Secret nuclear report should block SCANA from charging customers more, legislators told

A long-secret report – diagnosing critical problems at the V.C. Summer nuclear project – offers enough evidence to prevent SCANA from recouping from its power customers the costs of abandoning two nuclear reactors, an attorney told an S.C. House committee Friday.

The Cayce-based utility will seek to charge its customers more to cover those costs, the company’s executives told the same committee. However, SCANA executives offered to negotiate that amount.

The House panel, investigating the nuclear project’s failure, spent almost five hours Friday grilling SCANA’s leaders. The 18 legislators on the panel took turns hurling pointed questions at six SCANA executives.

Legislators pronounced themselves flabbergasted when the executives would accept no blame for the failure of the project, abandoned after nine years and $9 billion spent.

“At no point have I heard y’all own any significant portion of the blame for the failure to deliver the project on time or on budget,” said state Rep. Kirkman Finlay, R-Richland.

“It is clear to anybody who is sitting in this room that SCE&G bears some responsibility for where we sit today,” added state Rep. James Smith, D-Richland.

Much of the hearing’s testimony centered on a newly released, long-secret report completed by the Bechtel Corp. about 18 months before SCANA and the state-owned Santee Cooper utility pulled the plug on the Jenkinsville project.

That report warned SCANA that its project was suffering from myriad problems, including flawed construction plans, faulty designs, inadequate management of contractors, low worker morale and high turnover. It also noted strained relationships between the project’s contractors, as well as a lack of a shared vision and accountability among the companies involved.

SCANA executives said Friday the report only validated concerns they already were aware of and was prepared in anticipation of filing suit against the project’s contractors.

The report was released earlier this month by S.C. Gov. Henry McMaster’s office against the wishes of SCANA, which said its release could hurt the company in lawsuits, several of which already have been filed.

‘Should have been disclosed’

House members said Friday that the Bechtel report shows SCANA failed to effectively manage the V.C. Summer expansion or its lead contractor, Westinghouse. As a result, they added, SCANA should eat the $2.2 billion in remaining costs for the project.

That position was bolstered by a legal opinion from Columbia attorney Scott Elliott, a former Public Service Commission member who recently was retained as special counsel to the House committee that is investigating the nuclear debacle.

In past testimony before state regulators, SCANA leaders had put a good face on the struggling nuclear project – even after they had been warned the project was failing, Elliott testified.

In 2016, for example, SCANA leaders asked the state Public Service Commission to approve roughly $850 million in cost overruns for the twin reactor project in Fairfield County, testifying the reactors would be completed. But they neglected to mention problems highlighted – months earlier – in the Bechtel report, Elliott said.

SCANA never revealed the existence of that report to state regulators or private citizens who challenged the utility’s rate hike requests. That decision jeopardizes whether the Public Service Commission will approve any future SCANA rate hike requests, Elliott said.

“It should have been disclosed,” said Elliott, a Columbia attorney who represents manufacturers and other large power users. “Had SCE&G and Santee Cooper been more forthcoming, they may have come to the conclusion sooner … that these plants were not going to work out. I think that’s the likely outcome.”

Disclosing Bechtel’s finding that the project was in trouble likely would have saved money for SCANA’s power customers, Elliott said. He suggested SCANA was duty-bound to release the findings, first reported to the company in the fall of 2015.

Elliott said there is “no question in my mind” that SCANA executive vice president Stephen Byrne’s rosy testimony about the V.C. Summer project to the Public Service Commission later in 2016 contradicted the findings of the February 2016 Bechtel report.

‘We took prudent steps’

SCANA officials say they withheld the report because it was protected by attorney-client privilege, and prepared for a possible lawsuit against Westinghouse. They denied misrepresenting the status of the project to state regulators.

The company’s leaders also deflected blame for the project’s failure, saying that responsibility rests squarely with lead contractor Westinghouse, which filed for bankruptcy in March.

“I believe the actions taken by the company were prudent,” SCANA chief executive officer Kevin Marsh said. “We took prudent steps to address the issues in the report.”

Toward the end of the marathon hearing, Marsh offered an olive branch to legislators. He said SCANA would work with legislators on a settlement to reduce the amount – estimated at $2.2 billion – that the utility would seek to charge its customers to cover the project’s remaining costs.

While no numbers were offered, Marsh called it an opportunity to “significantly reduce the impact on customers.”

Still, Marsh said, any deal must be structured so that it does not cripple the Cayce-based utility.

“What I want to do is find a way to solve the problem in a way that would be fair to customers and fair to the company.”

This story was originally published September 15, 2017 at 11:34 AM with the headline "Secret nuclear report should block SCANA from charging customers more, legislators told."