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The two partially-built AP1000 reactors at the VC Summer plant in South Carolina may be resurrected ‒ but it is a long shot. On August 15, South Carolina Electric & Gas Co. (SCE&G) ‒ 55% owner of the project ‒ announced that it had voluntarily withdrawn its petition to the South Carolina Public Service Commission to abandon the two reactors, a fortnight after saying it would discontinue work on the project and lodging the abandonment petition.1
Kevin Marsh, CEO of SCE&G parent company SCANA Corp., said SCANA has "not changed our position on abandonment" and that the withdrawal of the petition is seen as temporary and that it will be refiled "at an appropriate time" once reviews of the project by legislators are complete.2 That may be after state legislators complete their Jan.‒ May 2018 sitting session, by which time they will also have completed reviews of the VC Summer project failures.3
SCE&G said it might not complete the reactors even if a new power company is willing to partner on the project.4 The company previously said it would have been willing to proceed with one of the two reactors if not for the decision of state-owned Santee Cooper ‒ 45% owner of the project ‒ to abandon both. But Marsh told state legislators on August 10: "I've got to be convinced that building the one-plant option ‒ even with a new partner ‒ would be in the best interest of our customer."4 He also said it would take at least a year to restart the project, even if a new partner emerged.
Marsh said the project could only move forward with a willing and capable partner, a new ownership agreement, a suitable agreement with a capable construction firm, some certainty about the project being able to qualify for a federal government tax credit (effectively a subsidy of about US$2 billion), and a new agreement with Westinghouse for design engineering services since "the plant is their design."5 The new partner would need to stump up US$3 billion.6
A federal government handout would also be required to revive the VC Summer project. Marsh noted that before abandoning the project, he went to the Department of Energy seeking a grant, but the agency responded with an offer of a loan. "Loans are nice, but they don't reduce the cost of the project. What we were trying to do was minimize the cost of the project," he said.3 SCANA sought a non-repayable grant of US$1‒3 billion.7
Marsh said the federal government would also need to guarantee that ratepayers wouldn't foot the bill for a project with an uncertain price tag. "We would need to protect customers from that risk, and that would be an absolute we would have to have from a cost perspective," he said at an August 1 public hearing with state regulators.8
So SCANA wants a US$1‒3 billion direct handout, a US$2 billion indirect handout in the form of tax credits, and also a blank check covering future cost overruns! No wonder the Trump administration has been silent on a nuclear project it once called 'massively important'.8
Reviving the project would also depend on the Base Load Review Act, which state legislators seem intent on revising or repealing, Marsh said.9 The Act allowed project partners to charge ratepayers for construction of the reactors during the construction period, and also gives them the right to pursue sunk costs from ratepayers.
State Governor Henry McMaster said that he was looking for a utility to buy Santee Cooper's share of the VC Summer project‒ or even to buy Santee Cooper outright ‒ if it meant one reactor would be completed. McMaster said his office was reaching out to some of the South's largest power companies ‒ including Dominion Energy in Virginia, Duke Energy in North Carolina and the Southern Co. of Georgia ‒ to see if they were interested in all or part of the state-owned utility.4 McMaster said he has heard from a "number of entities that have expressed an interest in purchasing Santee Cooper, in whole or in part, or have inquired regarding Santee Cooper's ownership interest" in the plant.10
At an August 22 meeting of South Carolina Senate's VC Summer Nuclear Project Review Committee, Santee Cooper representatives said they were aware of "very preliminary" discussions involving the Governor about the possible sale of the utility.6 Asked what would become of Santee Cooper's almost US$8 billion of debts ‒ US$4 billion for the nuclear plant ‒ Santee Cooper's chair Leighton Lord said: "It would stay with the state of South Carolina. I don't think any investor utility would want to acquire $4 billion in [nuclear] debt."6
So reviving the project would require a US$1‒3 billion direct handout, an indirect US$2 billion tax-credit handout and a blank check from the federal government, a US$4‒8 billion bailout from the state government, maintaining the Base Load Review Act which allows the project partners to continue to gouge ratepayers, a new project partner with US$3 billion to spare ... and much more besides. So much for nuclear power being too cheap to meter.
