I have blogged a lot about the project to build two new Westinghouse AP1000 nuclear power reactors at the VC Summer power plant in South Carolina. This was a very important project because no new nuclear reactors had been built in the U.S. in decades. Serious cost overruns and construction delays plagued the project and resulted in the bankruptcy of Westinghouse, the prime contractor. First, the construct of the reactors was suspended and then it was announced that the project would be abandoned on July 31st. South Carolina Electric & Gas (SCE&G) petitioned the South Carolina Public Service Commission (PCE) for approval of its plan to end the project.
Following the principles of the Base Load Review Act, SCE&G wanted to amortize the project cost and a return at the weighted averages cost of capital on the unamortized balance until it was fully recovered. They planned to use the proceeds that they anticipated from their settlement with Toshiba, the parent company of Westinghouse, which has agreed to pay up to two billion dollars to SCE&G and its parent, Santee Copper and some of the benefits that SCE&G was able to realize from tax deductions to reduce the impact of the cancellation of the project on the rate payers. However, yesterday, SCE&G said that it had decided to withdraw its petition with the PCE.
The company issued a statement that "Over the past two weeks, SCE&G management has met with various stakeholders and members of the South Carolina General Assembly, including legislative leaders, to discuss the abandonment of the new nuclear project and to hear their concerns." SCE&G said its decision to withdraw the abandonment petition was "in response to those concerns, and to allow for adequate time for governmental officials to conduct their reviews."
The CEO of SCE&G said, "The purpose of these ongoing meetings is to discuss their concerns and to explain the path that led us to the abandonment decision. In our discussions with the legislature, we have not changed our position on abandonment." Both bodies of the South Carolina General Assembly have formed committees to review the impact of the cancelled project on the customers of SCE&G. The committees will also consider the regulatory oversight that was applied during the project.
The CEO of SCE&G also said, "While ceasing construction was always our least desired option, based on the impact of the bankruptcy of Westinghouse on our fixed price construction contract, the results of our evaluation of the cost and time to complete the project, and Santee Cooper's decision to suspend construction, abandonment was the prudent decision."
The CEO said that the withdrawal of the petition was only temporary and that it would be reinstated once the General Assembly reviews were completed. When questioned about the possibility that the project might be revived, the CEO said "For us to restart the project, number one we will have to have a willing partner ... We would have to start with drafting a new partnership agreement to determine who would own what percentage of the project going forward." Part of the consideration for restarting the project would be whether only one of the reactors or both should be completed. "At that point we would have to negotiate a construction contract with the contractor, whether that be Fluor or someone else. We would also have to re-engage Westinghouse in a services agreement because the plant is their design and we would need their design engineering support if we were to go forward. Once all that was accomplished, we would have to go back to the Public Service Commission and have them review the project and agree to the reconstitution of a plan to go forward."
The entire review process could take as much as a year. The CEO remarked that "It's not something that would happen overnight. There would be significant negotiations to pull a project team back together. And once you've done that, you would then have assemble the construction team and oversight team back on site."
