How customers lost the nuke bet — for now

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The co-ops’ Mike Couick is angry and hopeful

By ROBERT MEYEROWITZ

Asked to explain his stake in the two abandoned, partly-built nuclear reactors at Jenkinsville, Mike Couick, head of the Electric Cooperatives of South Carolina, says it’s simple:

“My members have got $2.7 billion sunk in the red clay of Fairfield County.”

Couick is referring to the 20 electric co-ops that compose the ECSC, which is a non-profit trade organization, like a chamber of commerce. With their 750,000 meters, or households, he reckons the co-ops paid that much of Santee Cooper’s failed investment in V.C. Summer reactors 2 and 3.

Lead partner SCANA, the publicly traded owner of South Carolina Electric & Gas, spent $4.9 billion on the project before it was abandoned July 31. State-owned utility Santee Cooper, with a 45 percent share of the project, spent $4.3 billion. Much of it was borrowed, leaving their ratepayers on the hook to repay it, with no offset from the cleaner, less costly power that the reactors might have provided or shelter from a tax on carbon.

The electric co-ops are 70 percent of Santee Cooper’s electricity customers. They have a contract to buy three-quarters of their electricity from Santee Cooper through 2058.

At the moment it feels like a strained relationship.

Added to that, Governor Henry McMaster recently named Couick to a team to explore selling Santee Cooper. Couick served on it with Lonnie Carter, the Santee Cooper CEO, until Carter abruptly retired last week.

Couick’s a lobbyist principal, an intervenor, a teacher (of a graduate course in public energy policy at USC), and a super-customer, the tail that wagged the dog. He says he’d like to get his members’ money back but he can’t see how.

He speculates about ways the reactors still could be completed and in almost the same breath says stopping work was the right decision. So was starting it, he maintains.

He’s come a long way from the palmier days of 2007, when the ECSC lobbied for the Base Load Review Act, the legislation that gave SCANA the impetus to pursue the project along with Santee Cooper and contractor Westinghouse.

The BLRA paved the way for SCANA to recover some construction costs in advance, plus profit, through a series of designated rate increases. It also allowed that decisions on the project would be considered prudent by state regulator the Public Service Commission, or PSC, unless the Office of Regulatory Staff, or ORS, could show otherwise, which now sticks in Couick’s craw.

“From what I understood at the time, but for getting [the BLRA], you’re not going to be able to finance Jenkinsville,” Couick said, speaking to me in his Cayce office several weeks ago.

“That’s what I heard and that’s what I still believe. I was told that but for the Base Load Review Act, no one would have invested in it.”

And, he said, “The Base Load Review Act would look very smart now — if Jenkinsville were a success.”

 

South Carolina’s electricity co-ops came into being in 1939, with ECSC following two years later, to represent them before the state legislature.

“You have this situation in 1939 where there are no cooperatives and the rural population doesn’t have electricity, and because the for-profit IOUs [investor-owned utilities] have to make a profit, they can’t take electricity to where there’s no density,” Couick said.

“The density is people per mile of line. If you look at density for a co-op today, our most dense co-op, which serves around Hilton Head, has nearly 20 consumers per mile of line. My least has six. The lowest density for an IOU is in the mid-20s. So my most-dense co-op is still less dense than the least dense IOU, which is Duke Progress in the Pee Dee.

“It wasn’t government. The locals said, ‘We want electricity. We’re tired of seeing mom having to do laundry over an iron kettle over a fire and taking all day, and that you only can milk when the sun’s up.’ So they came together and formed their own cooperatives, governed by the people that they serve.”

In 2000, the co-ops agreed to buy all of their electricity from Santee Cooper.

In 2005, Couick, who had been a lawyer for the state before he retired, came on board as the co-op association’s head.

In 2006, Santee Cooper decided to build a 600-megawatt, $1.25 billion Pee Dee coal-fired generator. The co-ops eventually decided they wanted none of it. They were concerned about the cost, Couick says, and any future tax on carbon.

Santee Cooper at the time was already deriving about 80 percent of its power from burning coal.

“We thought we needed to get away from carbon,” he recalled. “For every ton of coal you burn, you produce three metric tons of CO2. Santee Cooper was burning 13 million metric tons of coal a year. That’s 39 million metric tons of CO2. We said, ‘There’s got to be a better way. Rather than building new generation, why don’t we see if somebody’s got excess.

