Santee Cooper an accomplice, not a victim in VC Summer nuclear fiasco, lawsuit alleges

In a January 2015 meeting, an executive for Westinghouse, the lead contractor in the now-abandoned V.C. Summer nuclear plant expansion made the mistake of asking the project’s owners if they were confident in a new construction schedule that estimated the project would be completed by June 2020.

The response wasn’t pretty.

A pair of top nuclear executives at Santee Cooper and SCE&G — partners in building two nuclear reactors in Fairfield County — verbally “pummeled” Westinghouse’s Jeff Benjamin about the poor performance of the project’s suppliers, the slow pace of construction and “questionable assumptions” in the construction timeline, according to notes of the meeting taken by one official.

But when Santee Cooper published its annual report to the public four months later, it stuck to the timeline and made no mention of its concerns that the project wouldn’t be completed on schedule.

That contrast between Santee Cooper’s private concerns and public disclosures is the crux of a recent legal filing against the Moncks Corner-based utility by its largest customer — the 20 electric co-ops that buy three-fifths of Santee Cooper’s power and distribute it across South Carolina.

The co-ops are suing to block Santee Cooper from charging its customers any more for the over-budget and protracted V.C. Summer expansion, finally abandoned in July 2017. Santee Cooper’s $4 billion in nuclear debt from the project threatens to cost customers thousands of dollars in higher power bills over the next four decades.

In a 38-page claim filed Friday, the co-ops worked to show Santee Cooper actively kept its customers in the dark about problems with the construction efforts.

The co-ops also alleged Santee Cooper violated their contract by withholding important information about the project’s flaws. The allegations clash with Santee Cooper’s defense that its 45% ownership stake and minority role in the project’s management left it mostly powerless to confront and solve problems with the project.

“The emails, letters, etc., described above tell the indisputable story of a project beset almost from the beginning with myriad fundamental, entrenched problems that led inexorably to major delays and cost overruns,” the co-ops’ attorney, Frank Ellerbe, wrote in the filing. “Yet, it was a story Santee Cooper kept largely to itself.”

Santee Cooper spokeswoman Mollie Gore said that’s not true and that the co-ops were “kept aware of the project’s status throughout.”

Co-ops face liability for debt

The debate about who knew what about the nuclear project’s doom — including when they knew and what they disclosed publicly — is at the heart of a legal battle between state-owned Santee Cooper, the electric cooperatives it serves and the other parties to the now-failed partnership.

The legal fight between the co-ops and Santee Cooper also will hinge on the co-ops’ argument that Santee Cooper doesn’t have the legal authority to charge customers for a power plant that never produced electricity.

Santee Cooper contends state law is clear the utility can charge its customers, including the co-ops, for that debt. If a judge were to rule to the contrary, it could be devastating to the state-owned utility, eliminating its ability to pay off the $4 billion debt.

The co-ops’ Friday filing uses the internal notes and memos of Santee Cooper executives — obtained through discovery in the legal fight — to paint a grim picture of the agency’s involvement in the project.

In short, the lawsuit alleges:

▪ Santee Cooper executives publicly reported project completion dates that they privately considered to be unrealistic and unreliable, given the slow pace of construction and a host of problems facing the effort.

▪ The utility’s leaders continued to pour money — including from co-op customers — into the project even as Santee Cooper’s top nuclear officials complained the project’s construction schedule was not reliable, the nuclear engineering was incomplete and project contractors were inaccurately reporting their construction performance and projections.

▪ Santee Cooper officials failed to disclose the extent of the project’s problems — including the findings of a damning 2015 third-party audit of the construction effort, known as the “Bechtel Corp. report” — to the co-ops, who were paying 70% of the construction costs.

▪ And they negotiated and signed a new contract in November 2016 that shifted the project’s financial risk to lead contractor Westinghouse, even though Santee Cooper officials were aware Westinghouse was financially troubled and that the new contract could lead to the contractor’s bankruptcy, jeopardizing the project.

The Bechtel report now is widely seen as a smoking gun that proves Santee Cooper and SCE&G officials knew as early as 2015 of the project’s flaws and kept them quiet. (Documents revealed since then have shown both utilities recognized significant problems as early as 2013).

The co-ops said Friday they found out about the Bechtel report only in late 2016, months after a final, watered-down version of the report was delivered to the two utilities and buried.

Santee Cooper denied the co-ops’ request for a copy of that report in late 2016, the co-ops alleged in the legal filing.

Santee Cooper plans to file a response to the co-ops’ filing within 15 days, utility spokeswoman Mollie Gore said.