Long-secret report could save SCE&G’s customers billions

Long-secret report could save SCE&G’s customers billions

September 5, 2017
The State
By Avery Wilks and Sammy Fretwell

S.C. lawmakers Tuesday urged state regulators to block SCE&G from charging its customers any more for the failed V.C. Summer nuclear project, a day after the release of a report that diagnosed critical problems at the construction site about 18 months before its abandonment.

That report, completed by Bechtel Corp. in February 2016, shows SCE&G and the state-owned Santee Cooper utility were warned the Fairfield County venture suffered a host of problems, including flawed construction plans, faulty designs and inadequate management of contractors.

Lawmakers who read the lengthy report Tuesday say it confirmed that SCE&G – and not its ratepayers – should shoulder any future costs.

“If they had data that said this project was in trouble and they chose to ignore it and dumped billions of dollars more ratepayer money into it, all the while earning a profit, I think the political atonement for that is going to be enormous,” said state Rep. Kirkman Finlay, R-Richland, who is on a S.C. House committee investigating the nuclear fiasco.

Finlay and others say the S.C. Public Service Commission, the state board that has OK’d nine SCE&G rate hikes since 2008 for the nuclear project, should reject any further V.C. Summer-related rate-hike requests from the utility.

 SCE&G customers already have paid $1.7 billion toward the failed project. In August, the Cayce-based utility filed – then withdrew – a request to charge customers at least another $2.2 billion to shutter the project.

However, the Bechtel report could undermine any efforts by SCE&G to recoup those costs.

The report questions how work was done at the site and whether some problems drove up costs. Among other things, it identified inadequate management of contractors by SCE&G and junior partner Santee Cooper.

Dukes Scott, director at the state Office of Regulatory Staff, said his agency and public interest groups could use the Bechtel report’s findings to challenge any request by SCE&G to recover the rest of the money it has spent on the V.C. Summer project. “Potentially, it would be something we would want to look at.’’

Under a 2007 state law, SCE&G needs the Public Service Commission’s approval to abandon the project and recover the $4.9 billion it has spent building the plant.

To get that approval, SCE&G must show that walking away from the nuclear project was “prudent.’’ That is a legal term that essentially means a company’s actions were reasonable, based on what was known at the time.

Should the PSC say the abandonment was prudent, that could pave the way for SCE&G to raise customers’ rates without the public having a chance to stop the rate hikes.

But critics, including environmental groups, say SCE&G didn’t spend the money wisely, meaning its costs were not prudent.

Bob Guild, a lawyer representing the Sierra Club, said the Bechtel report will make it difficult for SCE&G to justify any request before the PSC to raise rates to cover its V.C. Summer expansion project costs. “This is fatal to SCE&G in forcing ratepayers to pay abandonment costs.”

The Bechtel report also might allow SCE&G’s customers to recover some of the $1.7 billion they already have paid in higher rates for the project, Guild said. The Sierra Club and Friends of the Earth are seeking refunds as part of a case they have filed with the PSC.

Guild said the Bechtel report indicates to him that SCE&G misled the PSC. In late 2016, he added, the PSC signed off on an agreement that allowed a budget increase for the project without being told about problems outlined in the Bechtel report, which had been completed earlier in the year.

“SCE&G is going to have a hard time saying that they acted prudently,’’ said Frank Knapp, who heads the S.C. Small Business Chamber of Commerce.

Lawmakers agreed.

“Those failures, that poor business judgment, shouldn’t fall on the ratepayers,” said state Rep. James Smith, D-Richland. “As more and more information gets out about exactly what happened, the worse it looks for SCANA and Santee Cooper.”

SCE&G says it took steps to address problems that it and Santee Cooper identified during the nuclear construction.

But legislators say the Bechtel report shows the utility did not appropriately respond to the problems.

“The best thing that could happen to SCANA would be Michael Jackson dying again,” Finlay said. “There has got to be something to divert the attention because there is just no way around this.”