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Regulatory agency wants V.C. Summer project contract made public

Energy
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Updated at 5:49 p.m. May 1 with response from SCE&G.

The state Office of Regulatory Staff wants the S.C. Public Service Commission to revoke confidential treatment of a contract S.C. Electric & Gas signed with the contractor building two reactor units at V.C. Summer Nuclear Station.

The agency filed a petition Friday asking that SCE&G disclose terms of the engineering, procurement, and construction contract and all pricing information related to the project, which is over budget, years behind schedule and hobbled by Westinghouse Electric's recent filing for Chapter 11 bankruptcy protection. Late this afternoon, SCE&G said in an email that it did not object to the agency's request.

In another development related to the project, SCE&G’s parent, SCANA, and its partner, state-operated Santee Cooper, announced they had reached an agreement to extend the evaluation period through June 26 for deciding their next move as Westinghouse seeks to exit as contractor.

In its petition to the commission, the regulatory agency said that “sweeping changes” have occurred since 2008, when SCE&G and Westinghouse signed the contract and were allowed to keep pricing information secret for competitive reasons.

“SCE&G ratepayers should be afforded the opportunity to see the full EPC contract, including the parental guarantee, due to the changed circumstances,” the petition said. “Publication of the EPC contract is in the public interest and will assist ORS in determining remedies available to aid S.C. ratepayers.”

The ORS petition is backed by the S.C. Small Business Chamber of Commerce, the League of Women Voters of South Carolina, The Electric Cooperatives of South Carolina and Central Electric Power Cooperative, which filed letters in support of the petition.

“The construction at V.C. Summer has become the legitimate subject of deep public concern,” wrote JoAnne Day, co-president of the League of Women Voters. “Decisions made to resolve the difficult challenges facing this project have important implications for both business and residential customers in the SCE&G and Santee Cooper service areas.”

In his letter, Frank Knapp of the Small Business Chamber noted that legislation has been introduced to amend the Base Load Review Act, which has permitted SCE&G to seek annual rate increases to cover the cost of financing the project.

“Advocates for changes in the statute as well as our elected representatives should not be deprived of the valuable, historic contractual information they need in order to make the best decisions as this legislation moves forward,” Knapp wrote.

Since the commission approved SCE&G’s request in 2009 to build the reactors, the company’s electricity customers have seen nine rate increases. According to the Office of Regulatory Staff, residential customers using 1,000 kilowatt-hours per month have seen their bills climb to $147.53 per month. About 18.2% of the bill is the result of the nine rate hikes, according to the state agency.

Rationale for the law, passed by the General Assembly in 2007, was that raising rates on a pay-as-you-go basis to cover the cost of borrowing billions to build the reactor units would save ratepayers in the long run. An independent analysis conducted for the regulatory agency shows that the law will save ratepayers about $1 billion during construction and an additional $4 billion over the 60-year life of the reactor units.

In a letter to the commission dated May 1, SCE&G said it does not object to the request by the Office of Regulatory Staff, which is charged with representing the public interest of South Carolina in utility regulation.

In the letter, the company said that the information that the agency seeks is "owned by Westinghouse Electric Co. LLC ("Westinghouse"), which it has designated as confidential and proprietary." Under the contract, SCE&G "has a legal duty to notify Westinghouse of ORS' petition, and SCE&G has done so. Moreover, SCE&G has informed Westinghouse that it does not object to the relief requested in ORS' petition."

In the letter, SCE&G said it had not been informed by Westinghouse whether it will take any action in response to the petition.

In announcing that the assessment period had been extended, SCANA and Santee Cooper noted that work can continue on two 1,117-megawatt reactor units being built at the Jenkinsville power plant.

During this period, Fluor Corp. will remain in its current role as project manager and SCE&G and Santee Cooper will continue to make weekly payments for work performed during the interim. The project employs about 5,000 workers.

“The agreement extension allows the co-owners additional time to maintain all of their options by continuing construction on the project while examining all of the relevant information for a thorough and accurate assessment to determine the most prudent path forward. The goal is to reach a decision that would balance the needs of its customers and stakeholders,” the companies said in a statement.

SCANA CEO Kevin Marsh told state regulators during an April briefing on the project that possible options include:

  • Continue with construction on both units.
  • Focus on construction of one unit and delay work on the other.
  • Continue with one unit and abandon the other, seeking recovery of money spent on the project under the state Base Load Review Act.
  • Abandon the project altogether and seek recovery under the state law.

“All other things being equal, our preference would be to complete the units for the benefits that they would provide for our system,” Marsh said. “We are giving all available options full and equal consideration on their merits. We are not prejudging any option.”

Abandonment is the least-preferred option because SCE&G still needs to add generation capacity to serve its growing customer base, Marsh said.

Construction of the two units is about one-third complete, and most of the pieces, parts and equipment are either at the construction site, on the way, or already purchased.

Westinghouse has provided SCE&G revised in-service dates of April 2020 and December 2020 for Units 2 and 3. That compares with in-service dates of 2016 for the first unit and 2019 for the second unit that were included in a May 2008 news release announcing the project.

The S.C. project at the Fairfield County nuclear power plant is currently estimated to cost $13.9 billion, more than $2 billion over the original budget approved by regulators in 2009.

Reach Chuck Crumbo at 803-726-7542.

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May 03, 2017

If memory servers me correctly SCE&G had the option to purchase project cost insurance and voted not to purchase the insurance before the start of the project. This should be researched and if found to be correct used as evidence to prove that SCE&G, its management and stockholders should be held accountable for the cost overruns and now bankruptcy. This would also include cost rebates to consumers that have been paying for these bad decisions without a voice in the decision.

May 03, 2017

SCANA / SCE&G stockholders and management should be held liable for the cost and delays on this project. Dividends and share value as well as management bonuses and increases should be impacted by the poor decisions and lack of cost overrun insurance on this project.