S.C. Supreme Court hears challenge to nuclear plant’s higher costs

rburris@thestate.comApril 16, 2014 

VC Summer Nuclear Power Plant

— After hearing arguments Wednesday, the S.C. Supreme Court now will decide whether SCE&G is responsible for a $278 million cost increase at the V.C. Summer nuclear plant or if the utility can pass part of that tab along to ratepayers.

In November 2012, the Public Service Commission approved the increase for the Fairfield County nuclear installation. But some customers and conservationists challenged the increase in court.

SCE&G and the state-owned Santee Cooper utility are about seven years into the 10-year, $9.8 billion project to add two new reactors at the nuclear-power complex.

The first of two new 1,117-megawatt reactors near Jenkinsville is scheduled to go into service in 2017, followed by a third reactor in 2018.

The S.C. Energy Users Committee, an association of large industrial energy users, and the Sierra Club appealed the PSC’s ruling to the Supreme Court in 2013.

The PSC granted SCE&G’s original $283 million increase request, later revised to $278 million, under a state law that allows utilities to annually adjust electrical rates to customers during the construction of new facilities to recover financing costs.

In their petition to the Supreme Court, the plaintiffs blasted the PSC for allowing the increase.

The Sierra Club and the Energy Users charged the added costs were imprudent, saying SCE&G should have anticipated the higher costs in its initial estimates. That imprudence requires the Public Service Commission to re-evaluate whether continued construction of the new nuclear-power units should be allowed.

“The company has the duty ... to identify and (be sure) that the anticipated capital costs of construction (are represented),” said Scott Elliott, attorney for Energy Users.

The goal of the state law, Elliott said in papers filed with the court, is for SCE&G to be able to recover prudently incurred costs associated with construction, while protecting ratepayers from the responsibility for imprudent costs. The PSC’s interpretation of state law now fails to protect SCE&G’s ratepayers, Elliott said in his filing.

The plaintiffs want the court to reverse the PSC’s approval of the $278 million in additional costs for the project.

It is unclear when the court will rule.

The $278 million in additional costs includes a $137.5 million change order, including several changes in the plant and its design.

The plant and design changes included a shield building for the plant’s reactor unit, which was redesigned to increase its resistance to aircraft impacts, and unanticipated rock conditions at the foundation of one of the new reactors.

Other changes included rescheduling the construction plan for the units to account for a nine-month delay in SCE&G getting its construction and operating license from the Nuclear Regulatory Commission and a redesign to use higher-strength steel than originally planned, according to the court papers.

The S.C. Sierra Club said it was “committed” to using any opportunity at its disposal, including the legal system, “to “expose the exploding costs of nuclear power.”

“We are also disturbed by the Public Service Commission’s unwillingness to step up and protect the South Carolina ratepayer from this imprudent decision by SCE&G,” said Susan Corbett, Sierra Club chairwoman.

At Wednesday’s hearing, the justices peppered attorneys from both sides with questions.

“Where do you get the term ‘cost overruns,’ Mr. Elliott?” Chief Justice Jean Toal asked.

“They have got a basic estimate they made of what it’s going to cost to construct these facilities, and then, they are permitted to conduct a procedure whereby they amend that estimate before they convene construction, so tell me what you mean by cost overruns?”

The chief justice said she was suspicious that nuclear-power opponents were trying to re-litigate the entire approval procedure for building the controversial facility.

At the same time, the justices indicated they think state law skews in favor of utilities.

“Was there any evidence the company did not use the duty of care (to be prudent)?” Toal asked Elliott.

“Two hundred and eighty-three million reasons,” interjected Associate Justice Costa Pleicones, referring to SCE&G’s original increase request for the project.

Attorneys for the S.C. Office of Regulatory Staff, which argued on behalf of the Public Service Commission before the court, told the justices the commission’s decisions in 2012 were correct and should be upheld.

SCE&G said critics of the plant sometimes conflate the final cost of projects at the plant with the up-front costs paid by ratepayers under state law.

“None of the capital costs (brick-and-mortar expenses) of this overall project are being collected from customers until the plants are up and running,” said Eric Boomhower, SCE&G spokesman.

“The only thing customers are paying for through ... increases during construction are the financing costs SCE&G is incurring to pay for those brick-and-mortar expenses. We only seek to recover those financing costs after the capital dollars have been spent.”

Investors, not customers, are paying the capital costs, Boomhower said.

For now, SCE&G’s customers are paying only the financing costs associated with whatever portion of the $278 million already has been spent, Boomhower said. The company did not have exact figures for what already has been spent. But, he added, “It’s probably not much.”

“Bottom line, customers will not see that $278 million reflected in their rates until the plants are up and running.”

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