Charlotte Business Journal
May 1, 2017

By John Downey Senior Staff Writer Charlotte Business Journal

The S.C. Office of Regulatory Staff wants regulators to let the public see the V.C. Summer project’s original construction contract and the change orders that led to price increases now in the range of $16 billion.

ORS Executive Director Dukes Scott says that excessive secrecy about the 2,134-megawatt, two-reactor Summer expansion have fueled public suspicion about the project. “We need to let some sunlight in,” he says.

And he says it is time for the S.C. Public Services Commission to clear the air and make public information that SCANA Corp. (NYSE:SCG) subsidiary S.C. Electric & Gas has asked the commission to treat as confidential.

“This is something we probably should have done in 2009 (when the project was approved),” Scott, whose staff is charged with protecting the interest of utility customers, admits.

“The commission files orders saying they are entitled to keep this information confidential,” he says. “But it is not an entitlement. The law is permissive and keeping things confidential is discretionary.”

Bankruptcy questions

Nuclear plant construction is always controversial. The Summer project and a similar expansion at Southern Co.’s (NYSE:SO) Plant Vogtle, have become particularly so because of long delays and large cost overruns. Then in March, Westinghouse Electric Co., the principal contractor, filed for bankruptcy, raising new questions about the projects.

The petition, filed Friday afternoon, won immediate support from the Electric Cooperatives of South Carolina and Central Electric Power Cooperative Inc., in a letter filed the same day. The S.C. League of Women Voters and the S.C. Small Business Chamber of Commerce filed letters of support Monday.

Late Monday afternoon, SCANA Corp. gave notice that it would not oppose the petition to make the confidential filings public.

“As the Commission considers this matter, please know that the information for which ORS seeks the revocation of confidential treatment is not SCE&G’s information,” SCANA Deputy General Counsel Chad Burgess tells the commission in a letter dated Monday. “The information subject to ORS’s Petition is information owned by Westinghouse …, which it has designated as confidential and proprietary.”

Westinghouse action?

He writes that SCANA has informed Westinghouse of the ORS request and of its own decision not to oppose it. “Westinghouse has not informed SCE&G whether it will take any action in response to ORS’s petition.”

SCANA’s SCE&G subsidiary (which owns 55% of the Summer project) is subject to commission oversight. State-owned utility Santee Cooper (which owns 45%) is not. Santee Cooper’s spokeswoman, Mollie Gore, says she does not think that Santee Cooper will have a role in any proceeding concerning the petition. “We do not intend to oppose this,” she says.

Scott expected SCANA would not have a problem with releasing the initial engineering, procurement and construction contract that principal contractor Westinghouse signed with it and Santee Cooper. He notes that the most recent amendment, which set a fixed price of roughly $14 billion for the project, was made public after it was negotiated more than a year ago.

Change orders

He said there is unlikely to be much surprising in the original contract. But he believes that the important part of the petition is the part that makes of all change orders — both those already filed and those filed in the future — public documents.

“It’s these change orders that have driven up a lot of the costs of this project,” he says. “I think it is important that the pubic get a look at those to understand what has happened in this process.”

When the project was approved, it was projected to cost $9 billion, and the first 1,117-megawatt reactor was supposed to come on line last year.

It is now going to be at least 2020 before the first unit is operational, if indeed the project continues. And the price is approaching $16 billion. Under the fixed-price contract Westinghouse or its parent, Toshiba Corp., would be responsible for costs above $14 billion, though Toshiba limits its exposure to $1.7 billion.

“If these numbers had stuck, we probably wouldn’t be having this conversation,” Scott says.

Confidential filings

But he also says that the increasing use of confidential filings at the commission have worried him for some time. He thinks the frequent commission references to being “entitled” to confidential treatment is disturbing.

He says some small amount of information that comes from a public utility might be legitimately confidential. He said protecting information that would disclose a utility’s estimate for construction bids would likely be an appropriate use of confidentiality.

“But they are not even being required to justify it anymore,” he says. “They just contend that something is proprietary and they get confidential treatment.”

He concedes that he and his staff have let this continue for too long. But he thinks that there should be more challenges now to claims of confidentiality. He thinks that should include when utilities seek to shield information about contracts to solar and other independent power producers under federal regulations or contract to sell power and services to industrial customers, for instance.

“Company A can’t determine if they are getting discriminatory rates if they don’t know what Company B is paying,” he says.

‘No longer trade secrets’

The formal petition takes the same line on confidentiality. It says that exemptions from rules that require utilities to disclose financial details “do not create a duty of nondisclosure; rather, exemptions, at most simply allow the public agency the discretion to withhold exempted materials from public disclosure.”

It asserts that the terms of the contract “should no longer be protected as trade secrets … for economic development or contract negotiations” because the contract is long since signed, and Westinghouse has said in its bankruptcy proceeding it intends to stop being the contractor anyway.

The staff asks that SCE&G be ordered to immediately file an unredacted copy of the original contract, all current and future contract amendments, current and future change orders and “any exhibits or attachments to the EPC contract, amendments and change orders.”

‘Compelling case’

The letter from the cooperatives says they “believe that the ORS petition makes a compelling case that the documents should no longer be given protection from public disclosure and that the public interest would be served by granting the relief sought.”

The League of Women voters says the disclosure would ensure “this matter will move forward with continuing attention to the accountability and transparency that are crucial to the protection of the interests of South Carolina’s citizens.”

Frank Knapp, CEO of the Small Business Chamber, writes that “the South Carolina public and Legislature have a right to know how contractual relationships between SCE&G, Westinghouse and other vendors contributed to the current unsettling situation.”

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