Crime & Courts

Santee Cooper accuses SCE&G of civil fraud in failed, $9 billion nuclear project

Santee Cooper is accusing SCE&G — its partner in their $9 billion failed attempt to build a nuclear power plant — of civil fraud, misconduct and numerous “breaches of duties” in connection with the unfinished twin nuclear reactors.

In 2011, the two utilities, which together provide electricity to millions of South Carolinians, signed an agreement giving SCE&G authority to oversee all aspects of construction at the V.C. Summer Nuclear Station in Fairfield County.

But SCE&G broke that agreement with “various fraudulent acts,” including “dishonesty, bad faith, unfair dealing and the unlawful appropriation of Santee Cooper’s money by design,” Santee Cooper wrote this week in a legal filing in state court.

Over the past 17 months, SCE&G and Santee Cooper have been buffeted by news reports and hearings into mismanagement, waste and other flaws that plagued the V.C. Summer project before the utilities canceled the venture in July 2017.

But the legal filing this week marks the first time Santee Cooper has formally and publicly accused its former partner in the doomed nuclear project of serious wrongdoing and gross negligence.

SCE&G responded vigorously Friday afternoon to Santee Cooper’s charges.

“We deny Santee Cooper’s allegations,” SCE&G spokesman Eric Boomhower said in a statement.

“Santee Cooper was a co-owner and active participant in the decision-making process and oversight of the V.C. Summer project,” Boomhower said. “We believe any claim from Santee Cooper lacks legal merit and ignores its accountability for the termination of the project and the significant losses suffered by both companies.”

SCE&G, an investor-owned utility, owned a 55-percent share in the project. Santee Cooper, a state agency, owned a 45-percent share.

Santee Cooper’s filing against SCE&G comes days before Virginia-based power giant Dominion Energy is set to acquire SCE&G and its parent company, Cayce-based SCANA, in a deal that has been hotly debated for a year.

The high-profile nuclear project’s failure has gripped the public’s attention for months, in part because of how a supposedly promising venture turned into one of South Carolina’s biggest economic blunders, giving a black eye to the state’s politicians and once-respected business people who were the project’s purported stewards.

SCE&G’s nearly 730,000 electric customers have collectively paid more than $2 billion for the project in the form of higher power bills over the past decade. Separately, Santee Cooper’s more than 2 million direct and indirect customers can expect to pay more than $6,000 each over the next 40 years to pay off that utility’s $4 billion nuclear debt.

In its filing, Santee Cooper alleges that, since 2014, the S.C. utility repeatedly pleaded with SCE&G to improve its oversight of the project.

The companies had hired Westinghouse as the project’s lead contractor. But as time went on, Westinghouse proved incapable of delivering on promises — causing lengthy construction delays and cost overruns. SCE&G knew about the contractor’s shortcomings but didn’t act on them, Santee Cooper alleges now.

“SCE&G willfully and intentionally did not confront Westinghouse” about its “failure to manage the project in ways that would be effective,” the filing said.

Santee Cooper wrote that SCE&G’s “hand’s off” approach to managing the project delayed implementation of corrective measures and contributed to the project’s failure.”

In the filing, Santee Cooper asserts it pushed SCE&G to require Westinghouse to improve, starting in 2014.

The utility says it:

Emailed SCE&G’s then CEO, Kevin Marsh, in September 2014 to tell him Santee Cooper wanted to hire an additional construction expert to evaluate construction.

Suggested in February 2015 that Bechtel Corp., the country’s largest construction company, be hired to assess the project.

Recommended in 2016, as a result of the Bechtel report, that SCE&G hire more independent engineering and construction experts be hired to evaluate the project’s progress. But SCE&G did not hire those resources “despite Santee Cooper’s repeated requests that it do so,” the filing said.

Santee Cooper wrote that SCE&G also “resisted Bechtel’s attempt to develop a final report.” Instead, Santee Cooper said SCE&G demanded the report be altered.

SCE&G ultimately hid the report from the public, claiming it to be protected by attorney-client privilege. The report was finally made public over SCE&G’s objections by Gov. Henry McMaster in early September, 2017, a little more than a month after the project shut down.

In this week’s filing, Santee Cooper asserted that because of SCE&G’s “intentional misconduct and failure to exercise even slight care,” Santee Cooper has suffered damages arising from its having to hire lawyers to defend it in numerous legal actions.

“Santee Cooper is entitled to damages arising from SCE&G’s gross negligence,” the filing said. Santee Cooper was represented by Rush Smith, William Hubbard, Matt Bogan and other lawyers from the Columbia firm of Nelson Mullins

Tuesday’s filing is only the latest of dozens of lawsuits and claims in state and federal civil courts filed in connection with the high-profile failure of the nuclear project. Although reports have indicated federal and state investigation are underway into possible criminal wrongdoing, no charges have yet yet been forthcoming.

Avery G. Wilks is The State’s senior S.C. State House and politics reporter. He was named the 2018 S.C. Journalist of the Year by the South Carolina Press Association. He grew up in Chester, S.C., and graduated from the University of South Carolina’s top-ranked Honors College in 2015.
John Monk has covered courts, crime, politics, public corruption, the environment and other issues in the Carolinas for more than 40 years. A U.S. Army veteran who covered the 1989 American invasion of Panama, Monk is a former Washington correspondent for The Charlotte Observer. He has covered numerous death penalty trials, including that of the Charleston church killer, Dylann Roof, and that of child killer Tim Jones.