for GDS clients and has provided 29testimony on power plant operations and decommissioning in several jurisdictions. Dr. Jacobs 30has provided testimony before the Georgia Public Service Commission, the Public Utility 31Commission of Texas, the North Carolina Utilities Commission, the South Carolina Public 32Service Commission, the Iowa State Utilities Board, the Louisiana Public Service Commission, 33the Florida Public Service Commission, the Indiana Regulatory Commission, the Wisconsin 34Public Service Commission, the Arizona Corporation Commission and the FERC. 35 36A list of Dr. Jacobs’ testimony is available upon request. 37 381986-Present GDS Associates, Inc. 39 40 As Vice-President, Dr. Jacobs directs GDS' nuclear plant monitoring activities 41 and has assisted clients in evaluation of management and technical issues related 42 to power plant construction, operation and design. He has evaluated and testified 43 on combustion turbine projects in certification hearings and has assisted the 44 Georgia PSC in monitoring the construction of the combustion turbine projects. 5 6 7 GDS Associates, Inc., 1850 Parkway Place, Suite 800, Marietta, GA 30067 8 (770) 425-8100 9 (770) 426-0303 – Fax 10 [email protected] 1William R. Jacobs, Jr. GDS Associates, Inc. 2Vice President - Generation Support Services Page 2 of 6 3 4 1 Dr. Jacobs has evaluated nuclear plant operations and provided testimony in the 2 areas of nuclear plant operation, construction prudence and decommissioning in 3 nine states. He has provided litigation support in complex law suits concerning 4 the construction of nuclear power facilities. 5 61985-1986 Institute of Nuclear Power Operations (INPO) 7 8 Dr. Jacobs performed evaluations of operating nuclear power plants and nuclear 9 power plant construction projects. He developed INPO Performance Objectives 10 and Criteria for the INPO Outage Management Department. Dr. Jacobs 11 performed Outage Management Evaluations at the following nuclear power 12 plants: 13 14  Connecticut Yankee - Connecticut Yankee Atomic Power Co. 15  Callaway Unit I - Union Electric Co. 16  Surry Unit I - Virginia Power Co. 17  Ft. Calhoun - Omaha Public Power District 18  Beaver Valley Unit 1 - Duquesne Light Co. 19 20During these outage evaluations, he provided recommendations to senior utility management on 21techniques to improve outage performance and outage management effectiveness. 22 231979-1985 Westinghouse Electric Corporation 24 25 As site manager at Philippine Nuclear Power Plant Unit No. 1, a 655 MWe PWR 26 located in Bataan, Philippines, Dr. Jacobs was responsible for all site activities 27 during completion phase of the project. He had overall management 28 responsibility for startup, site engineering, and plant completion departments. He 29 managed workforce of approximately 50 expatriates and 1700 subcontractor 30 personnel. Dr. Jacobs provided day-to-day direction of all site activities to ensure 31 establishment of correct work priorities, prompt resolution of technical problems 32 and on schedule plant completion. 33 34 Prior to being site manager, Dr. Jacobs was startup manager responsible for all 35 startup activities including test procedure preparation, test performance and 36 review and acceptance of test results. He established the system turnover 37 program, resulting in a timely turnover of systems for startup testing. 38 39 As startup manager at the KRSKO Nuclear Power Plant, a 632 MWE PWR near 40 Krsko, Yugoslavia, Dr. Jacobs' duties included development and review of startup 41 test procedures, planning and coordination of all startup test activities, evaluation 42 of test results and customer assistance with regulatory questions. He had overall 43 responsibility for all startup testing from Hot Functional Testing through full 44 power operation. 5 6 7 GDS Associates, Inc., 1850 Parkway Place, Suite 800, Marietta, GA 30067 8 (770) 425-8100 9 (770) 426-0303 – Fax 10 [email protected] 1William R. Jacobs, Jr. GDS Associates, Inc. 2Vice President - Generation Support Services Page 3 of 6 3 4 11973 - 1979 NUS Corporation 2 3 As Startup and Operations and Maintenance Advisor to Korea Electric Company 4 during startup and commercial operation of Ko-Ri Unit 1, a 595 MWE PWR near 5 Pusan, South Korea, Dr. Jacobs advised KECO on all phases of startup testing and 6 plant operations and maintenance through the first year of commercial operation. 7 He assisted in establishment of administrative procedures for plant operation. 8 As Shift Test Director at Crystal River Unit 3, an 825 MWE PWR, Dr. Jacobs 9 directed and performed many systems and integrated plant tests during startup of 10 Crystal River Unit 3. He acted as data analysis engineer and shift test director 11 during core loading, low power physics testing and power escalation program. 12 13 As Startup engineer at Kewaunee Nuclear Power Plant and Beaver Valley, Unit 1, 14 Dr. Jacobs developed and performed preoperational tests and surveillance test 15 procedures. 