What is the Base Load Review Act and how did SCANA profit from it?
A federal grand jury in South Carolina is investigating possible criminal violations involving SCANA and its failed nuclear construction project in Fairfield County, multiple sources have told The State newspaper.
The company and partner Santee Cooper acknowledged Thursday they had received subpoenas from the U.S. Attorney’s Office seeking documents that, by some accounts, could explain why the utilities abandoned the project after hitting customers with about $2 billion in rate increases.
Thursday’s development is significant because, for the first time, it shows federal investigators are interested in the bungled project, which has generated a cascade of criticism from customers and state legislators. Overall, SCANA and Santee Cooper spent $9 billion on the effort before saying July 31 the job was too expensive to complete. The decision to quit building two new reactors left more than 5,000 workers jobless.
The potential unlawful activities the federal grand jury could be examining include whether SCANA deliberately understated the precariousness of its nuclear project in legally required public filings, sources familiar with the probe said. SCANA is under fire from state legislators for failing to disclose the existence of an 18-month-old report by the Bechtel Corp. that was critical of the project.
Federal grand juries normally are activated when there is evidence of possible criminal wrongdoing, and their investigations can result in a criminal indictment, or formal criminal charge. Grand juries also can determine as a result of their investigation that there is not enough evidence to bring an indictment.
“We can’t comment on ongoing investigations,” a spokesman in the U.S. Attorney’s Office in Columbia said.
SCANA’s stock shares were trading at $57.18 at the close of business Thursday on a day when the Dow Jones was down slightly. That was sharply down from earlier this year when the stock hit a high of $75.92. SCANA’s stock price was down .62 Thursday.
News of the investigation surfaced after SCANA issued a public statement saying it had received a subpoena from the U.S. Attorney’s Office in South Carolina, which works with the FBI and oversees federal grand juries in the Palmetto State. Santee Cooper then said it also had received a subpoena.
State-owned Santee Cooper and SCANA, an investor-owned utility whose shares are traded on the New York Stock Exchange, said Thursday they would work with federal investigators.
The subpoena to SCANA, the parent corporation of SCE&G, requires the South Carolina corporation to produce “a broad range of documents related to the project,” the company’s news release said.
“The company intends to cooperate with the government’s investigation,” SCANA’s news release said. “No assurance can be given as to the timing or outcome of this matter.”
SCANA declined to provide the subpoena in response to a request from The State newspaper or say if it already had provided documents to the grand jury. But Santee Cooper, the company’s junior partner in the nuclear project, released the subpoena it received Sept. 7.
The subpoena asks that Santee Cooper turn over to federal investigators the Bechtel report; any documents, notes, meeting minutes, recordings or presentations Bechtel used to compile that report; and any project assessments, audits, due diligence reports or documents concerning the project.
Federal agents also demanded Santee Cooper’s internal and external emails concerning the Bechtel report, its investigation, its findings or its lack of disclosure to the public or state regulators. Records obtained recently by The State show that Santee Cooper knew about problems about three years ago and urged SCANA to make improvements, but in some cases, SCANA was hesitant to do so.
Investigators said they wanted a list detailing who had received a copy of the Bechtel report and any correspondence with the Bechtel Corp. about the report’s findings.
“Our intention is to fully cooperate and comply with the request for documents,” Santee Cooper spokeswoman Nicole Aiello said.
SCANA and Santee Cooper have said the bankruptcy of chief contractor Westinghouse contributed heavily to the project being shut down, but other issues, such as decreased energy demand and sharply rising costs, were factors.
Officials from both companies met last week and earlier this week with state legislative panels investigating why the project failed. Among other things, legislators have been trying to determine whether SCANA concealed information from state lawmakers and regulators about problems the project was having long before the shutdown announcement was made July 31.
SCANA declined in recent weeks to release the Bechtel report once its existence became known publicly.
Gov. Henry McMaster made the document public earlier this month after pressuring Santee Cooper to give his office a copy. SCANA claimed in a legislative hearing earlier this week that it had provided information like that found in the report to state regulators.
McMaster’s office said Thursday it gave a copy of the Bechtel study to the U.S. Attorney’s Office Sept. 5, a day after the office got the report from Santee Cooper.
State Sen. Tom Davis, R-Beaufort, said he knew “there had been some federal involvement in this” and welcomed the federal review. Davis said the power companies knew as far back as 2010 that natural gas prices were dropping and that Santee Cooper knew it didn’t need the energy capacity from the nuclear project. But Davis said the companies didn’t act “in a reasonable way in response to those factors.”
The drop in natural gas prices has been a key point of debate over whether the utilities should have kept building the project.
“Based on the sort of surreal nature of this, that billions of dollars were being spent, despite the principals knowing that factors existed that made this economically unviable, that suggests that something else insidious was at work here,” Davis said, adding: “There’s got to be some explanation for this.”
Davis suggested state legislators bear responsibility. The Public Utilities Review Committee was supposed to keep an eye on the project, he said. Committee members have received nearly $78,000 from SCANA, its political action committees and employees since 2005, The State reported this past weekend.
“To get to the bottom of this, you may need to have somebody independent like the feds coming in, so it is not tainted by any sort of political bias,” Davis said.
Sen. Mike Fanning, a Fairfield County Democrat whose district includes the construction site, said he was told by fellow senators that a federal agent was at a State House hearing Monday about the nuclear project. Fanning did not know which department the agent represented.
But an FBI agent attended a Sept. 15 House hearing, in which legislators grilled SCANA executives over the Bechtel report, according to state Rep. Peter McCoy, the Charleston Republican who chairs that committee.
Robert Kittle, a spokesman for S.C. Attorney General Alan Wilson, said that office likely will issue an opinion early next week on the constitutionality of the 2007 state law that allowed SCE&G to recoup construction costs from ratepayers while construction took place. The attorney general’s opinion also will examine whether lawmakers can change the 2007 law, called the Base Load Review Act, to repay customers for the abandoned project.
The attorney general’s office also has opened its own probe into SCANA’s failed nuclear project, Kittle said. “We’re continuing to investigate.”
Government watchdog John Crangle, who is with the S.C. Progressive Network, said he had no first-hand knowledge of the federal probe, but said it could involve a failure to disclose information to the federal government. Companies are supposed to file reports quarterly with the federal government. The reports are supposed to include “material” information that might need to be known, Crangle said.
“The question is whether they reported the contents of the Bechtel report,” Crangle said.
Staff writer Jamie Self contributed.