US utilities Santee Cooper and South Carolina Electric & Gas (SCE&G) announced on 31 July that they have decided to pull out of the $14bn project to build two new reactors at the VC Summer nuclear power plant in Jenkinsville, South Carolina. They cite rising costs, falling demand for energy, construction delays and the bankruptcy in March of lead contractor Westinghouse Electric Company.
SCE&G said in a statement that a comprehensive review of the project, which began after Westinghouse filed for bankruptcy, had led the company to conclude that completing the reactors “would be prohibitively expensive”. Together, SCE&G and Santee Cooper have spent some $9bn on the project to build two Westinghouse AP1000 reactors at the site.
SCE&G customers have already paid about $1.4bn through higher monthly utility bills for the project, which is about 64% complete. SCE&G and Santee Cooper launched the VC Summer project in 2009 after the state legislature passed the Base Load Review Act, which removed much of the financial risk to investor-owned SCE&G. Under the law, SCE&G was allowed to charge customers for the project before it was completed, which led to nine rate increases.
“We arrived at this very difficult but necessary decision following months of evaluating the project from all perspectives,” said Kevin Marsh, Chairman and CEO of SCANA, which is SCE&G’s parent corporation. Several factors beyond the company’s control had changed since the construction project was launched, including the Westinghouse bankruptcy, he said in a press release. “Ceasing work on the project was our least desired option, but this is the right thing to do at this time."
SCE&G had considered completing just Summer 2 but rejected that option after Santee Cooper, which owns 45% of the project, withdrew from the construction effort. The project was behind schedule and over budget, and Santee-Cooper's board said stopping construction, which began in 2012, would save customers $7bn. The company has spent approximately $4.7bn in construction and interest to date. “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 $11.4bn,” it said in a statement.
Santee Cooper blamed Westinghouse for most of the project’s troubles, which had contributed to the project costing 75% more than originally anticipated. Santee Cooper also noted that falling electricity demand and the current political landscape had reduced the urgency for emissions-free baseload generation.
Lonnie Carter, Santee Cooper president and CEO said: “We simply cannot ask our customers to pay for a project that has become uneconomical."
However, Carter said that Santee Cooper would continue investigating federal support and additional partners to see if the company can make the project economical again.
The decision came a few days after Toshiba agreed to pay the two project owners nearly $2.2bn to cap its liabilities from the unfinished nuclear project. However, Santee Cooper executives said they fear Toshiba, which is facing financial difficulties, will be unable to make good on the pledge.
Toshiba reached a similar $3.7bn agreement with Southern Co in June in an attempt to limit its liabilities from the Vogtle project in Georgia, where two more AP1000 units are under construction. The project is facing similar difficulties of delays and cost overruns, but for the time being development is continuing.
Soaring costs and delays
SCE&G said its analysis showed that the additional cost to complete both units at VC Summer would “materially exceed” previous Westinghouse estimates. SCANA as a 55% owner of the project, expected its share of costs to reach $9.9bn. Even if the Toshiba guarantee of $1.1bn for SCE&G were taken into account, the cost would still be $8.8bn which was far more than South Carolina Public Service Commission’s approved fixed price option of $7.7bn. Completing just one of the two units would have cost $7.1bn.
SCANA Corp officials said a four-month-long cost and schedule evaluation forecast showed that the units would not be completed until 2022 and 2024, which represented years of delay compared with the last approved in-service dates 2019 and 2020. However, Westinghouse in 2012 had committed to completion dates of 2016 and 2019. SCANA noted the units would need to be online before the end of 2020 to qualify for production tax credits. Based on this evaluation and Santee Cooper’s decision, SCE&G decided that “the only remaining prudent course of action” would be to abandon construction of both units. Scrapping the project will cost $4.9bn, which SCANA said it would seek to recover. The abandoned assets should be amortised over 60 years, officials said.
Westinghouse said it was disappointed by the decision to abandon Summer 2&3. The company said it would work with SCANA to determine the process under which safe and efficient project close-out is undertaken.
“While we respect Santee Cooper’s decision, we are extremely disappointed,” commented José Emeterio Gutierrez, Westinghouse president and chief executive officer. “The South Carolina economy is sure to feel the negative impact of losing over five thousand high-paying, long-term jobs, as well as not having available the reliable, clean, safe and affordable energy these units would provide. Also, at a time when other nuclear plants are being retired, the US energy sector is sure to feel the stunting impact of walking away from these two nuclear units.”