When the S.C. Public Service Commission rules on SCE&G’s electric rates next month, the Cayce-based utility doesn’t want those regulators to put too much stock into scathing testimony by two of its former employees.
Nor does SCE&G want the commission to weigh heavily a nuclear contractor’s late 2015 assessment that concluded SCE&G’s $9 billion nuclear construction project was foundering and way behind schedule.
Fighting allegations of fraud and mismanagement in this month’s PSC hearing into the failed V.C. Summer Nuclear Station expansion project, SCE&G has sought to disparage its former employees and a high-powered construction company that it paid $1 million.
It is a key part of SCE&G’s defense as the state’s utility watchdog, environmentalists and consumer groups cite those witnesses to bolster their arguments that the utility’s power bills – which rose by about $27 a month to bankroll the failing project – should be slashed.
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That strategy likely will be on display again Tuesday when former utility executive Carlette Walker, vice president of nuclear finance administration for SCE&G’s parent company SCANA, and retired SCE&G engineer Ken Browne testify before the commission for the first time in this case.
‘Impeach your own people’
Walker and Browne are star witnesses for the S.C. Office of Regulatory Staff, the state’s utility watchdog.
In sworn statements filed with the PSC, both have said SCE&G executives misled the commission in 2015 by testifying the project would cost $698 million more to complete – a number supplied by the project’s lead contractor, Westinghouse.
That number was unrealistically low and based on a productivity rate that never had been achieved at the Fairfield County construction site, Walker and Browne say. A team of SCE&G accountants and engineers worked for weeks to estimate the project actually would cost an additional $1.2 billion to finish — $500 million more than Westinghouse had said.
That half-billion-dollar difference is key to Regulatory Staff’s argument that SCE&G fraudulently won rate hikes and kept its failing nuclear project alive by providing the PSC with low-balled cost estimates.
SCE&G’s attorneys and witnesses have countered that argument by disparaging the utility’s own internal cost-projection team.
The utility’s chief executive, Jimmy Addison, testified SCE&G went with Westinghouse’s number because the nuclear contractor had more access to information. He described SCE&G’s team as a “small group of people” that didn’t speak for the utility.
At one point, SCE&G outside attorney Jonathan Chally questioned the credibility of the utility’s cost-projection team by noting none of its members ever had worked on a nuclear plant, as Westinghouse had.
“It’s odd to me that you would impeach your own people,” replied Gary Jones, a witness for Regulatory Staff with more than 45 years of experience in the nuclear industry. Instead, “You brag on Westinghouse. You brag on a company that never got a schedule right in the whole history of the project.”
SCE&G also has taken aim at a damaging, fall 2015 assessment of the project by San Francisco-based Bechtel Corp., the country’s largest construction company.
Bechtel — paid $1 million by SCE&G and its minority partner, the state-owned Santee Cooper utility — concluded the effort to build two new nuclear reactors needed significant improvements and was failing.
An October 2015 draft version of the report predicted the nuclear construction project would not be finished in time to collect $2 billion in federal tax credits needed to defray the cost of the reactors. But George Wenick, an outside attorney for SCE&G, said he had that section of the report deleted from the final, February 2016 version, which SCE&G did not disclose to state regulators.
Over the first three weeks of the PSC hearing, Regulatory Staff and SCE&G have spent hours quarreling about the report’s importance.
Regulatory Staff has argued it — along with the PSC — should have been given the report, saying the document could have sparked a frank discussion about whether the project should continue.
But SCE&G’s attorneys and witnesses have dismissed the report.
Kevin Marsh — the former CEO of SCE&G parent SCANA — testified in a sworn statement that the utility’s executives didn’t consider the report accurate or reliable. He also has said Bechtel’s report didn’t tell SCE&G anything the utility didn’t already know.
Wenick testified Bechtel used “flawed methodology” and lacked evidence supporting its conclusion. SCE&G also has said Bechtel admitted it didn’t have access to data it needed for its assessment.
But in a newly released sworn statement, Bechtel general manager of nuclear power Ty Troutman said, “We, ultimately, got everything we needed to do the assessment.”
Jones, the Regulatory Staff consultant, said the commission should not let SCE&G dismiss a $1 million report from “one of the top contractors in the nuclear business.”
He asked why the report was edited and withheld from regulators when SCE&G could have told state regulators it existed but the utility didn’t consider it credible.
“It’s just amazing to me that, if you didn’t believe it was significant, SCE&G took so many pains to hide it from us,” Jones said. “They scrubbed it. They whitewashed it. They flushed it.”