“We went next-door to North Carolina, and Duke Energy had excess. The reason they had it was they’d had a number of textile and furniture companies close down, so they were willing to sell us the equivalent of the Pee Dee coal plant. But that was a political struggle, to get Santee Cooper to take the Pee Dee coal plant off the table and allow us to step outside of the relationship. That actually saved $2 billion for our members [and for Santee Cooper’s other customers]. Even without the price of carbon, that new coal plant was still going to be more expensive than what was already built and generating electricity.”

The co-ops switched to getting 75 percent of their electricity from Santee Cooper and 25 percent from Duke, phased in over seven years. Santee Cooper abandoned the Pee Dee coal plant in 2009, after spending $362 million on it. (It was a Chinese-manufactured kit plant, which Santee Cooper still owns.)

Couick and the co-ops were eager to get further from the cost of coal, which led to their support for new nuclear.

The U.S. Supreme Court, in the 2007 Massachusetts v. Environmental Protection Agency ruling, “says you’ve got to regulate carbon under the Clean Air Act,” Couick explains. “We didn’t know how much it was going to be.”

In the American Clean Energy and Security Act of 2009, also known as the Waxman-Markey Bill, which passed the U.S. House but not the Senate, “they were talking about up to $200 per metric ton as a cost on carbon.”

That would have been an additional cost of$7.8 billion for Santee Cooper’s coal consumption.

“At that time, our total whole power cost from Santee Cooper was about $1.4 billion dollars.”

Nuclear wasn’t looking half-bad.

 

In the spring, when things weren’t looking good for the Jenkinsville reactors but long before SCANA and Santee Cooper gave up on them, Couick printed several hundred trifold, oversized cardboard rulers.

On one side is a timeline of federal decisions relating to carbon, from the amendment of the Clean Air Act in 1970 to 2017, when President Trump directs the EPA to withdraw and rewrite the Obama-era Clean Power Plan. Along the bottom at each date is the percent of Santee Cooper energy generated from burning coal.

On the other side is a timeline of the V.C. Summer reactors 2-and-3 project, from 2006, when the state legislature blesses Santee Cooper’s participation, to 2017, when Westinghouse files for bankruptcy.

What Couick wants a visitor to see is what was known when, because hindsight is too easy, and how the landscape for the reactor project has been a moving target.

“Think about adding on a price to carbon and what that would do to that bottom-line bill,” he says of his members, asking you to step back to 2007.

“So we as co-op people are saying, ‘We see a price on carbon coming, because of the Supreme Court decision; because of what we see the next year when the president elected is Obama; what the U.S. House is doing with amendments to the Clean Air Act, they want to pass Waxman-Markey; and then, in ’14, ’15, with the release of the Clean Power Plan regulations.

“The way the Clean Power Plan was originally released in 2014, under Obama, it did not give us any credit for Jenkinsville being CO2-free. Why would we not get credit for something that was carbon-free? I don’t think they’d really thought about it, because there were only two states in that situation. It was an issue peculiar to Georgia and South Carolina, people [there] were building new nuclear generation and it somehow got lost.

“So we had our members send 182,000 emails to Washington asking for a change. That’s one time government listened.

“The rule that was reissued in 2015 said, ‘We’re going to give you the benefit of what’s going on at Jenkinsville.’ So now there’s a federal incentive to finish the two units. It was worth a billion dollars a year. If you didn’t finish it, you had to do something else to reduce your carbon. If you costed out any other possible solution, the one that still perked up was, you need to build new nuclear in order to avoid a billion-dollar-per-year penalty. That continues to be the law even today: There’s a billion-dollar-a-year difference between having Jenkinsville or not.

“What changes is, you have a different president elected than what people expected,” Trump, “and he sends the signal that ‘I’m not gonna enforce the Clean Power Plan. I want to resurrect the value of coal.’”

This adds to uncertainty about policy under a Trump administration. For example, speaking in Phoenix last week, Trump said, “We’ve ended the war on beautiful, clean coal, and it’s just been announced that [there is] a second, brand new coal mine, where they’re going to take out clean coal,” although “clean coal” typically refers to the burning of coal, not the state in which it’s found. That was shortly followed by the release of a grid study from the federal Department of Energy, ordered by Secretary Rick Perry, contending that coal and nuclear generation are more secure than renewables.