Estimates of the amount already spent on the VC Summer project range from US$9 billion to US$10.4 billion.11 The estimated cost to complete the project, from start to finish, is around US$25 billion including interest, according to Santee Cooper's Lonnie Carter (almost US$18 billion excluding interest).6
SCANA's Kevin Marsh said: "The governor has stated that he's looking for another partner to possibly come into the plant, but if someone says they're interested, that's not something that will happen overnight," Marsh said. "There are a lot of bridges that have to be crossed before we would get there."4 SCANA had looked unsuccessfully for a new partner before giving up on construction on July 31.12
Santee Cooper said it had heard from two utilities interested in buying its 45% share of the VC Summer project, after contacting "about 50 utilities and other entities in the Southeast who could enter into power purchase agreements dozens of power companies."13 But Lonnie Carter, the utility's chief executive, said neither company has the assets to undertake a multi-billion-dollar construction project.14 Santee Cooper has set a September 15 deadline for serious expressions of interest.15
Corso Capital Management analyst David Frank said that abandoning the project was the likely outcome: "I'm not quite sure how anyone after any comprehensive review could come to any other decision ‒ I mean, even if you had someone with half a brain ‒ to spend the amount of money with all of the risks and potential risks that are still ahead. All these people, I'm sure they are very upset, it's very emotional, but I'd be curious to really hear someone make a solid argument for going ahead and taking on all that risk."3
Dukes Scott, executive director of the South Carolina Office of Regulatory Staff, said it would take something close to a miracle to revive the project.6
Just about everyone involved in the VC Summer fiasco failed to meet expectations by a wide margin ‒ state legislators and regulators, the project owners, the lead contractor Westinghouse and a number of other contractors and sub-contractors. Legislators are trying to shift blame to the project owners, who are trying to shift blame to Westinghouse.
The South Carolina House and Senate have initiated separate inquiries, both of which are providing plenty of theatre. Commenting on the failure to establish a credible work schedule or cost estimates before the project began, Republican Rep. Kirkman Finlay told the House inquiry on August 23: "We embarked on a multi-year, multi-billion project with a road map that we didn't really believe was going to get us to the destination. Help me understand how we could have planned it less thoroughly."16 Republican Sean Bennett, a member of the Senate inquiry, told a community meeting that "the good news is, there is no good news".17
Many of the legislators investigating the VC Summer fiasco are themselves partly responsible for it. South Carolina resident Joe Cali said: "This is like asking the foxes to investigate the depredations at the hen-house."17
Republican state Senator Shane Massey said at an August 22 hearing into the fiasco: "We went a number of years with Westinghouse just screwing you over and you let it happen. We can sit here and we can blame Westinghouse all day. At some point, y'all, we can't pass the buck anymore."18
Santee Cooper chair Leighton Lord blamed state and federal politicians ... and Westinghouse: "Without the state Base Load Review Act, the project would have never started. Without the Congress providing single-application licensing, and production tax credits for new nuclear construction, the project would have never happened. ... [W]e would have completed the new units if Westinghouse had lived up to its contract to complete the project for an agreed fixed price. Westinghouse failed to do what it promised it could do."19
Cindi Ross Scoppe, a columnist with The State newspaper, highlighted the absurdities of the Base Load Review Act:20
"You're a private-sector, regulated utility, so your job is not to protect ratepayers. They're stuck with you, and besides, it's the government's job to look out for them. Your job is to protect your stockholders. And you're doing that. Magnificently. That's why you and your executive team keep getting those huge bonuses.
"There's this law, the Base Load Review Act, that your team convinced the Legislature to pass in 2007. It says your stockholders won't suffer the consequences of your decisions, no matter how much you go over budget. In fact, the more you spend, the more they profit, because they're guaranteed a 10.25 percent return on investment. So you have no incentive to keep costs down. Just the opposite.
"You have no incentive to get out unless things get so bad that it would be "imprudent" ‒ an important legal term that can yank that profit out of your fingers ‒ to continue. Like, say, if your prime contractor goes belly up. And your 45 percent partner bails on you. Until that happens, invest more, profit more.
"When you add this bizarre economic incentive to the natural human inclination toward inertia, it's almost impossible not to keep sending money on the project. More than you should. Longer than you should. That situation is not SCANA's fault, at least not mostly. It's the fault of our Legislature, which created that disincentive to keep costs down. Or pull the plug."
In a blistering attack that's worth reading in full, Republican state Senator Chip Campsen blamed state legislators for passing the Base Load Review Act.21 He says that as a freshman senator he voted against the Act in 2007 but it was approved by a vote of 21 to 1.
