The Santee Cooper Board of Directors decided July 31 to end construction of Units 2 and 3 at V.C. Summer Nuclear Station in Jenkinsville, SC.

Following that decision, SCANA Corp. said that it too it will cease construction of the two new nuclear sites. It plans to file a petition with the Public Service Commission of South Carolina seeking approval of its abandonment plan.

SCE&G says it reached the decision 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., as well as Santee Cooper's decision to suspend construction of the project.

Santee Cooper says the decision is anticipated to save nearly $7 billion in additional costs to complete the project, including projected interest during construction.

santeeThe decision to suspend construction is based in large part on an analysis of 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 said in a statement that it 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.

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% 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 the utility's share of the costs at $6.2 billion. 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 billion for construction and approximately $3.4 billion for interest. The schedule delays increased the projected interest costs 143% over the original plan.

SCE&G says it also considered completing construction of Unit 2 and abandoning Unit 3 under the existing ownership structure and using natural gas generation to fulfill any remaining generation needs. That option provided what the utility calls a "potentially achievable path forward" that may have delivered SCE&G a similar megawatt capacity as its 55% interest in the two units.

However, SCE&G had not reached a final decision regarding this alternative when Santee Cooper announced that it would be unwilling to proceed with continued construction.

SCANA Chairman and CEO, Kevin Marsh, said “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. Chief among them, the bankruptcy of our primary construction contractor, Westinghouse, eliminated the benefits of the fixed-price contract to our customers, investors, and other stakeholders. Ultimately, our project co-owner Santee Cooper’s decision to suspend construction made clear that proceeding on our own would not be economically feasible. Ceasing work on the project was our least desired option, but this is the right thing to do at this time.”

According to Leighton Lord, chairman of the Santee Cooper Board of Directors, “Generation diversity remains an important strategy for Santee Cooper, but the costs of these units are simply too much for our customers to bear.”

“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% 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.”

Westinghouse’s parent, Toshiba Corp., has contractually agreed to pay Santee Cooper $976 million in settlement beginning later in 2017 and continuing through 2022. Santee Cooper says it will use these funds to avoid new debt and stabilize rates, to directly benefit customers.

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 some of 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 forecast to stay high
• Congress was considering several bills that would limit greenhouse gases emitted by coal and natural gas units

In 2007, Santee Cooper’s Board approved a goal to meet 40% of customer energy needs by 2020 with non-greenhouse gas emitting resources, renewables, conservation and energy efficiency.

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 fell after hydraulic fracturing gained widespread use. Santee Cooper also says the current political landscape has reduced the urgency for emissions-free base load generation.