But, says Couick, “What Trump can’t do is say, ‘I’m gonna do it overnight.’ He’s either got to change the regulation, he’s got to change the endangerment finding [under the Clean Air Act, the EPA must determine that emissions from particular sources such as coal, “cause or contribute” to a threat to public health and welfare], he’s got to have the Supreme Court reverse its ruling in Mass v. EPA, or he’s got to have Congress change the law.

“So where utilities are right now is almost purgatory. The law tells you one thing but almost everything on the political horizon says, ‘That’s not gonna be the law.’

 

“What’s really changed has nothing to do with the law, though,” Couick continues.

“There are three things that changed the wisdom of Jenkinsville that are outside our control. No. 1 is the change of carbon and its treatment, and it being potentially changed by Trump.

“No. 2 is what happens in 2007,” as SCANA and Santee Cooper pushed ahead with V.C. Summer. “It’s the first year that [fracking of] natural gas becomes commercially viable. Half the CO2 emissions that you find in coal are in natural gas. When you originally looked at build or not build nuclear, ’04, ’05, ’06, gas was being priced at about $13 per MMBTU [one million BTUs].

“Now it’s about $3. And people tell you that there’s an abundant supply that will last for several hundred years. That was not the case in ’04, ’05, ’06. They were building LNG import ports to bring it from overseas. They’re now converting those to export natural gas. So that’s all changed since ’07. Now, could that change again? People claim there’s seismic activity and results from fracked natural gas. They claim there might be clean water issues. I don’t know, I’m just saying, that’s beyond our control.

“No. 3 is Westinghouse’s bankruptcy.”

Westinghouse, founded in 1886, pioneered air brakes, AC electricity distribution, and many more things that changed the industrial and consumer landscape. Its last remnant was acquired for $5.4 billion by Toshiba in 2006, to prioritize nuclear power construction.

When Westinghouse filed for Chapter 11 bankruptcy protection in March, Toshiba stated that it, too, had mounting losses stemming from its foray into the nuclear business. But, says Couick, “When you looked at Toshiba, it was a $90 billion company at the time all of this was being considered. So we think that we know that Toshiba’s sound.

“You’ve got those things that you think you know, the ones Mark Twain says are the ones that’ll get you. We think that we know that carbon’s going to be regulated. We think that we know that natural gas is going to be $13 per MMBTU. Those things are all things out of our control. And I can’t hold anybody accountable for them, because the world changes.

“What I do hold as a customer, that we’ve been concerned about and expressed for several years now, is, what was actually happening on the Jenkinsville site? Who was minding the store as it relates to the general contractor getting the work done?

“So we’re asking questions of Santee Cooper. We don’t own any of it, but for every dollar spent at Jenkinsville, thirty-one-and-a-half cents is a co-op dollar. We pay 70 percent of their capital costs. We don’t have a [killowatt-hour] rate from Santee Cooper. We have cut the agreement with them through 2058 that, because we’re so large, you have to plan for our needs, we buy between 55 and 60 percent of your electricity.

“For our thirty-one-and-a-half cents, I can’t get mad or hold people accountable for things outside their control. What I can be concerned about is, was it effectively managed?”

 

In some ways, the co-ops are already functioning like energy customers in a deregulated market. Unlike SCE&G ratepayers and Santee Cooper’s other customers, the co-ops can leave if they don’t like new-generation investment choices, as they’ve shown. They can make trouble if they don’t like where a project is headed. So in theory, they already should function as some check on Santee Cooper’s imprudence.

Couick doesn’t altogether disagree.

“Our contract is only fixed in that we pay for [Santee Cooper’s] costs. To the extent costs are controlled, we benefit. So as a customer, I’m hoping they get it right. When we did the Duke deal, we said, ‘We’re gonna buy 25 percent of our power from somebody else in the future. And we also said, ‘If you choose to build anything new in the future, we have the opportunity to opt out.’

“Now, we become responsible for finding our own power. So if they say, ‘We want to build another Pee Dee coal plant, 1,000 megawatts,’ we get to say, ‘Well, we don’t think that’s the smartest thing, we’re gonna let you build it, let you pay for it, and we’ll go look for our own 70 percent of 1,000 megawatts somewhere else.’ We’ll do it on the market. As customers, we’ve now got the ability to do that, to exercise choice [about new generation].”

The new Jenkinsville reactors, however, he says, are a “legacy of the old relationship. We didn’t decide to build Jenkinsville. Santee Cooper did their analysis — and I agreed with their analysis [about the need for some investment in nuclear], at that point in time with what they knew. But when you get to three weeks ago, I also agreed with their analysis that it was time to stop.