16 171971 - 1973 Southern Nuclear Engineering, Inc. 18 19 Dr. Jacobs performed engineering studies including analysis of the emergency 20 core cooling system for an early PWR, analysis of pressure drop through a 21 redesigned reactor core support structure and developed a computer model to 22 determine tritium build up throughout the operating life of a large PWR. 23 24SIGNIFICANT CONSULTING ASSIGNMENTS: 25 26Georgia Public Service Commission – Selected as the GPSC’s Independent Construction 27Monitor for the Plant Vogtle 3 and 4 nuclear construction projects. Assists the Commission staff 28in providing oversight of all aspects of the Plant Vogtle 3 and 4 project. Provides testimony in 29the semi-annual hearing before the GPSC on the Vogtle project. 30 31South Carolina Office of Regulatory Staff – Assisted the South Carolina Office of Regulatory 32Staff in evaluation of South Carolina Electric and Gas’ request for certification of two AP1000 33nuclear power plants at the V.C. Summer site. 34 35Florida Office of Public Counsel – Assists the Florida Office of Public Counsel in monitoring the 36development of four new nuclear power plants in Florida including providing testimony on the 37prudence of expenditures. 38 39East Texas Electric Cooperative – Represented ETEC on the management committee of the 40Plum Point Unit 1 a 650 Mw coal-fired plant under construction in Osceola, Arkansas and 41represents ETEC on the management committee of the Harrison County Power Project, a 525 42Mw combined cycle power plant located near Marshall, Texas. 43

5 6 7 GDS Associates, Inc., 1850 Parkway Place, Suite 800, Marietta, GA 30067 8 (770) 425-8100 9 (770) 426-0303 – Fax 10 [email protected] 1William R. Jacobs, Jr. GDS Associates, Inc. 2Vice President - Generation Support Services Page 4 of 6 3 4 1Arizona Corporation Commission – Evaluated operation of the Palo Verde Nuclear Generating 2Station during the year 2005. Included evaluation of 11 outages and providing written and oral 3testimony before the Arizona Corporation Commission. 4 5Citizens Utility Board of Wisconsin – Evaluated Spring 2005 outage at the Kewaunee Nuclear 6Power Plant and provided direct and surrebuttal testimony before the Wisconsin Public Service 7Commission. 8 9Georgia Public Service Commission - Assisted the Georgia PSC staff in evaluation of Integrated 10Resource Plans presented by two investor owned utilities. Review included analysis of purchase 11power agreements, analysis of supply-side resource mix and review of a proposed green power 12program. 13 14State of Hawaii, Department of Business, Economic Development and Tourism – Assisted the 15State of Hawaii in development and analysis of a Renewable Portfolio Standard to increase the 16amount of renewable energy resources developed to meet growing electricity demand. Presented 17the results of this work in testimony before the State of Hawaii, House of Representatives. 18 19Georgia Public Service Commission - Assisted the Georgia PSC staff in providing oversight to 20the bid evaluation process concerning an electric utility’s evaluation of responses to a Request 21for Proposals for supply-side resources. Projects evaluated include simple cycle combustion 22turbine projects, combined cycle combustion turbine projects and co-generation projects. 23 24Millstone 3 Nuclear Plant Non-operating Owners – Evaluated the lengthy outage at Millstone 3 25and provided analysis of outage schedule and cost on behalf of the non-operating owners of 26Millstone 3. Direct testimony provided an analysis of additional post-outage O&M costs that 27would result due to the outage. Rebuttal testimony dealt with analysis of the outage schedule. 28 29H.C. Price Company – Evaluated project management of the Healy Clean Coal Project on behalf 30of the General Contractor, H.C. Price Company. The Healy Clean Coal Project is a 50 megawatt 31coal burning power plant funded in part by the DOE to demonstrate advanced clean coal 32technologies. This project involved analysis of the project schedule and evaluation of the impact 33of the owner’s project management performance on costs incurred by our client. 34 35Steel Dynamics, Inc. – Evaluated a lengthy outage at the D.C. Cook nuclear plant and presented 36testimony to the Indiana Utility Regulatory Commission in a fuel factor adjustment case Docket 37No. 38702-FAC40-S1. 38 39Florida Office of Public Counsel - Evaluated lengthy outage at Crystal River Unit 3 Nuclear 40Plant. Submitted expert testimony to the Florida Public Service Commission in Docket No. 41970261-EI. 42

