Could losing tax break sink SCE&G’s nuclear project?

SCE&G updates nuclear power plant construction plant

The State Public Service Commission listened to executives of SCANA - parent company of SCE&G as they continued to express hope that they could complete a troubled nuclear plant project.
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The State Public Service Commission listened to executives of SCANA - parent company of SCE&G as they continued to express hope that they could complete a troubled nuclear plant project.

Whether SCANA and Santee Cooper complete two nuclear reactors may depend on whether a deadline is extended for the companies to gain more than $2 billion in federal tax credits that would help pay for the financially troubled project.

But an effort to extend the deadline has stalled, and it’s questionable whether Congress will take action before the companies make a final decision on the project’s future.

Without the tax credit, it would be more difficult to finance the project that already is in trouble because its chief contractor, Westinghouse, is in bankruptcy, utility officials acknowledge.

Santee Cooper and SCE&G, a subsidiary of SCANA, have until June 26 to complete an assessment on whether the nuclear expansion work is worth continuing.

The project’s future is important to SCE&G customers because they already have paid at least $1.4 billion for the reactors’ construction. If the project is not finished, SCE&G is not required to return the money. About 18 percent of a customer’s current bill goes toward the plant’s construction.

Neither power company would speculate on whether the failure to get the tax credit would sink the nuclear construction effort, but no one disputes the fact that gaining more than $2 billion is important to the companies’ ultimate decision on continuing to build the reactors.

“It’s over $2 billion,’’ said Dukes Scott, director of the S.C. Office of Regulatory Staff. “That’s going to be crucial to the decision-making.’’

Some interest groups and utility executives expressed doubt that the tax credit issue will be resolved before the companies make a decision on the nuclear reactor project in Fairfield County just north of Columbia. The project is expected to cost about $14 billion.

Chances are slim that a free-standing bill, introduced recently by Sen. Tim Scott, R-S.C., and Rep. Tom Rice, R-S.C., would pass Congress anytime soon, if at all.

At issue is whether to extend the time that power companies have to complete the project and gain the tax credit. Under the current deadline, the companies have until the end of 2020 to finish the work, but the project is behind schedule.

“The prospect of moving a stand-alone bill like this in today’s Congress is zero,’’ said Tyson Slocum, energy program director for the interest group Public Citizen in Washington. “Even naming post offices is not a sure thing today.’’

The more realistic hope of extending the break is to attach the measure to other legislation already moving through Congress, said Slocum, whose group opposes extending the tax break deadline. But that effort suffered a major blow earlier this month when a plan to extend the time period was not included in a budget agreement worked out through Congress.

U.S. Sen. Lindsey Graham, R-S.C., told a group of electric cooperative members last week that he is still working in Congress to extend the deadline to get the tax breaks.

“He maybe will not try to run a separate bill through, but put some pieces of (other) energy components into that, so that there will be others supporting it,” said John Tiencken, chief counsel for Central Electric Power, which provides wholesale electric service to South Carolina’s retail electric cooperatives. “What he was saying sounded good to me.’’

Slocum said combining the bill with other legislation would bring a broader appeal to federal lawmakers from other parts of the country. The bill now benefits nuclear projects in South Carolina and Georgia.

Neither Graham’s office nor Rice’s office responded to questions from The State, but Scott’s office issued a statement saying he would press the matter as part of a tax reform package this fall.

“I was very disappointed to see that the nuclear production tax credit, an initiative that would both provide a clean, renewable source of energy and help lower energy prices for millions of Americans, was not included in the spending bill recently passed by Congress,’’ Scott said. “I continue to have a number of discussions with my colleagues as we explore viable options moving forward.”

The plan to build two new nuclear reactors at SCE&G’s V.C. Summer energy station has been beset with delays and cost overruns. Many problems center on Westinghouse, the chief contractor, which filed for bankruptcy in March. About 5,000 people work at the plant site. Construction on the project is about one-third complete. The effort is one of two nationally to expand existing nuclear power stations. At SCE&G’s site near Jenkinsville, the two new reactors would be in addition to an existing atomic power reactor.

The key to continuing the expansion project may depend more on how Westinghouse’s bankruptcy is resolved, instead of the tax credit, Slocum said. The company’s owner, Toshiba, has pledged $1.7 billion to complete the project. Toshiba, however, is in financial trouble because of Westinghouse’s financial woes.

SCANA spokesman Eric Boomhower indicated that SCANA would not make a final decision on the future of the project on June 26 – but the tax credit is needed.

“The federal production tax credits potentially available to the project represent approximately $2.2 billion in value to SCE&G’s customers, if both units are completed, and are an important part of our cost evaluation,’’ Boomhower said in an email.

Santee Cooper spokeswoman Mollie Gore could not say how much weight the tax credit extension would carry in the state-owned power company’s ultimate decision on the nuclear project.

Gore said that is one of a number of issues being analyzed by Santee Cooper in anticipation of June 26. The Santee Cooper board meets that day.

The bill advanced by Scott and Rice would help Santee Cooper by making it easier for the state-owned utility to use the tax credits, Gore said. As it stands, the law is murky on how easy that would be for her company, as opposed to SCANA, because Santee Cooper is a state agency.

Slocum’s group opposes extending the tax break, saying the nuclear industry does not need continued subsidies as other forms of energy, such as wind and solar, become more viable.

“We don’t see it as a sustainable or affordable energy option,’’ Slocum said. “It is a technology that served us well – but it has been eclipsed in terms of its efficiency and its impact on the environment.’’