“I told you that there are three things that are not under our control, but there’s one thing under our control. And this is where I find fault with the Base Load Review Act. The Base Load Review Act’s ability for SCANA to contract away its prudency bothers me, because they’re able to say, ‘Well, we were relying on Westinghouse to do that.’ The ability to manage the schedule is the one thing that Santee Cooper and SCANA should have done a different or better job of. I don’t know that they ever had a schedule that was effective. How do you pay somebody and you’re not able to measure their work output?

“In 2015, with ORS, we start to say, ‘We don’t know that we can tell what progress is being made at Jenkinsville.’ We’re not seeing ways to measure progress. And we’re asking our builder, Santee Cooper, are things going well? And we’re getting anecdotes rather than measurable benchmarks… Where’s the big thermometer? Where was the ability to track progress?

“And so then, in 2015, they sign the fixed-price agreement. We intervened in that as co-ops. We’re getting concerned about paying people money and is there really a schedule. And we get from Santee Cooper and SCANA that they’ve signed a fixed-price agreement with Toshiba and Westinghouse to finish. They want a fixed price to control the risk of cost escalation.

“And what we say back — we intervene in that proceeding at the Public Service Commission. We’re not regulated by the Public Service Commission, but our only recourse is, we go to the commission with ORS, with others, and I testify that we need a road map, we need measurable milestones. We need to make sure that we’ve got a schedule.

“And what we get in the negotiated [PSC] settlement with SCANA is that they’re going to have a schedule that not only includes Westinghouse’s input, but the new subcontractor, Fluor, whom I trust, is going to have input, so you’re going to have a real schedule and that’s going to the Public Service Commission before the end of 2016.

“The second thing we ask for is that, for the risk of failure, we want a price tag and to the extent there’s an overage [on the SCANA side], it needs to fall on the shareholders of SCANA. I’ve got no shareholders at Santee Cooper. I need the major partner, the managing partner, SCANA, to be concerned about the self-interest of [their] shareholders.

“We get both of those things. That’s part of the order of the commission [on Nov. 28, 2016]. Now, think about that.”

That’s the first time in this project that SCANA assumes any risk?

“That’s right, the first time. And look what happens next. All of a sudden, less than a month later, at Toshiba, they sound the alarm, ‘We’ve got problems.’”

“Think about what caused that. There’s not a blank check anymore. They can’t fudge their schedule. SCE&G can’t contract away its prudency anymore, because the shareholders are at risk. So they tighten the screws on Westinghouse.

“This is success here. This is the regulatory system working. It produces, less than a month later, right after Christmas, Toshiba saying, There’s trouble in River City.”

“The thing that happens after that is 2017, waiting for the schedule. If it wasn’t so damn sad it would be funny. Westinghouse keeps telling SCE&G and Santee Cooper, ‘We’re gonna give you the schedule. It’s gonna include the Fluor inputs.’

“They never get it. It never does happen.”

 

At that point, I suggest, the project would have needed a new contractor.

“So who makes that decision in a capitalist society?” Couick asks. “Is it the regulator? Is it the customer? It’s got to be SCANA, it’s got to be Santee Cooper. They’ve got to get together.

“As we looked at this as we entered 2017, the co-ops did not have an opinion as to whether it was right to finish or not finish Jenkinsville. We wrote letters to Santee Cooper saying ‘For any decision you make, we want to know where it’s going and what it’s going to cost.’“

And if you don’t get those things, I asked, what are you going to do?

“We’re just going to stop paying our bill, for that,” he said. “Because how in the world can you justify any decision, whether it be Santee Cooper or SCANA, without having a price tag or a road map?”

But you can’t just stop paying your bill, you’ve got customers who need electricity.

“I’ll put it this way: Whatever we need to do, we’re gonna do to protect our customers.”

In retrospect, then, in 2016, what should Santee Cooper and SCANA have done?

“I don’t know.”

What would have brought this project to completion?

“I think it had to start earlier. I think the 2014, 2015 period, somebody should have been focusing on, ‘Is the work getting done, is it getting done on schedule, are we only paying for work that’s been done on schedule?’ I don’t know the answers to that because we’re not the builder-owner.”

But your suspicion is that Santee Cooper and SCANA didn’t know the answers to these things either — and that was a hazard?

“I don’t have to have that suspicion. What I do know is that once there was a mandate of no blank check, and once there was a mandate of a real schedule, things stopped. Which leads me to believe there was at least an expectation of either a blank check or not having a schedule.