5 6 7 GDS Associates, Inc., 1850 Parkway Place, Suite 800, Marietta, GA 30067 8 (770) 425-8100 9 (770) 426-0303 – Fax 10 [email protected] 1William R. Jacobs, Jr. GDS Associates, Inc. 2Vice President - Generation Support Services Page 5 of 6 3 4 1United States Trade and Development Agency - Assisted the government of the Republic of 2Mauritius in development of a Request for Proposal for a 30 MW power plant to be built on a 3Build, Own, Operate (BOO) basis and assisted in evaluation of Bids. 4 5Louisiana Public Service Commission Staff - Evaluated management and operation of the River 6Bend Nuclear Plant. Submitted expert testimony before the LPSC in Docket No. U-19904. 7 8U.S. Department of Justice - Provided expert testimony concerning the in-service date of the 9Harris Nuclear Plant on behalf of the Department of Justice U.S. District Court. 10 11City of Houston - Conducted evaluation of a lengthy NRC required shutdown of the South Texas 12Project Nuclear Generating Station. 13 14Georgia Public Service Commission Staff - Evaluated and provided testimony on Georgia Power 15Company's application for certification of the Intercession City Combustion Turbine Project - 16Docket No. 4895-U. 17 18Seminole Electric Cooperative, Inc. - Evaluated and provided testimony on nuclear 19decommissioning and fossil plant dismantlement costs - FERC Docket Nos. ER93-465-000, et 20al. 21 22Georgia Public Service Commission Staff - Evaluated and prepared testimony on application for 23certification of the Robins Combustion Turbine Project by Georgia Power Company - Docket 24No. 4311-U. 25 26North Carolina Electric Membership Corporation - Conducted a detailed evaluation of Duke 27Power Company's plans and cost estimate for replacement of the Catawba Unit 1 Steam 28Generators. 29 30Georgia Public Service Commission Staff - Evaluated and prepared testimony on application for 31certification of the McIntosh Combustion Turbine Project by Georgia Power Company and 32Savannah Electric Power Company - Docket No. 4133-U and 4136-U. 33 34New Jersey Rate Counsel - Review of Public Service Electric & Gas Company nuclear and fossil 35capital additions in PSE&G general rate case. 36 37Corn Belt Electric Cooperative/Central Iowa Power Electric Cooperative - Directs an operational 38monitoring program of the Duane Arnold Energy Center (565 Mwe BWR) on behalf of the non- 39operating owners. 40 41Cities of Calvert and Kosse - Evaluated and submitted testimony of outages of the River Bend 42Nuclear Station - PUCT Docket No. 10894. 43

5 6 7 GDS Associates, Inc., 1850 Parkway Place, Suite 800, Marietta, GA 30067 8 (770) 425-8100 9 (770) 426-0303 – Fax 10 [email protected] 1William R. Jacobs, Jr. GDS Associates, Inc. 2Vice President - Generation Support Services Page 6 of 6 3 4 1Iowa Office of Consumer Advocate - Evaluated and submitted testimony on the estimated 2decommissioning costs for the Cooper Nuclear Station - IUB Docket No. RPU-92-2. 3 4Georgia Public Service Commission/Hicks, Maloof & Campbell - Prepared testimony related to 5Vogtle and Hatch plant decommissioning costs in 1991 Georgia Power rate case - Docket No. 64007-U. 7 8City of El Paso - Testified before the Public Utility Commission of Texas regarding Palo Verde 9Unit 3 construction prudence - Docket No. 9945. 10 11City of Houston - Testified before Texas Public Utility Commission regarding South Texas 12Project nuclear plant outages - Docket No. 9850. 13 14NUCOR Steel Company - Evaluated and submitted testimony on outages of Carolina Power and 15Light nuclear power facilities - SCPSC Docket No. 90-4-E. 16 17Georgia Public Service Commission/Hicks, Maloof & Campbell - Assisted Georgia Public 18Service Commission staff and attorneys in many aspects of Georgia Power Company's 1989 rate 19case including nuclear operation and maintenance costs, nuclear performance incentive plan for 20Georgia and provided expert testimony on construction prudence of Vogtle Unit 2 and 21decommissioning costs of Vogtle and Hatch nuclear units - Docket No. 3840-U. 22 23Swidler & Berlin/Niagara Mohawk - Provided technical litigation support to Swidler & Berlin in 24law suit concerning construction mismanagement of the Nine Mile 2 Nuclear Plant. 25 26Long Island Lighting Company/Shea & Gould - Assisted in preparation of expert testimony on 27nuclear plant construction. 28 29North Carolina Electric Membership Corporation - Prepared testimony concerning prudence of 30construction of Carolina Power & Light Company's Shearon Harris Station - NCUC Docket No. 31E-2, Sub537. 32 33City of Austin, Texas - Prepared estimates of the final cost and schedule of the South Texas 34Project in support of litigation. 35 36Tex-La Electric Cooperative/Brazos Electric Cooperative - Participated in performance of a 37construction and operational monitoring program for minority owners of Comanche Peak 38Nuclear Station. 39 40Tex-La Electric Cooperative/Brazos Electric Cooperative/Texas Municipal Power Authority 41(Attorneys - Burchette & Associates, Spiegel & McDiarmid, and Fulbright & Jaworski) - 42Assisted GDS personnel as consulting experts and litigation managers in all aspects of the 43lawsuit brought by Texas Utilities against the minority owners of Comanche Peak Nuclear 44Station. 5 6 7 GDS Associates, Inc., 1850 Parkway Place, Suite 800, Marietta, GA 30067 8 (770) 425-8100 9 (770) 426-0303 – Fax 10 [email protected]