House panel grills SCE&G Executives

About energy report kept from regulators

Patrick Gentry
September 16, 2017 - 2:26 pm

South Carolina House legislators grilled SCANA officials for nearly seven hours Friday over a confidential audit the company kept from state regulators which showed it knew of serious issues with the ill-fated VC Summer nuclear project at least 18 months before abandoning work.

The House Utility Ratepayer Protection Committee hearing occasionally turned tense. Legislators accused SCANA’s power utility SCE&G and its partner state-owned utility Santee Cooper of deliberately hiding the report while seeking state approval to raise customer rates to pay for rising construction costs.

“It is a misrepresentation if I leave out material facts, if I leave out facts that I believe would help and aid this commission I’m appearing in front of to make its decision,” chairman State Rep. Peter McCoy, R-James Island, said.

The February 2016 audit, known as the “Bechtel Report” after the engineering firm which conducted it, showed the project did not have a fully-integrated construction schedule and relied on a reactor design unbuildable at the Fairfield County site. It also questioned if lead design contractor Westinghouse had the resources to follow through its promises on the project. Westinghouse ultimately declared bankruptcy earlier this year, derailing the project.

SCANA CEO Kevin Marsh insisted the report was meant to be kept confidential amid a potential lawsuit against Westinghouse. “We believe that report was confidential,” he said several times. “It was prepared in anticipation of litigation. We were aware of the majority of the issues that were contained in the report. We were taking steps to address those issues and taking prudent actions to make the corrections we knew were necessary.”

Marsh said he was not aware of requests by the state Office of Regulatory Staff (ORS) to get a copy of the report. ORS Director Dukes Scott told the Charleston Post & Courier last month that SCANA told his agency it did not have a copy of the report. However, SCANA’s project construction manager Alan Torres insisted he only heard from an ORS staffer while the audit was still underway and did not hear back once it was finished.

The project’s critics implied SCE&G withheld the report so regulators would be unable to find justification to block a 2016 rate increase request. “It was just designed to never see the light of day,” attorney Scott Elliott told the House panel.

Other legislators pounced on Bechtel’s comment in the audit that it would help the utilities avoid disclosing its findings. “You guys chose to not disclose the very thing that could’ve allowed these regulatory entities, imperfect as they may be, to protect the ratepayer,” State Rep. Tommy Pope, R-York, said.

Santee Cooper’s board voted to pull out of construction on July 31, after both utilities reviewed their options following Westinghouse’s bankruptcy. SCE&G announced later that day it would abandon the project. The two utilities sunk more than $9 billion into the project.

State Rep. Kirkman Finlay, R-Columbia, said he was frustrated as SCE&G executives repeatedly insisted their actions were “prudent” despite the project’s failure. “Y’all spent and inordinate amount of time telling us who built the Titanic and how it was built,” he said after four hours of questioning. “We’re not interested in that. We’re interested in who captained it onto the iceberg.”

Despite Finlay’s criticism, the SCE&G officials stuck to claims their actions were prudent. A 2007 state law allows the utility to charge ratepayers for any cost overruns if it can document it spent the money prudently. SCE&G has indicated it will seek state approval for a plan that attempts to recover its losses through a combination of tax credits, settlement payments from Westinghouse and $2.2 billion through customers’ power bills. That plan would be subject to approval by the state Public Service Commission. Legislators appoint the commission’s members.

Marsh said he believes the company acted appropriately with what it knew at the time. He insisted the project would still be underway had Westinghouse honored its end of the contract. “People are looking with 20/20 hindsight to see something that was done wrong,” he said. “But, since this project started in 2009, I believe people have acted prudently… I don’t believe people have done anything illegal. I don’t believe they’ve done anything unethical.”

State Rep. Todd Rutherford, D-Columbia, said he was concerned SCE&G leaders are unrepentant of potential mistakes, considering the $2.2 billion loss.

“The level of trust that we provided you in the past was a blank check,” he told Marsh, in reference to the 2007 law. “And what we got for those results was, ‘Everything is just fine.’ And that does not seem to be the case.”

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