"This shifting of risk to customers, when coupled with guaranteed returns up to 11 percent on construction costs, created a perverse incentive to spend big dollars building risky plants. The more utilities spend, the more money they make. Customers underwrite it all, even if a project fails.
"How did such a bill ever pass the General Assembly? The principle of concentrated benefits and diffuse or abstruse costs. When the benefits of a bill are significant and concentrated in a few, beneficiaries lobby the General Assembly assiduously for its passage. When costs are diffuse, abstruse, or both, no one is motivated to lobby against it. Members sense a lot of support and no opposition. The bill typically passes.
"In this case utility lobbyists descended upon the General Assembly like the plague of locusts in Exodus 10. And what of the opposition? Instead of locusts, it was crickets chirping. Opposition was essentially nonexistent."
Cheryl Rofer, who runs the 'Nuclear Diner' blog, blames everyone in a sarcastic post:22
"So congratulations to:
The contractors who cannot build nuclear plants on time and within budget. Special mention for lowballing their bids and failing to meet quality control requirements.
The utilities that cannot contract or manage the building of nuclear plants.
The financiers who have botched their judgments of the projects.
Proponents of nuclear power. The strategy of competitive parading of one's knowledge, parochial defense of a single system against all others, and unthinking opposition to wind and solar have been tremendous public relations successes.
Opponents of nuclear power. Spreading incorrect information and confusion instead of clearly delineating actual problems with nuclear power has made the public dumber.
Reporters who can't be bothered to learn middle-school science.
The schools that didn't teach it.
The Department of Energy and its predecessors. From a major misjudgment by a Rickover protégé through continuing confusion as to its role relative to the national laboratories and wildly varying support for nuclear energy, these agencies at best have been a neutral influence on commercializing nuclear energy.
Congress. Ever-increasing micromanagement of budgets, bending to lobbyists without a clear plan, and, since the mid-1990s, continuing resolutions rather than thought-out budgets make long-range plans impossible.
The national laboratories. Replacing their role as national resources for nuclear issues with a university model of individual investigators, but with more fighting over resources and overhead has diluted what they can contribute to the development of nuclear power.
Particular thanks to those who have assembled studies showing their favorite type of energy to be the most economically favored.
Good job, all! Your participation trophies are in the mail."
Environmentalists and nuclear opponents
The weirdest part of the blame game is the mud being thrown at environmentalists. Environmentalists aren't to blame for the VC Summer fiasco. As Houston Chronicle business columnist Chris Tomlinson noted: "Let it be written that environmentalists didn't kill the nuclear power industry, economics did. South Carolina Electric and Gas Co. and partner Santee Cooper abandoned work on two new nuclear reactors ... not because of public protests, but because the only way to pay for them was to overcharge customers or bankrupt both companies."23
Nonetheless, attempts are being made to blame environmentalists and nuclear opponents more broadly. James H. Holloway Jr., an accountant whose clients have included nuclear utilities and companies, runs this curious argument:24
1. Historically, environmentalists and other nuclear opponents forced costly delays to reactor construction, stopping some and driving up the cost of others.
2. As the nuclear renaissance took hold, power companies had to eliminate the risk of opponents forcing costly delays. Hence the need for the Base Load Review Act and similar legislation elsewhere: "If customers were charged for the interest during construction (and construction delays), then opponent activities to stall or stretch out construction would have less financial impact on the project. ... If the activities of nuclear power opponents had not had such a large effect on earlier construction, there would have been no need for a base load law for the new construction."
3. "So when you're sending out thank you notes to the Public Service Commission, SCANA and the Legislature for their roles in forcing you to pay the construction interest on these now-abandoned nuclear plants, be sure to include one to your favorite nuclear power opponents. They won't like it, but they do need to hear from you."
But of course, as Santee Cooper's Leighton Lord bluntly stated, without the state Base Load Review Act, the project would never have started.19
And of course, Westinghouse, SCE&G, Santee Cooper and others proved themselves perfectly capable of screwing up the VC Summer project without any help from environmentalists and other nuclear opponents.
Had the early warnings of environmentalists been heeded, the project never would have started. South Carolinians would have saved many billions of dollars. Or some or all of the wasted money could have been invested in renewables which would have been producing low-carbon power years ago.
