Projected power needs fueled SCE&G nuke project – but the projections were wrong

When SCE&G and Santee Cooper announced plans for two new nuclear reactors nearly a decade ago, they made a simple argument to justify the project: They needed the power as South Carolina grew.

But it turns out the utilities overestimated the demand for electricity.

Today, their missed forecasts have left some people questioning whether the over-budget, $14 billion nuclear project was ever necessary. The partially built project has resulted in 14 separate rate increases for customers of the two utilities.

“They are burning money,’’ said Mark Cooper, a Vermont Law School economist who is studying the utilities’ reactor project.

The companies acknowledge that the projected power needs have changed. But they say a new, large source of power will eventually be needed.

Records show that in the past decade, the utilities have steadily projected a smaller need for energy by 2020, when the new V.C. Summer reactors are supposed to crank up.

In 2009, South Carolina Electric & Gas forecast peak demand needs of 5,855 megawatts for 2020 across its system. But in 2017, the company said it needed 5,073 megawatts for 2020, according to documents filed with state regulators. That’s a more than 13 percent drop from the 2009 estimate.

In 2009, Santee Cooper estimated it would need 7,007 megawatts by 2020 to meet peak energy demands. Now, the company says it will need 4,748 megawatts. The current forecast is about 30 percent lower than the 2009 estimate.

Cooper, who studies nuclear issues nationally, said SCE&G and Santee Cooper should have abandoned the project as soon as the companies realized they would need less power than initially forecast. He said that became evident five years ago as energy demand projections continued to drop.

“This project was a bad decision to begin with; it was imprudent to keep on keeping on,’’ Cooper said. “They have excess capacity today.’’

Cooper, hired by environmental groups to study the V.C. Summer effort, is preparing to release a report that, among other things, will show how much he said the utilities erred in their energy forecasts.

A graphic to be included in the study, provided last week to The State newspaper, shows that forecasts dating to 2008 outlined greater future energy needs than now are predicted by SCE&G. Cooper’s graphic did not include Santee Cooper.

Sara Barczak, a program director with the Southern Alliance for Clean Energy, said Georgia utilities also overestimated the amount of power needed to build two nuclear reactors near the Savannah River. Those plants, like the ones SCE&G and Santee Cooper are building, are only about one-third complete, she said, citing testimony from a hearing last week in Georgia.

Barczak said utilities in both states should have paused work five years ago to reassess the need for the projects after energy demands began dropping.

Officials from SCE&G and Santee Cooper defended the assessments, but conceded that energy demands are not as great as expected in 2009. The companies are now reassessing whether to abandon the nuclear project in light of the bankruptcy of Westinghouse, the project’s main designer and contractor.

The project is about one-third complete, years behind schedule and at least $2 billion to $3 billion over budget. Some estimates have placed the ultimate cost of the project at nearly $23 billion, more than double its original price tag.

To pay for the upfront costs, SCE&G has hit ratepayers with nine power bill increases, while Santee Cooper customers have faced five increases since 2009. A sixth was proposed last week. About 18 percent of the average SCE&G customer’s power bill pays for the nuclear plant. SCE&G ratepayers have put about $1.4 billion toward the unfinished project.

Both SCE&G and Santee Cooper expect decisions on the future of the project by mid-fall, if not sooner. Their assessments are expected to be complete by Aug. 10. One question under review is whether to build only one of the two reactors. It’s also possible the companies could drop both reactors and build a natural gas plant. The V.C. Summer site has an existing nuclear reactor built decades ago.

A joint news release in 2008 quotes Santee Cooper executive Lonnie Carter as saying “we must meet the needs of growth.’’ Bill Timmerman, then the chief executive of SCE&G’s parent corporation, SCANA, said the new reactors would help the company “continue meeting the energy needs of our customers.’’

News accounts from 2008 show that SCE&G also persuaded regulators to approve the nuclear project because of the need to meet future energy demands.

Santee Cooper spokeswoman Mollie Gore declined last week to say whether the company would walk away from the incomplete project, but she and SCE&G spokeswoman Rhonda O’Banion backed their companies’ efforts to forecast future energy needs.

“Forecasts change as your inputs change,’’ Gore said. “We had a forecast in 2009 and when you build a forecast, you build it based on what you know to be true and what you anticipate will happen.’’

Both companies say a variety of factors caused them to tone down their energy forecasts – most notably the Great Recession that hit about the same time the nuclear project was starting. The stagnant economy reduced energy demand from customers, both Gore and O’Banion said.

At the same time, programs to encourage energy efficiency have meant people are using less power than they did at one time, they said. Nationally, the U.S. Energy Information Administration says the agency’s own energy use projections have been lowered in recent years.

“Various economic, environmental, and efficiency factors have affected projected energy use over the years,’’ O’Banion said in an email.

In Santee Cooper’s case, the company said it allowed Duke Energy to provide a chunk of the power the state utility once provided to electric cooperatives.

Gore and Leighton Lord, the Santee Cooper board chairman, said new nuclear units weren’t just based on the need for more power. They also were envisioned as a way to reduce the use of coal, a reliable but polluting source of energy. Unlike nuclear, coal-fired power plants create air pollution and contribute to global warming with carbon dioxide releases.

“The board wants energy diversity, which essentially means less coal,’’ Lord said last week at the company’s board meeting.

Officials with both companies have continued to express interest in completing the reactor project, if it is affordable. They say the state will at some point need energy generated by the plants, which would produce more than 2000 megawatts. Even with scaled-back growth projections, the demand for energy continues, officials said.

“Additional generation capacity will be needed in the future to meet those needs,’’ said O’Banion, whose company is one of three main utilities that supply power in South Carolina. The others are nuclear project partner Santee Cooper, and Duke Energy.

Cooper said major new generating plants aren’t always the best answer. With demand for electricity dropping, there is less need to construct huge power plants, he said. Instead, utilities could rely more on natural gas, which is abundant, or on solar and wind power, neither of which pollute the environment or create waste, he said.

“If you need a little bit of energy, you can buy a little bit of wind, a little bit of solar, a little bit of efficiency and a little bit of natural gas,’’ he said. “This alternative lets you meet it in small increments without overbuilding the system.’’

This story was originally published July 1, 2017 at 1:57 PM with the headline "Projected power needs fueled SCE&G nuke project – but the projections were wrong."