MONCKS CORNER, S.C. – The Santee Cooper Board of Directors approved today the suspension of construction of Units 2 and 3 at V.C. Summer Nuclear Station in Jenkinsville, SC. The decision is anticipated to save Santee Cooper customers nearly $7 billion in additional costs to complete the project, including projected interest during construction.
The decision to suspend construction is 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.
Santee Cooper has spent approximately $4.7 billion in construction and interest to date for its 45 percent 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.
Santee Cooper and majority partner South Carolina Electric & Gas Co. gave Westinghouse full notice to proceed in April 2012. The contract provided that Westinghouse would provide substantially complete units in 2016 (Unit 2) and 2019 (Unit 3). Santee Cooper’s Board approved a $5.1 billion budget, representing its 45 percent share of the joint project and additional transmission needed for the Santee Cooper electric system. In October 2015, the Board approved an amended Westinghouse contract that included an option to fix our share of the costs at $6.2 billion, and the Board approved fixing the price at $6.2 billion in June 2016.
The most recent analysis, anticipating the rejection of the contract by Westinghouse in bankruptcy proceedings, shows the final cost for Santee Cooper to complete the project would be $8.0 billion for construction and approximately $3.4 billion for interest. The schedule delays increased the projected interest costs 143 percent over the original plan.
“Generation diversity remains an important strategy for Santee Cooper, but the costs of these units are simply too much for our customers to bear,” said Leighton Lord, Chairman of the Santee Cooper Board of Directors. “Even considering these project challenges, Santee Cooper is proud of our role in this initial effort to restart a 30-years-dormant industry. Nuclear power needs to remain part of the U.S. energy mix.”
“After Westinghouse’s bankruptcy and anticipated rejection of the fixed-price contract, the best case scenario shows this project would be several years late and 75 percent more than originally planned,” said Lonnie Carter, Santee Cooper president and CEO. “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.”
Westinghouse’s parent, Toshiba Corp., has contractually agreed to pay Santee Cooper $976 million in settlement beginning later this year and continuing through 2022. Santee Cooper will use these funds to avoid new debt and stabilize rates, to directly benefit customers. “Santee Cooper will continue to pursue Westinghouse assets and other revenues and assets, through bankruptcy court and other legal channels, to further offset costs,” Carter said.
Today’s Board action provides for a wind-down and suspension of construction on the two units and directs management to preserve and protect the site and related components and equipment. “During the wind-down, Santee Cooper will also continue investigating federal support and additional partners to see if we can make the project economical again,” Carter said.
Congress is considering amendments to nuclear production tax credits that would provide some revenue toward the project, but resources such as additional federal support or partnerships with other utilities will also be needed.
Santee Cooper began exploring new nuclear power more than a decade ago. Santee Cooper has a one-third ownership of V.C. Summer Unit 1, with SCE&G again the majority partner. That unit came online in 1983 and today provides the lowest cost electricity of all Santee Cooper’s base load generating stations.
Santee Cooper and SCE&G filed an application to build Units 2 and 3 in 2008. At that point:
- Santee Cooper’s system was experiencing rapid growth and all forecasts indicated the state would continue to grow quickly
- Natural gas prices were three times higher than today and forecasted to stay high
- Congress was considering several bills that would limit greenhouse gases emitted by coal and natural gas units
- Then-presidential candidate Barack Obama was campaigning against new coal-fired generation
- In 2007, Santee Cooper’s Board approved a goal to meet 40 percent of customer energy needs by 2020 with non-greenhouse gas emitting resources, renewables, conservation and energy efficiency
- Nuclear power is the only base load resource that is virtually emissions free
Today, the business climate has changed considerably. Santee Cooper’s load forecast has slowed, due to lingering impacts from the Great Recession and energy efficiency successes tied to programs Santee Cooper launched in 2009. Natural gas prices plummeted after fracking began, and the current political landscape has reduced the urgency for emissions-free base load generation.
“In choosing Westinghouse, Santee Cooper and SCE&G chose a company with a worldwide reputation as the clear leader in nuclear design and engineering. Unfortunately, Westinghouse failed to live up to its reputation and perform,” Carter said.
Santee Cooper is South Carolina’s largest power provider, the largest Green Power generator and the ultimate source of electricity for 2 million people across the state. Through its low-cost, reliable and environmentally responsible electricity and water services, and through innovative partnerships and initiatives that attract and retain industry and jobs, Santee Cooper powers South Carolina. To learn more, visit www.santeecooper.com.
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