Had the mid-project warnings of environmentalists been heeded, problems with the project might have been forced onto the public and political agenda and the project might have been put back on track ‒ or abandoned at a much earlier date with the associated savings.
Sammy Fretwell wrote in The State newspaper on August 12:25
"The troubles at the site didn't surprise [Columbia lawyer Bob] Guild and a small group of environmentalists who oppose nuclear power. Even though they philosophically do not believe in building more nuclear plants, activists from the Sierra Club and Friends of the Earth raised questions as far back as 2008 about the cost of the project and how it might affect ratepayers. Through the years, they held signs and acted out satirical plays, in an effort to raise awareness.
"Despite the efforts, Guild and others said they were able to gain little more than moderate support. "There were so many issues, but people didn't pay attention'' said Leslie Minerd, a longtime environmental activist and Five Points business owner. "Legislators bought what SCE&G said hook, line and sinker. They were listening to them before us.""
The fake environment group 'Environmental Progress' claims that SCE&G and Santee Cooper were "caving into pressure from Sierra Club and Friends of the Earth" by abandoning the project.26 Attempting to justify that ridiculous claim, 'Environmental Progress' said: "The effect of the campaigns funded by [Friends of the Earth and the Sierra Club] has, in fact, been to create the environment in which the Summer project is abandoned".27
Friends of the Earth complained in an August 22 statement about the failure of the South Carolina legislature to include public interest groups in their inquiries into the VC Summer project.28
Friends of the Earth has nevertheless filed unsolicited testimony ‒ titled 'Doomed from the Start' ‒ with the legislature.29 The testimony "documents the state's Public Service Commission (PSC) and the Office of Regulatory Staff (ORS) repeatedly failed to thoroughly analyze suspect requests by utility South Carolina Electric & Gas (SCE&G) concerning cost overruns, schedule delays, construction problems and nine pay-in-advance rate hikes to pay for project financing. Public interest groups, namely Friends of the Earth and the Sierra Club, repeatedly raised warning flags about challenges facing the project but were ignored by both the PSC and ORS."28
Tom Clements, senior adviser with Friends of the Earth and author of the 'Doomed from the Start' testimony, said: "As has been clear since day one, both the PSC and ORS viewed their roles as facilitators in what SCE&G requested, an approach that makes the regulators in large part responsible for the resulting debacle. Both the PSC and ORS rubber stamped every cost overrun and schedule delay that SCE&G asked for and it is now clear that those decisions were based on faulty information and grossly inadequate analyses. For their failure to protect the public interest, PSC commissioners and the director of the ORS must accept responsibility for enabling this $9 billion debacle and resign."28
1. SCE&G, 15 Aug 2017, South Carolina Electric & Gas Company to Voluntarily Withdraw Its New Nuclear Abandonment Petition to Accommodate the Legislative Review Process', www.scana.com/docs/librariesprovider15/pdfs/press-releases/08152017-sce-...
2. World Nuclear News, 16 Aug 2017, 'SCE&G withdraws petition to scrap Summer project', www.world-nuclear-news.org/NN-SCEG-withdraws-petition-to-abandon-Summer-...
3. Kristi E. Swartz, 17 Aug 2017, 'Will V.C. Summer project restart? Probably not', www.eenews.net/energywire/stories/1060058867
4. Thad Moore, Aug 2017, 'CEO: SCANA may not return to scuttled nuclear project — even if a new partner emerges', www.postandcourier.com/business/ceo-scana-may-not-return-to-scuttled-nuc...
5. Rod Adams, 17 Aug 2017, 'Is V.C. Summer really dead or is near term revival possible?', https://atomicinsights.com/v-c-summer-really-dead-near-term-revival-poss...
6. John Downey, 22 Aug 2017, 'Senators told saving V.C. Summer project could take ‘a miracle'', www.bizjournals.com/charlotte/news/2017/08/22/senators-told-saving-v-c-s...
7. Amy Harder, 4 Aug 2017, 'Utility made failed plea for billion-dollar nuclear grant', www.axios.com/utility-made-failed-plea-for-billion-dollar-nuclear-grant-...
8. Thad Moore and Emma Dumain, 12 Aug 2017, 'Trump administration silent on demise of nuclear project it once called 'massively important'', www.postandcourier.com/business/trump-administration-silent-on-demise-of...
