On at least two occasions, SCE&G intentionally buried damaging reports that could have prompted the S.C. Public Service Commission to seriously re-examine or cancel the Cayce-based utility’s $9 billion nuclear construction project, those commissioners were told Friday.
Gary Jones, a consultant with more than 45 years of experience in nuclear power, told the commission that SCE&G deceptively hid a sobering, $1 million report on the project’s flaws and ignored its own employees’ projections of how much the floundering project would cost to finish.
Instead, Jones said, SCE&G fed state regulators overly optimistic and unrealistic projections, which it never achieved, before the utility and its minority partner, the state-owned Santee Cooper utility, canceled the long-delayed and over-budget construction of two new reactors at the V.C. Summer Nuclear Station in July 2017.
“The importance and impact of this failure to disclose cannot be overemphasized,” said Jones, a key witness in the S.C. Office of Regulatory Staff’s effort to persuade the PSC to slash SCE&G’s nuclear-related electric rates.
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Jones testified for more than five hours Friday, the second day of a weeks-long PSC hearing that will set SCE&G’s new rates and decide who — the utility’s owners, customers or both — will have to pay off its nearly $5 billion in construction debt. The hearings also decide whether Virginia-based Dominion Energy finalizes its proposed buyout of SCE&G’s parent company, SCANA.
Jones, who monitored the V.C. Summer project for Regulatory Staff, is key to the state agency’s case that SCE&G intentionally misled Regulatory Staff and the PSC about the project’s flaws in order to keep the decade-long effort alive, and revenues and executive bonuses flowing.
SCE&G’s attorneys, meanwhile, have sought to show that Regulatory Staff was well aware of the project’s flaws and is making SCE&G a scapegoat now that the project has failed. SCE&G blames the project’s collapse on lead contractor Westinghouse — for declaring bankruptcy in March 2017 — and Santee Cooper — for pulling out of the project in July 2017.
During nearly two hours of questioning by SCE&G outside attorney Jonathan Chally, Jones conceded he and other Regulatory Staff employees knew of problems at the Fairfield County construction site.
Those problems included some of the issues raised in a February 2016 report by the San Francisco-based Bechtel Corp. civil engineering firm, Jones said. But regulators didn’t know Bechtel had offered a serious criticism about the project’s construction delays, one that was removed before the firm issued its final report, Jones said.
In a draft version of that report, Bechtel said the twin reactors likely would not be completed in time to qualify for billions of dollars in federal tax breaks needed to defray the V.C. Summer project’s massive cost.
Jones testified SCE&G never turned over Bechtel’s report — with that warning — to regulators, telling him there was no report at all.
“I was told by SCE&G, in response, that nothing new had been identified (by Bechtel), that the assessment was done at a very high level and that the result wasn’t known by those in attendance, and that there would not be a written report,” Jones testified Friday. ”We have subsequently learned … that this information was false.”
Jones also backed up written testimony by two former SCE&G employees that the utility’s executives ignored projections that the construction project would cost $500 million more than its contractors were estimating.
SCE&G knew the contractors had provided a low-ball, unrealistic figure but filed that number with the PSC anyway in 2015, Jones said.
“Unfortunately, SCE&G was successful in deceiving me as well as the PSC and ORS,” Jones testified.
The hearing will resume Monday, with SCE&G’s attorney continuing to question Jones.