Santee Cooper should have blown whistle on failing nuke project, legislators say

Some legislators are incensed that Santee Cooper, a state-owned power company, failed to tell them for years about the troubles it had discovered at the failing V.C. Summer nuclear construction project.

Santee Cooper identified the need for better project management at least three years before the company and senior partner SCE&G quit the reactor construction effort, according to records released this past week by Santee Cooper. During those years, Santee Cooper pushed SCE&G to fix problems, but in some cases, SCE&G was hesitant or did not respond, according to Santee Cooper.

After Santee Cooper released documents Thursday outlining its concerns, state lawmakers asked why the company didn’t alert them about the problems. If lawmakers had learned about the troubles, they might have been able to help get the project on track – or push to abandon it before billions more dollars were spent, they said.

“They could have come to the Legislature and said ‘We’re in this project and we’re not getting what we think out of it, and we think there’s potential mismanagement,’” state Sen. Nikki Setzler said. “But instead, they just kept on going down the road until Westinghouse went bankrupt.’’

Four months after chief contractor Westinghouse filed for bankruptcy, Santee Cooper and SCE&G walked away from the project July 31. The companies had spent $9 billion and nine years on the effort. Santee Cooper and SCE&G, a division of SCANA, charged customers more than $2 billion for a nuclear reactor project that will not be completed. All told, the companies raised rates 14 times for the nuclear project.

SCE&G has said it wants to charge ratepayers at least $2.2 billion more to recover its project costs. The state Public Service Commission would have to approve those additional charges.

Setzler, a Lexington County Democrat who co-chairs a committee investigating the failure, said the Santee Cooper board “could have voted to end this project sooner.’’

Sen. Paul Campbell, a former Santee Cooper board member, said the failure to disclose troubles long ago suggests an effort to cover up the problems.

“They could have at least called me and alerted me and we would have gone to SCANA and said ‘What the hell is going on here?’” Campbell, R-Berkeley, said. “We could have said ‘you guys are raising rates because of this and now it looks like you’re in some jeopardy.’”

SCE&G had publicly painted an optimistic view of the project’s progress until Westinghouse filed for bankruptcy in March. SCE&G and Santee Cooper were trying to build two of the first nuclear reactors in the country in decades. The reactors would have complemented an existing reactor at the Summer site.

The companies said the Westinghouse bankruptcy was a prime reason for quitting, as well as escalating costs and flat energy demand. The failure has caused what one senator called the biggest business issue he’s seen in decades.

SCE&G, which oversaw the project as senior partner, did not respond to questions from The State this past week about Santee Cooper’s concerns.

Santee Cooper for parts of three years pushed to make improvements on the project, records show. Among other things, Santee Cooper said the effort needed an independent construction manager to investigate problems and recommend ways to get the construction effort moving forward.

Reps. James Smith, D-Richland, Bill Hixon, R-Aiken and Nathan Ballentine, R-Lexington, also expressed concerns about the lack of information, saying legislative committees hope to get more answers when they meet with utility executives at hearings later this month. All are on committees investigating the nuclear project shutdown.

“We are looking at having SCANA and Santee come before us, and that will be a very important meeting,’’ Ballentine said. “Why was a rate increase approved before all that was known?’’

Santee Cooper board chairman Leighton Lord said Friday that the board could have told legislators, but was concerned about making public statements or taking public actions that could affect the myriad of contractors and companies involved in the project.

“We were subject to such deep confidentiality all the way around,’’ Lord said. “We tried to work with (major contractors) to make changes. We thought that was the more responsible course.’’

Lord, a Republican from Columbia, said the Santee Cooper board never was able to persuade SCE&G to make some of the changes it thought would improve the project. But during the years Santee Cooper raised questions, it continued to believe the issues could be resolved and the nuclear reactors completed, he said.

If Santee Cooper had voted to quit the project before the Westinghouse bankruptcy, it would have breached contracts and potentially cost the state power company large sums of money fighting in court, Lord said.

“Walking away would have caused a worse firestorm than we are in now,’’ Lord said.

Santee Cooper did not realize until after Westinghouse filed for bankruptcy in March that the project wasn’t salvageable.

Records released this past week week show that Santee Cooper strongly urged SCE&G, the project’s majority partner, to bring in independent managers to oversee problems on the site, instead of relying on a part-time oversight board. The Construction Oversight Review Board was a good idea, but it did not have enough of a regular presence on the site to ensure problems were resolved quickly, according to the records.

Santee Cooper said some changes were made, but an independent construction manager was never hired. An independent study of the project commissioned by both companies also recommended an independent manager. The report by the Bechtel Corp. was finished in February 2016.

The records released last week by Santee Cooper also showed that the company wanted to hire an independent bankruptcy lawyer, and it wanted to release the Bechtel report to the state’s electrical cooperatives last year, but SCANA management balked. Under pressure from Republican Gov. Henry McMaster, Santee Cooper gave the Bechtel study to the governor this past week. McMaster then released the report to the public.

McMaster is so upset about the project failure that he is discussing the possible sale of Santee Cooper to private utilities.

The Bechtel report showed a litany of problems at the project site in Fairfield County. Among them were flawed construction plans, faulty designs, inadequate management of contractors, low worker morale and high turnover. The report said the project suffered from strained relationships among contractors, as well as a lack of shared vision by major companies. It also said employees were being overworked and the project suffered from a high turnover rate.

Hixon, the Aiken legislator, said it may have been difficult for Santee Cooper to raise red flags on the project publicly because SCE&G was the majority partner. But Smith, a potential Democratic candidate for governor, said South Carolina’s state-owned power company should have done more to get the word out.

The real question, Smith, Hixon and other lawmakers say, is making sure ratepayers are not charged more to shut down the project and that a fiasco of this magnitude never happens again in South Carolina. Smith said he’s drafting legislation to address problems that occurred.

“I believe it’s clear that Santee Cooper failing to act in a timely manner and tell people also failed to protect South Carolina ratepayers,’’ Smith said.

This story was originally published September 9, 2017 at 11:21 AM with the headline "Santee Cooper should have blown whistle on failing nuke project, legislators say."