SCANA Corp. and Santee Cooper have ceased construction of Units 2 and 3 at the V.C. Summer Nuclear Station in South Carolina.
The project owners said the decision, prompted by analysis of detailed schedule and cost data, would save customers nearly $ 7 billion. The project, which was about 64% complete, has been in limbo since key contractor Westinghouse filed for bankruptcy in March.
The decision comes just days after Westinghouse’s parent company Toshiba agreed to pay the two project owners nearly $ 2.2 billion to cap its liabilities from the unfinished nuclear project. Toshiba reached a similar $ 3.7 billion agreement with Southern Co. in June as it seeks to limit its liabilities from the Vogtle project. Both AP1000 nuclear projects are years behind schedule and billions of dollars over budget.
Construction continues at the two Vogtle AP1000 units in Georgia. A project owner, Georgia Power, on July 28 told POWER that it expects to complete the cost-to-complete and schedule assessment by the end of August.
Twin Decisions
The Santee Cooper Board of Directors approved the decision on July 31 to suspend construction at the two AP1000 units. South Carolina Electric & Gas Co. (SCE&G) on July 31 also announced its decision to cease construction on the units, adding it would promptly file a petition with the Public Service Commission of South Carolina seeking to abandon the units.
For Santee Cooper, the decision was based “in large part on a comprehensive analysis of detailed schedule and cost data, from both project contractor Westinghouse Electric Co. and subcontractor Fluor Corp., first revealed after Westinghouse filed for bankruptcy in March.”
According to SCE&G, the decision was reached after “considering the additional costs to complete the units, the uncertainty regarding the availability of production tax credits for the project, the amount of anticipated guaranty settlement payments from Toshiba Corp., and other matters associated with continuing construction.”
SCE&G also noted that its decision was based on Santee Cooper’s decision to suspend construction of the project. “Based on these factors, SCE&G concluded that it would not be in the best interest of its customers and other stakeholders to continue construction of the project,” it said.
Completion for Santee Cooper Would Exceed $ 11B
Santee Cooper has spent approximately $ 4.7 billion in construction and interest to date for its 45% share of the new nuclear power project. “The analysis shows the project would not be finished until 2024, four years after the most recent completion date provided by Westinghouse, and would end up costing Santee Cooper customers a total of $ 11.4 billion,” it said in a statement. Santee Cooper would have needed to spend about $ 8 billion to complete construction plus about $ 3.4 billion for interest, it explained. “The schedule delays increased the projected interest costs 143 percent over the original plan.”
“We simply cannot ask our customers to pay for a project that has become uneconomical. And even though suspending construction is the best option for them, we are disappointed that our contractor has failed to meet its obligations and put Santee Cooper and our customers in this situation,” said Lonnie Carter, Santee Cooper president and CEO in a July 31 statement.
SCE&G Says Completion Would Be “Prohibitively Expensive”
According to SCE&G’s analysis, the additional cost to complete both units beyond the amounts payable in connection with the engineering, procurement, and construction contract would “materially exceed” prior Westinghouse estimates, as well as the anticipated guaranty settlement payments from Toshiba.
SCANA forecast that its share of costs, as a 55% owner of the project, would soar to $ 9.9 billion. If the Toshiba guarantee of $ 1.1 billion (for SCE&G’s 55% share) was factored in, net cost of construction still stood at $ 8.8 billion—far surpassing the South Carolina Public Service Commission’s approved fixed price option of $ 7.7 billion.
SCE&G evaluated the feasibility to completing Unit 2 but abandoning Unit 3 under the existing ownership structure, leaning on gas generation to fulfill remaining generation needs. “This option provided a potentially achievable path forward that may have delivered SCE&G a similar megawatt capacity as its 55% interest in the two Units and provided a long-term hedge against carbon legislation/regulation and against gas price volatility.”
Completing Unit 2 and abandoning Unit 3 would have cost $ 7.1 billion, it said.
SCANA Corp. officials, meanwhile, told investors in a late afternoon call on July 31 that its four-month-long cost and schedule evaluation forecast that Unit 2 wouldn’t be completed until December 2022 and Unit 3, until March 2024. That amounted to years of delay compared to the last approved in-service dates of August 2019 for Unit 2 and August 2020 for Unit 3.
SCE&G and Santee Cooper gave Westinghouse full notice to proceed in April 2012, committing Westinghouse to substantially complete Unit 2 in 2016 and Unit 3 in 2019.
Also, the utility noted, the units would need to be online before January 1, 2021, to qualify for production tax credits, under current tax rules. “SCE&G’s analysis concluded the Units could not be brought online until after this date.”
However, SCE&G decided to scrap the project altogether after Santee Cooper’s board approved abandonment plans for both units. “Based on this evaluation and analysis, and Santee Cooper’s decision, SCE&G has concluded that the only remaining prudent course of action will be to abandon the construction of both Unit 2 and Unit 3 under the terms of the Base Load Review Act (BLRA).”
Abandoning the project will cost $ 4.9 billion, for which SCANA will seek recovery. The abandoned assets should be amortized over 60 years, officials said. Regulators are expected to rule on the petition for abandonment within six months.
“We arrived at this very difficult but necessary decision following months of evaluating the project from all perspectives to determine the most prudent path forward. Many factors outside our control have changed since inception of this project,” said SCANA Chairman and CEO Kevin Marsh.
“Ceasing work on the project was our least desired option, but this is the right thing to do at this time.”
—Sonal Patel is a POWER associate editor (@sonalcpatel, @POWERmagazine)
Update (July 31): Adds SCANA Corp.’s project completion cost and schedule estimates.
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