“I told Senator [Lindsey] Graham and others, when they were talking about bailing out Westinghouse, ‘Put ’em on an ankle bracelet, put ’em under house arrest.’ Because I didn’t think this thing was going well, well before this bankruptcy.

“That was if Westinghouse was going to have a continuing role in what I believe is important, that we have a diversified generation mix that includes a healthy amount of renewables, a healthy amount of things like conventional generation, coal and natural gas, and then your bridge fuel to a carbon-free economy is really nuclear — if you can afford to build it.

“But the real magic bullet is storage. And the co-ops are engaged in that. What about a plug-in electric vehicle? What about if they charge it at night and they don’t drive it the next day and the co-op can send a signal into that home? We’re built out with two-way communication to 80 percent of our homes, so we can send a signal saying, ‘We want to buy electricity from you and we’ll pay you more than what you purchased it for last night,’ and we’re benefiting all of our members.

“That’s where we’re going in this industry. It’s not what’s happening on the utilities’ side of the meter that’s important. What’s really incredibly important and is transformative is what’s happening on the customers’ side of the meter, in terms of choices that are coming — plug-in electric vehicles, switches, timers, water-heaters, empowering customers with choices that come through digital apparatuses.”

Meanwhile, we have these partly-built reactors. Since the decision to not go forward with the project, there’s been a lot of discussion about the legislative hearings, questions about whether the PSC is doing its job — are any of these things going in a productive direction, the way you see it?

“Why would they not be?”

Well, what you want to know is whether Jenkinsville is ever going to get built, isn’t it?

“No sir, that’s not what I want to know. Right now, looking back and thinking you can change time, change causes and conditions that were outside of our control, is a worthless endeavor. What is worthwhile is to look at, what did we know at the time. Did we exercise good judgment? Or did SCANA and Santee Cooper exercise good judgment based upon the time and what we knew? Did regulators exercise good regulatory judgment based upon what was known then?

“If we want to apply the test of 20-20 hindsight to past actions and decisions, it doesn’t help us. What helps us is, what can we learn of the utilities and how they decide things, structurally and systemically. What can we learn about the regulators and what they did and what they had to work with? And I think it is well that we dig into all of that. I think the governor ought to be focused on it [also]. I think the regulators ought to be willing to engage in this intellectual inquiry.

“And I’m expecting something else. I want money back for my members.”

 

But, I said, they’re talking about revising the Base Load Review Act. Isn’t that like closing the barn door when your money is in the next county?

“My thought is, you do the inquiry, and, there’s an old Czech proverb: ‘The work will teach us how to do it,’” he said. “Whatever we learn in these hearings will teach us what we need to do. We don’t need to pre-judge what we’re going to learn. We don’t need to pre-judge that it’s wise to keep Santee Cooper just like it is. We don’t need to pre-judge that it’s right to sell it.”

So you have an unbiased hope that this inquiry is going to be productive?

“Yes. Absolutely. There are smart people working on this. There are people on the committees that want to finish these units.”

If you had to guess the likelihood that these units are ever going to be completed, what would you say it is?

“Is there going to be a Clean Power Plan? Or does President Trump get Congress to go back to 1990 and change the Clean Air Act? Or does he change the endangerment finding? Is fracked natural gas still available, or is somebody going to successfully challenge its safety? Is there an environmental hazard there? And the bankruptcy of Westinghouse: Who in the world can finish it now? Is there a general contractor to finish it? Is Vogtle” — the two-reactor project underway near Waynesboro, Georgia – “going to be finished by the Southern [Nuclear] company?”

Westinghouse is the contractor there, too, using the same proprietary technology as at V.C. Summer.

“Is the Southern company going to have the experience, if they do finish, that may be transferable to South Carolina?

“We don’t have answers to any of those three questions right now. So what I’m trying to do is run away from this rush to answer your question. It cannot be answered right now definitively. It’s the same mistake as if you would say, ‘You shouldn’t have made the decision in 2005 or ’06 to build these reactors.’

“Will these things ever be finished? I don’t know. Watts Bar,” a Tennessee Valley Authority pair of reactors, “just got restarted 30 years after it was abandoned. They had already sold off part of the generation parts of the nuclear unit. They had to go get ’em rebuilt, restarted. But — it’s now making electricity.”

Back from the dead?