9. Avery Wilks, 16 Aug 2017, 'SCANA sticking with plans to abandon nuclear project, charge customers more', The State, www.islandpacket.com/news/state/south-carolina/article167467032.html
10. 19 Aug 2017, 'McMaster to Santee Cooper board: 'All options' on the table when it comes to possible sale', http://bvtnews.com/news/mcmaster-to-santee-cooper-board-all-options-on-t...
11. Mark Nelson and Michael Shellenberger, 2 Aug 2017, 'Wind Energy Still More Expensive Than Nuclear Reactors Halted for Cost Overruns', www.environmentalprogress.org/big-news/2017/8/2/wind-energy-still-more-e...
12. John Downey, 16 Aug 2017, 'SCANA sees little hope for reviving V.C. Summer nuclear project despite partner search', www.bizjournals.com/charlotte/news/2017/08/16/scana-sees-little-hope-for...
13. 17 Aug 2017, 'Fate of US VC Summer NPP still uncertain', www.neimagazine.com/news/newsfate-of-us-vc-summer-npp-still-uncertain-59...
14. Thad Moore, 21 Aug 2017, 'Santee Cooper has heard from 2 companies interested in joining V.C. Summer project, but neither is 'viable'', www.postandcourier.com/business/santee-cooper-has-heard-from-companies-i...
15. 22 Aug 2017, 'Santee Cooper: Offers to Revive Summer Nuclear Expansion Not Viable', www.power-eng.com/articles/2017/08/santee-cooper-offers-to-revive-summer...
16. Avery G. Wilks, 23 Aug 2017, 'SCE&G got state's OK for doomed nuclear project without a detailed construction schedule', www.thestate.com/news/politics-government/article168857122.html
17. Jenna-Ley Harrison, 22 Aug 2017, 'Local senator promises to 'protect the ratepayers' after nuclear project ends', www.journalscene.com/news/local-senator-promises-to-protect-the-ratepaye...
18. Andrew Brown, 22 Aug 2017, 'SCANA CEO rushed from state Senate hearing as failure review begins on abandoned $9 billion nuclear plant project', www.postandcourier.com/business/scana-ceo-rushed-from-state-senate-heari...
19. Leighton Lord, 21 Aug 2017, 'Here's why Santee Cooper started, stopped nuclear plants', www.thestate.com/opinion/letters-to-the-editor/article168389797.html
20. Cindi Ross Scoppe, 22 Aug 2017, 'How ‘waste not, want not' became ‘spend more, profit more'', www.thestate.com/opinion/opn-columns-blogs/cindi-ross-scoppe/article1679...
21. Chip Campsen, 15 Aug 2017, 'How the S.C. Legislature paved the way for nuclear mess', www.postandcourier.com/opinion/commentary/how-the-s-c-legislature-paved-...
22. Cheryl Rofer, 3 Aug 2017, 'A Job Well Done', https://nucleardiner.wordpress.com/2017/08/03/a-job-well-done/
23. Chris Tomlinson, 3 Aug 2017, 'Nuclear power as we know it is finished', www.houstonchronicle.com/business/columnists/tomlinson/article/Nuclear-p...
24. James H. Holloway Jr., 20 Aug 2017, 'How nuclear opponents paved the way for SC law', www.thestate.com/opinion/op-ed/article167998207.html
25. Sammy Fretwell, 12 Aug 2017, 'Warnings were raised years before utilities abandoned nuke project', www.thestate.com/news/local/article166947252.html
26. Mark Nelson and Michael Light, 31 July 2017, 'New South Carolina Nuclear Plant Would Cut Coal Use by 86%, New Analysis Finds', www.environmentalprogress.org/big-news/2017/7/31/new-south-carolina-nucl...
28. Friends of the Earth, 22 Aug 2017, 'Friends of the Earth Files Unsolicited Testimony with South Carolina Legislature on Termination of Nuclear Reactor Project', www.foe.org/news/news-releases/2017-08-friends-of-the-earth-files-unsoli...
29. Friends of the Earth, 22 Aug 2017, 'Doomed from the Start: $9 Billion Reactor Construction Debacle due to Imprudence by South Carolina Electric & Gas (SCE&G) and Dereliction of Duty by the S.C. Public Service Commission and the Office of Regulatory Staff', http://webiva-downton.s3.amazonaws.com/877/92/e/10766/testimony_in_absen...