Statehouse Report
April 21, 2017
By Bill Davis, Senior Editor
There are several “nightmare scenarios” swirling around two incomplete and incredibly expensive nuclear reactors being built in the Midlands in Jenkinsville and what damage they could do to ratepayers’ wallets.
The ongoing work on the reactors, a joint effort of Santee Cooper and SCE&G, at the V.C. Sumner facility appears to be over budget and behind schedule, according to company documents.
But what’s more concerning to many is that the company building the reactors, Westinghouse, filed for Chapter 11 bankruptcy protection in the face of what may be billions of dollars of corporate losses. Westinghouse’s parent company, Japan’s Toshiba, has promised an unknown amount of money to help guarantee completion, according to published reports.
At least one state lawmaker is worried about a bigger impact: Whether the way that utilities are funding the nuclear reactors is a hidden but growing state crisis that might bite ratepayers in the behind. That could cause more problems to residents who are already suffering from years of underinvestment by state leaders in education, roads and pensions.
Background
According to a utility company email from March provided by an interested party, one of the two nuclear reactors is two years behind schedule, while another is four years behind. Costs for the project have grown by nearly $2.5 billion to a total of $13.8 billion, according to the email. A company spokesman was given a chance to challenge the numbers, but did not respond.
SCE&G’s portion has grown from $6.1 billion to $7.67 billion, according to the email. Santee Cooper, according to other documents, owns a smaller stake in the plant, and has seen its portion grown from $5.1 billion to $6.2 billion.
Following Westinghouse’s recent bankruptcy announcement, SCANA, the parent company of SCE&G, instituted a 30-day “transition and evaluation” period to see how much it would cost to complete the two multi-billion dollar reactors, and figure out who potentially would pay for the work yet to be done.
The utility company has received a completion estimate from Westinghouse, but is so far unable to verify the amount, according to the SCANA documents.
When asked for the estimate, another SCANA public affairs officer said Friday morning that it has “no immediate plans to comment publicly on the status of the project or our ongoing evaluation efforts beyond the information that has already been communicated.” The spokesman directed inquiries to Westinghouse.
A legislative reaction
None of this is making state Rep. Kirkman Finlay III, R-Columbia, happy.
“Let be perfectly clear, I am pro-nuclear,” said Finlay. But the manner in which the legislature allowed the utilities to pay upfront for the construction of the units with ongoing taxpayer rate increases has proven to be a terrible decision, he said.
South Carolina is one of a few states that allows utilities to use this method to pay for massive capital projects like reactors. But what happens if a series of financial maneuvers related to the bankruptcy fail? Finlay said state ratepayers could be on the hook for billions of dollars regardless of whether the plant is finished.
As a result, Finlay has filed a bill to amend the Base Load Review Act that would curtail this practice.
State Sen. Thomas Alexander, the Walhalla Republican who chairs the Labor, Commerce and Insurance Committee and who serves on a joint committee overseeing the utilities, said that the potential cost-savings to consumers of paying up front is still a tremendous lure for policymakers and lawmakers.
Kirkman responded, saying that “the decision that is going to have be made is whether to stop where we are and admit it’s not going to work, or to invest more, potentially throwing good money after bad money and hoping it works.”
Kirkman’s “nightmare scenario” is that the units are finished with state ratepayers’ money, but the utilities have to sell the power they generate for less than it costs to produce.
“My point is this: We have created the pension plan of nuclear power — a great, big financial hole that will cost a lot of money over the future top dig out of, and at the end of the day there is no one else to pay for it” but ratepayers, said Finlay.
Nightmare scenario may be a long way off, observers say
Dukes Scott, the executive director of the state Office of Regulatory Staff, said that it is possible that ratepayers could get saddled with the cost of the reactors, completed or not. His agency is charged with part of the job of overseeing utilities.
But, Scott stressed, that is a situation that is “a long way off,” and one that would have to jump through a lot of “ifs”:
- If SCE&G and Santee Cooper can’t complete the project with available funds,
- If parent company Toshiba doesn’t provide enough of a guarantee to finish the work,
- If a bankruptcy judge can’t find enough money to send the project’s way,
- If the sale of expensive reactor parts wouldn’t net enough to cover current bills, and so on.
Scott said because of the state’s growing power demands, some sort of plant would have to be constructed to deliver the megawatts slated to come from Sumner, and that could include plants burning coal or natural gas — far from the favorites of statewide conservationists and environmentalists.
S.C. Small Business Chamber president Frank Knapp worried that 30 days won’t be long enough of a reassessment period, due to the scope of the work and magnitude of the money involved.
Like Scott, Knapp said the final result of who pays for what is still a long way off, and hopes the reactors are finished. But if they are shuttered, Knapp’s nightmare includes ratepayers shelling out for “What? The cement just sitting there in the ground?”
Knapp said ratepayers are somewhat protected by a “final cost” agreement hammered out last year with SCE&G. But he allowed the utility could come back asking for more money.