“That’s one of my favorite programs, The Walking Dead! … I can’t tell you what’s gonna be smart two years from now or five years from now.”

So what you want, ideally, as a customer, is for this suspension to be a true suspension and for the assets such as they are at V.C. Summer to be preserved — you want it bubble-wrapped until you can figure out how to restart it?

“I did not say that. I said I don’t know. But it may that when smart people that own it look at it and they look at risk — we’ll know more about [taxing] carbon soon. That’s a major factor. We may know within this next six months the likelihood of ever restarting. You may decide that you want to sell scrap metal out there.”

So you think this pause is a good thing because these externalities may get clarified.

“I think the wrong thing would be racing forward to finish them. So they made the right decision to stop. I think it would also be a mistake to race forward to sell scrap metal up there.”

From what you know now, is it possible that SCANA and Santee Cooper were not up to the job of being able to manage a project of this scale and complexity?

“They were certainly over-matched by the things that were external to this. I don’t know how they’re able to walk away from being accountable for there not being a schedule. A multi-billion-dollar project — who would not have a schedule that you could read, follow, and talk about productivity?”

Leighton Lord and Lonnie Carter, the chairman of the board and the CEO of Santee Cooper — were they remiss, as the minority partner, in not having that schedule?

“I don’t know. The schedule never existed, apparently.”

Does that bother you?

“I am beyond being angry. I’ve been angry for 10 years about this. Let me tell you about things that the co-ops have suggested that have not been accepted.

“The co-ops suggested, back in ’08, ’09, ‘Even though you’re gonna build [these reactors] and we agree with you, we don’t need this much electricity. The co-ops don’t believe you need this much new generation. We don’t see you needing 45 percent of this. Why don’t you let Duke Energy into Jenkinsville. Duke wants to get in it. They want to be a consortium to serve the state of South Carolina.’

“We urged both SCANA and Santee Cooper to let Duke Energy into Jenkinsville. I talked to Santee Cooper’s then-chairman, O.L. Thompson, talked to Lonnie, and what we were being told at the time was, ‘We don’t need to let Duke in.’ Santee Cooper said, ‘We’re gonna sell it somewhere else.’ And we’re saying, ‘Why not sell it to a utility serving South Carolina? To a utility that wants in it?’”

And was your thought that Duke also might be better able to manage a project like this?

“Yes — I don’t know ‘manage.’ Just input. Or even provide the horsepower to help think of good solutions, whether it be managing or not. They have a long history of building nuclear. So we urged this. They say no.”

This is the period when Santee Cooper says they tried to sell some of Jenkinsville and no one was interested…

“Duke is merging with Progress. Duke-Progress merger, we intervene, the co-ops do, and our sole thing is, ‘If you merge, you really ought to be focused… on getting into Jenkinsville.’

“So in 2014, they want to get in, Duke wants to buy 10 percent of the total 100 percent [not just of Santee Cooper’s share]. They take a proposal to ORS, the co-ops go with them. It’s presented to SCANA and Santee Cooper. Santee Cooper says they back it. SCANA says, ‘No, we’d rather not have Duke in the project.’

“And we say, ‘That’s not good enough. We don’t need this much power.’

“And SCANA says, ‘Well we’ll buy it. And we’ll not only just buy 10 percent, we’ll buy 11.66 percent, and will take the ownership of units 3 and 2 to the same ownership as unit 1, which is one-third Santee Cooper and two-thirds SCE&G.’ They were going change the ownership of all three to be one-third, two-thirds.

“So we said, OK. They worked through agreements with Santee Cooper immediately on 5 percent. It only changed if it went operational, so now it’s not effective.

“The goal was to never let Duke in. I bet you they would both like to have Duke Energy there now. I’ve been angry for 10 years and it’s not about where we are now — it’s about that failure to listen.”

 

In everything that you’ve read in the coverage of this, I said, and there’s been a lot, what’s missing? Is there anything?

“It goes back to why we should have these hearings,” he said. “If it’s just to get mad, it’s not good enough. If we can learn something out of it, if we can think about how to do it better, OK. Because this industry, this sector of our economy, is changing so quickly with distributed generation and storage and things like that, we need to get this right.”

Whether or not reactors 2 and 3 are ever completed.

“That’s important but that’s not [the only thing]. Our regulatory approach has worked well when you look at what brought this to its knees in 2016.

“It worked well with Act 236 [ South Carolina’s Distributed Energy Resources Program Act, of 2014]; we worked well with Dana [Beach, of the Coastal Conservation League] getting a trajectory for solar in this state.

