State-owned Santee Cooper paid nearly $9 million of the bonuses that went to executives and managers of investor-owned SCANA for their performance on a failing nuclear construction project.
SCANA continued to bill Santee Cooper for its nuclear-related bonuses until Aug. 31, 2017, when it requested another $3.3 million. That was the first time that Santee Cooper refused to subsidize SCANA’s bonuses to its managers and executives for their work on the nuclear project.
The August bill for bonuses came a month after the two utilities pulled the plug on their $9 billion, decade-long effort to build two more nuclear reactors at the V.C. Summer Nuclear Station in Fairfield County. It also came after years of private complaints by the state agency about SCANA’s management of the project, including questioning whether the V.C. Summer expansion could be completed on time.
Santee Cooper owns 45 percent of the two now-abandoned, unfinished reactors.
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In previously secret internal emails, one Santee Cooper executive wrote that he had questioned the state agency’s payments for SCANA’s nuclear bonuses in 2011 but was overruled by Santee Cooper’s former chief executive, Lonnie Carter.
According to the Santee Cooper emails, never before made public, the state-owned utility routinely paid 45 percent of SCANA’s nuclear bonuses. In total, the state agency paid $8.9 million — money that came from the 2 million people that Santee Cooper serves either directly or via S.C. electric co-ops — for the stockholder-owned utility’s nuclear bonuses. The bonuses were tied to meeting milestones in the construction of the two reactors or overall performance on the project.
“We took it to the top (in 2011) ... but I ultimately got reamed for sitting on invoices,” wrote Michael Crosby, Santee Cooper’s senior vice president for nuclear energy, in a Sept. 2, 2017 email. “Lonnie was not interested in getting involved in the details of the SCANA bonus program ... as long as same (bonuses) were allowed under the Design and Construction agreement ... which they are.”
Carter announced his retirement from Santee Cooper on Aug. 25, 2017, less than a month after the nuclear project collapsed under the weight of cost overruns and construction delays.
In an emailed statement, Santee Cooper spokeswoman Mollie Gore said the agency’s contract with SCANA subsidiary SCE&G called for Santee Cooper to pay 45 percent of the project’s costs, “including labor.”
“Santee Cooper received the first invoice in 2011, and although some members of Santee Cooper management advised against paying it, the decision fell to the CEO,” Gore wrote. “It was a project administrative decision and so did not require board approval or involvement. When the nuclear management team received the last invoice in the fall of 2017, the decision was made to not pay it. Our interim CEO agreed with that decision.”
The two utilities and their failed project have been the subject of intense public scrutiny, State House hearings, state and federal investigations and a host of lawsuits.
After nine rate hikes, SCE&G has charged its customers more than $2 billion in the form of higher power bills to help finance the project. Those customers continue to pay $27 a month, on average, for the useless reactors.
Santee Cooper customers, meanwhile, pay about $5 a month in higher power bills for the project. They have paid more than $530 million collectively so far and can expect their power bills to rise another 7 percent as Santee Cooper pays down its construction debt.
Gov. Henry McMaster’s office released the once-confidential invoices to reporters and legislative leaders Wednesday, citing them as evidence that the state Senate quickly should confirm McMaster’s appointment for Santee Cooper’s new board chairman: former S.C. Attorney General Charlie Condon.
“The people who are paying Santee Cooper for their service — whether its individuals or (electric) cooperatives — they deserve to know where their money is going,” said McMaster spokesman Brian Symmes. “It was going to executives of SCANA for a project that wasn’t on track. This is exactly why we need Charlie Condon in place, so he can start holding these people accountable.”
The documents were among a trove of material that Santee Cooper has turned over to the U.S. Department of Justice, which is investigating the nuclear project’s collapse.
S.C. lawmakers Wednesday said the bonus payments were embarrassing for the state-owned utility. While Santee Cooper’s leaders had complained for years to SCANA about the project’s cost overruns and lack of progress, they did not tell state lawmakers of their concerns.
“It just shows a complete lack of trustworthiness on either part,” said state Rep. Peter McCoy, the Charleston Republican who co-chairs the House’s special nuclear committee. “The utilities have lost any credibility.”
“You can’t defend this. I didn’t think I could be surprised anymore,” said state Rep. Russell Ott, D-Calhoun, the committee’s other co-chair.
“But, at the same time, it also shows that there are a lot of people involved with both SCANA and Santee Cooper that were trying to do the right thing. I think Mr. Crosby is a prime example of somebody that obviously knew that this wasn’t right.
“Unfortunately, people that were his bosses and above him were making his life very uncomfortable for trying to do what was right.”
SCANA did not respond to requests for comment by 7 p.m. Wednesday.
The invoices show Santee Cooper approved paying:
▪ Nearly $1 million toward SCANA’s nuclear bonuses between 2009 and 2010
▪ Nearly $1.7 million for SCANA bonuses for 2011 and 2012
▪ $3.8 million for SCANA bonuses between 2013 and 2014
▪ More than $2.4 million for SCANA bonuses in 2015
The documents specify the bonuses were related to performance for work on the new nuclear reactors, not the existing reactor that is operating at the Summer site.
Santee Cooper paid its own executives far smaller bonuses — about $70,000 — tied to their performance on the nuclear project.
After SCANA’s August 2017 request for money to cover the 2016 nuclear bonuses paid to its employees, Santee Cooper’s Crosby vented to fellow employees.
“Seriously … I will not approve this invoice,” Crosby wrote to Santee Cooper accountant Fritz Hood on Aug. 31, 2017. “I may get over-ridden … but if SCANA cares to push this … CFOs & CEOs will need to get involved.”
Later that day, Crosby forwarded that email to another coworker — Santee Cooper chief financial officer Jeff Armfield — warning Armfield that then- SCANA chief financial officer Jimmy Addison, now chief executive of the embattled Cayce-based utility, might call to complain if Santee Cooper didn’t pay up.
“As you know, the timing is more than poor right now,” Crosby wrote later in the email exchange. “As a minimum … I thought it was worth making Addison get in the loop … understand what his people are doing … and man-up and ask if he wants to push this. Regardless … I know I will get reamed again for sitting on invoices … would appreciate your advice.”
Armfield agreed in a Sept. 2, 2017 reply.
“On the face of it I do not see how we pay for exec bonuses related to Summer (units) 2 & 3 if the bonus was tied to making milestones or some other measure not achieved,” Armfield wrote. “Have not gotten a call from Jimmy and if/when it comes we should ask the judge to weigh in legally.”
It is unclear whether the “judge” referred to is interim Santee Cooper chief executive Jim Brogdon or the state utility’s general counsel, Michael Baxley. Both are retired judges.
The state-owned utility later rejected the invoice.