Confidential memo shows SCANA, Santee Cooper long worried over nuclear woes

Some 20 months before a report critical of the failing V.C. Summer nuclear project became public, SCE&G was worried how much – if anything – it should tell bond buyers, stockholders and state regulators about the contents of that report, according to a memo obtained by The State newspaper.

The one-page memo – written by an unnamed official of Santee Cooper, SCE&G’s junior partner in the project – depicts SCE&G as wanting to know if releasing the Bechtel report’s contents to stockholders would expose top utility executives and directors to legal liability.

“Now that SCE&G is specifically aware of problems raised in (the) report, failure to act may result in O&D (officers and directors) liability,” the memo says, noting there was concern about how “to defend (a) potential shareholder suit.”

The Santee Cooper memo, titled “Bechtel Report Action Plan,’’ also says both utilities wanted to know what kind of disclosures they should make to prospective buyers of their corporate debt, given that they both knew the nuclear project had serious troubles.

“(D)isclosures (by Santee Cooper and SCE&G) should be similar,” the memo says.

The undated Santee Cooper memo apparently was written around mid-February 2016, within weeks of Santee Cooper and SCE&G officials receiving a report from the Bechtel consulting firm. That report detailed serious problems at the V.C. Summer project.

Meanwhile, SCE&G also was aware the state Office of Regulatory Staff was trying to find out about the Bechtel report. However, an SCE&G official did not answer questions from Santee Cooper about how “to handle ... disclosure’’ of the report.

Officials of the state Office of Regulatory Staff, which oversees SCE&G, have testified before S.C. legislators, investigating the nuclear debacle, that they had heard Bechtel was working on a report. But SCE&G initially denied a written report existed, those regulators said.

The Bechtel report said the nuclear project suffered from flawed construction plans, faulty designs, inadequate management of contractors, low worker morale and high turnover.

‘The people ... deserve better’

Santee Cooper’s internal memo, obtained Friday by The State, adds insight into how early the two utilities had concerns about troubles at the nuclear plant and how concerned they were about others finding out about those woes. The memo was written more than a year before the contractor at the V.C. Summer site, Westinghouse, filed for bankruptcy in March 2017. That filing eventually led to the July 31 decision to abandon the construction of two new reactors.

The memo shows Santee Cooper agreed to keep the contents of the Bechtel report secret — for a period of time and if legal — if SCE&G would take steps to correct problems at the V.C. Summer project in Fairfield County.

The Bechtel report only became public this month after Gov. Henry McMaster pressured state-owned Santee Cooper to release the study. McMaster then released it to the public.

The one-page memo made its way to The State after state Rep. Kirkman Finlay, R-Richland, came across it. Finlay shared it with state officials. The State obtained the memo Friday and authenticated it with Santee Cooper.

SCE&G, a subsidiary of Cayce-based SCANA, and Santee Cooper abandoned construction of the nuclear reactor project after spending about a decade and $9 billion on the effort. The project was over budget, behind schedule and no longer affordable at a time of falling power demand and low natural gas prices, the companies said.

The decision to quit the project left more than 5,000 out of work and ratepayers wondering if they would get back the approximately $2 billion they have been charged for the work. A 2007 state law allowed the utilities to more easily charge rate payers up-front for the cost of the reactors’ construction. Efforts are now under way by the Office of Regulatory Staff to halt additional charges for the project, which won’t be completed.

Finlay said Friday he was appalled by the memo’s portrayal of utility officials, seemingly concerned only with themselves.

“The people of South Carolina, the rate payers, the investors and the hard-working employees who’ve bought SCANA stock over the years deserve better than this,” Finlay said.

‘We were pushing for more ... oversight’

The publicly traded SCANA, the parent company of SCE&G, was the lead partner in the nuclear venture, owning 55 percent of the project. Santee Cooper, a state agency, owned 45 percent.

Mollie Gore, a Santee Cooper spokeswoman, confirmed the state-owned utility wrote the one-page document in early 2016. Gore said it was an internal document, intended to ensure the nuclear project was completed.

“This was an opportunity to push the changes that we wanted that were identified in the Bechtel report,’’ Gore said. “We were pushing for more specific …. project oversight.’’

Gore said Santee Cooper has had three bond sales since the Bechtel report was completed in February 2016. Two were for the nuclear project, she said.

In each case, the company disclosed the necessary information to prospective buyers, Gore said.

Efforts to reach SCANA were unsuccessful Friday.

State Rep. James Smith, D-Richland, said he doesn’t think the Santee Cooper memo was intended to be released. Instead, he thinks, it was inadvertently included in the Bechtel report that Santee Cooper provided to House leaders earlier this month.

Smith said the document provides further evidence that SCANA and Santee Cooper knew the nuclear project was failing long before they told anyone else. He particularly was critical of SCANA, which the memo shows did not want to release the Bechtel report.

“This shows they could no longer have plausible deniability, to say they didn’t know what was going on,’’ Smith said. “They knew or should have known what was going on.’’

This story was originally published September 29, 2017 at 8:20 PM with the headline "Confidential memo shows SCANA, Santee Cooper long worried over nuclear woes."