SCANA, Santee Cooper Halt V. C. Summer Nuclear Plant Construction

by Will Davis

Yesterday, a rapid series of events led to the announcement that the expansion of the V. C. Summer nuclear plant, comprising two AP1000 units (Units 2 and 3), would be cancelled. Details and some of the developments leading to the decision are herein discussed.

According to information revealed by SCANA executives during yesterday’s investor call, it was Santee Cooper (the state-owned partner utility) that first made the decision to suspend construction. According to Kevin Marsh, chairman and chief executive officer of SCANA, the two companies conducted completely separate cost-to-complete studies. SCANA had entertained the option of completing Unit 2 and suspending Unit 3. Earlier in the day, its partner, Santee Cooper, made public its decision to suspend construction. SCANA was more or less forced to cancel, since no other partners could be found to join the project to complete either one or both units. SCANA principal subsidiary South Carolina Electric & Gas (SCE&G) owns 55 percent of the project, while Santee Cooper owns the other 45 percent. According to the press release issued by SCANA/SCE&G, related to completion of one unit only:

“SCE&G also considered the feasibility of completing the construction of Unit 2 and abandoning Unit 3 under the existing ownership structure and using natural gas generation to fulfill any remaining generation needs. This option provided a potentially achievable path forward that may have delivered SCE&G a similar megawatt capacity as its 55% interest in the two units and provided a long-term hedge against carbon legislation/regulation and against gas price volatility. SCE&G had not reached a final decision regarding this alternative when Santee Cooper determined that it would be unwilling to proceed with continued construction of two units or one unit. Consequently, SCE&G determined that it is not in the best interest of customers and other stakeholders for it to continue construction of one unit.”

In its decision to suspend, Santee Cooper cited a large number of project deficiencies on the part of Westinghouse and its subsidiaries, which include the former CB&I Shaw Stone & Webster group that was acting as engineer and constructor. These deficiencies essentially comprise project management. The utility also pointed out that there was, by the latest possible estimates (which the utility had itself performed after Westinghouse’s schedule appeared impossible), a likely total delay of 6.5 years in the project with neither unit coming on line in time to receive production tax credits (PTC). According to Santee Cooper, and looking just at its share of the project, the construction cost had gone up 57 percent over the years, while the interest on monies obtained had gone up an almost incredible 143 percent. The company estimated that total project cost has gone up about 75 percent since the project began.

SCANA’s conference call and presentation pointed out the serious delay as well; its detailed estimate showed that the dates of completion for Units 2 and 3 had moved all the way out to December 2022 and March 2024, respectively, but the last approved unit in-service dates had been given as August 2019 and August 2020. It was pointed out that even if the present legislation to extend the PTC were to go through, the new estimated completion dates would fall even after that amended date.

During the investor call, SCANA chief financial officer Jimmy Addison made it plain that the plan it will present to the Public Service Commission (PSC) includes definite protection for the ratepayers for “several years,” as he put it. The company intends to immediately take the monies received from Toshiba (as its parental guarantee covering Westinghouse) and use those to offset any need for rate increases in the near future, while it will also use other accounting to offset rates for the next few years. The company expects that recovery of the construction costs over the last year (not yet approved by the PSC) will be deemed prudent by the PSC and that it will eventually be able to recoup those funds by rolling them into the rate base. The company will immediately file to abandon the project as is allowed by law. A hearing is set today with the PSC.

In the final analysis, final to this early date anyway, the key factor leading to the abandonment of the project was, according to both partners, the bankruptcy of Westinghouse. This led to the probable dropping of the engineering, procurement, and construction contract (as was their right to do under bankruptcy proceedings) and the removal of the fixed price guarantee for the project. That removal placed any ballooning costs squarely on the shoulders of the owners. Once the owners figured out that the latest approved construction schedule could not be met, and that significant cost increases would occur (“prohibitively expensive,” according to SCANA’s description of future costs), they decided that the prudent course was to abandon the project as soon as possible. It’s clear that SCANA wished to try to complete one unit, but barring any willing new participant in the project and the complete exit of Santee Cooper, even this move was not deemed prudent for ratepayers or shareholders. Thus, as a direct result of the removal of the fixed price protection, the project has now been cancelled.

It is more than obvious that further south the owners of the Plant Vogtle expansion are aware of all the same factors. However, as Georgia PSC member Tim Echols has pointed out on Twitter, the owners of the Vogtle project have a vastly larger customer base. The owners also have somewhat better interest rates on loans, having secured federal loan guarantees (which, it must be noted, protect only the banks, not the utilities, their shareholders, or the ratepayers). Surely the decision on whether or not to proceed with Vogtle on the part of its owners is coming soon—and one can only hope that it will signal the continuation, not the end, of the much condensed nuclear renaissance here in the United States.

ANS member Will DavisWill Davis is a member of the Board of Directors for the N/S Savannah Association, Inc. He is a consultant to the Global America Business Institute, a contributing author for Fuel Cycle Week, and he writes his own popular blog Atomic Power Review. Davis is also a consultant and writer for the American Nuclear Society, and serves on the ANS Communications Committee and the Book Publishing Committee. He is a former U.S. Navy reactor operator and served on SSBN-641, USS Simon Bolivar.

5 thoughts on “SCANA, Santee Cooper Halt V. C. Summer Nuclear Plant Construction

  1. Will Davis

    The remains of UE&C and EBASCO have been rolled into Morrison-Knudsen; and as we see Bechtel will be taking over at Vogtle! Now, Stone & Webster was a significant engineer – constructor in the field during the first US nuclear build, and both designed and constructed a number of plants. They were not the biggest but certainly not the smallest. They started as engineers on Shippingport, and went on to design and build Maine Yankee, Connecticut Yankee, Surry, North Anna, and Beaver Valley; they also designed Millstone 3.

  2. Ken Hofstetter

    Very disappointing. As a life-long advocate of nuclear power and resident of South Carolina, why can we not complete large nuclear projects on-time and under budget? Construction on these two advanced design reactors as well as the MOX at SRS are being terminated, and now the completion of the Vogtle reactor is being questioned. The “Nuclear Renaissance” was upon us and we are dropping the ball.

  3. David Dixon

    Do ‘we’ know about root causes? Blaming poor project management and ‘knowledge’ is too general. I was told years ago that the plan to avoid on-site welding by delivering larger prefabricated pieces was not working because tolerances were not being meet. And I expect the general lack of experienced people was a big problem, but that is just my guess. Where there features of the advanced PWR that proved difficult to actually construct?

  4. Richard Soderholm

    My information is second hand,and could be wrong, but the selection of CB&I Shaw Stone & Webster group seems to have been a poor choice.
    CB&I was a skilled fabricator who constructed the Susquehanna RVs on site, but had little experience in plant design. Shaw was also a fabricator, not an A-E firm. S&W has been closed for years, and was a small player. UE&C, Ebasco, Raytheon are all gone. Should have used Bechtel or Fluor or similar. My few contacts at SC were always dismayed at the lack of knowledge overall.

  5. Wade Williams

    Under the fixed price contract, would Westinghouse have had to absorb the 75% cost increase?

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