“Let’s don’t throw the baby out with the bathwater. I’m a big believer that technology is driving this industry and either you can keep up with it or you can fall way behind, and if at some point in time we don’t adjust, those people that can afford to move with technology will move, and those people that can’t afford to move will be the last ones paying for decisions to invest in steel and concrete. We’ve got to be able to move everybody forward.”

You said you want your money back. How’s that going to happen?

“I don’t know if we can get it back, because I have no shareholders [to go to], like SCANA. So it may be that I make sure that we don’t waste money. Maybe there’s value to be extracted from Santee Cooper. Maybe it’s not the way it ought to be there. Maybe it ought to be sold. I don’t know. It may be that structural change is the only payment that my members get for the benefit of their $2.7 billion.

“If we end up with a Santee Cooper board and management that listens and reacts, it may be worth the $2.7 billion.

“If they had listened to us as their single largest customer 10 years ago as it relates to Duke Energy, I can’t tell you we wouldn’t be in the same place we are now, but we would have owned less. We’d have had less risk. Maybe somebody would have been minding the contractor. Maybe somebody would have been saying, ‘There’s no schedule,’ or, ‘There’s not an adequate schedule.’“

So you’d like to see more accountability now from the Santee Cooper executive structure and board.

“And I testified to that before the oversight committee of Santee Cooper last spring.”

What does more accountability look like?

“Well, right now there’s an annual review for the Public Service Commission and for ORS, by the legislature. There is no such annual review for Santee Cooper. I asked for one. We said there needs to be accountability, and not just for co-ops but for environmentalists, they’ve had their struggles, too.

“When the governor appoints [Santee Cooper] board members, how do you take new board members and hold them accountable for decision-making that they’ve never been a part of? They don’t know enough.

“So what we asked for was annual accountability at a minimum, that there was the ability for the General Assembly to do annual oversight just like they do for ORS, and let stakeholders file comments. That’s the beauty of ORS, everybody’s invited to share how you feel, about [executive director] Dukes Scott and ORS, and then the committee sifts through that. You don’t have that with Santee Cooper.

“But I’m still hopeful. My folks deserve better.”

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  • Rex O’Steen

    If you talk to some of the people who worked there, you would see the waste as obvious. One worker who delivered material said he saw a crew being paid to do a week’s work for what he could do in half a day. Perhaps part of the problem is a lack of understanding of how this new generation of reactors would work and cost. Some type of competent nuclear and engineering audits need to be integrated into the traditional financial-type audit.

  • Randolph

    Nice deep dive! Follow the money!

  • Randolph

    Follow the money! Nice deep dive.

  • Randolph

    Nice deep dive! Follow the money!

  • SCMike1

    That there was no schedule is surprising, bordering on incompetence. No wonder Couick was PO-ed. Project Management 101’s first lesson on the first day is that one can’t build anything of any complexity without a bottom-up work breakdown schedule that’s then priced out by work unit to arrive at the overall budget. Whoever’s paying for the project has to also decide whether it’s worth the cost of requiring performance bonds or liquidated damages. Such measures add to the price but arguably are worth the reduced risk. Maybe the state of nuke art is too unsettled to allow such risk mitigation at a reasonable price. But such measures are common in large-scale construction projects like bridges, especially replacement ones where traffic flow has to be maintained from start to finish of the new bridge and through demolition of the old one. (See http://www.newnybridge.com/ .)

    By describing the regulatory and technology environments over time, this article also hints at the risks that may lie around the next corner. Will natural gas stay cheap? We know there’s a lot now available thanks to fracking, but is it recoverable at current low prices? OPEC’s attempt to lower output to reduce prices to the point where the frackers could not compete has to date both crushed some operators but also produced more efficient frackers. Whether they can continue operations at the current price point has recently come into question thanks to the changing mix of oil and gas new wells are producing.

    On the other hand will increased exports of liquid natural gas in response to long-term contracts raise prices by reducing domestic supplies?

    For economic development the state needs stable baseload power, something wind and solar don’t yet offer. Boosters of wind and solar will no doubt throw in their two cents. They should be asked about how reliable their alternatives are, how predictable the output is, how much space their approaches take up, what their cost per KWH turns out to be, and how their solutions are working in South Australia and Germany. Maybe they could post performance bonds.

    Meanwhile my quest for my very own thorium reactor continues.