Feds Subpoena Documents Related to 2016 Bechtel Audit of V.C. Summer Nuclear Expansion

SCANA Corp. and Santee Cooper-utility partners that recently abandoned a two-unit expansion at the V.C. Summer nuclear plant-have received federal subpoenas for documents associated with a much-guarded February 2016 assessment report conducted by Bechtel, documentation of meetings with the firm, and documentation of site walk-downs and real-time observations at the half-built project.

A copy of the subpoena served to Santee Cooper on September 8 served to Santee Cooper by the U.S. Attorney's Office for the District of South Carolina-which POWER obtained on September 22-also shows federal investigators want to see external audits of the project starting in 2010, seven specific presentations to Bechtel, and all internal and external e-mails related to the Bechtel report, including its investigation and its findings. Investigators also want to see to whom the report was sent.

SCANA Corp. confirmed receipt of a federal subpoena on September 21, but it did not confirm the subpoena called for the same breadth of documents. It said in a statement that a "broad range of documents related to the project" had been requested.

Both companies said they intend to cooperate with the government's investigation, though neither has described the nature of the probe.

Six Weeks of Turmoil

The two-unit project to build first-of-their-kind AP1000 reactors was about 64% complete in May, but it had been in limbo since key contractor Westinghouse filed for bankruptcy in March.

The utility partners announced their decision to abandon the project on July 31. The key reason for SCANA's decision was that the project would be "prohibitively expensive." For Santee Cooper, the decision was based "in large part on a comprehensive analysis of detailed schedule and cost data, from both project contractor Westinghouse Electric Co. and subcontractor Fluor Corp., first revealed after Westinghouse filed for bankruptcy in March."

SCANA said its share of costs as 55% owner of the project would soar to $9.9 billion, while Santee Cooper, which owns the remaining 45%, said it would have needed to spend about $8 billion to complete construction, plus about $3.4 billion for interest. The decision to abandon the project would save customers nearly $7 billion, the partners said.

However, on August 15, SCANA announced it would voluntarily withdraw its abandonment petition filed just two weeks before with the Public Service Commission of South Carolina under the Base Load Review Act. The withdrawal decision was to give various stakeholders and South Carolina legislators more time to discuss the future of the costly, much-delayed nuclear construction project, the company said.

"We have been meeting with governmental officials and various stakeholders since our announcement to abandon the new nuclear project," said Kevin Marsh, SCANA chairman and CEO, in a statement on August 15. "The purpose of these ongoing meetings is to discuss their concerns and to explain the path that led us to the abandonment decision," he explained.

As POWER reported, SCANA explored a number of possibilities to keep the project alive, including looking for a partner to take up state-run utility Santee Cooper's 45% share. However, no buyers stepped forward. South Carolina Gov. Henry McMaster (R) reportedly also ramped up efforts to revive the project.

The Bechtel Report

Since their public abandonment of the project, meanwhile, the partners have been fending off allegations of a general lack of transparency.

In a bombshell revelation, The Post and Courier on September 4 reported that an audit conducted by construction and civil engineering firm Bechtel-a company that will take over construction at the Vogtle AP1000 nuclear expansion in Georgia-was completed in February 2016, three months before SCANA asked regulators to increase its share of the project cost and approve a fixed-price contract with Westinghouse, which eventually filed for bankruptcy protection in March 2017.

"All the while, SCANA officials told state regulatory staff members that they didn't have a physical copy of the report that they could share-a statement they contradicted under oath last month," the Courier reported.

Gov. McMaster released the audit in early September.

In it, Bechtel concludes, among other things: "There is a lack of shared vision, goals, and accountability between the Owners and the Consortium," and "The [engineering, procurement, and construction] Contract does not appear to be serving the Owners or the Consortium particularly well." It adds: "The detailed engineering design is not yet completed, which will subsequently affect the performance of procurement and construction" and "The issued design is often not constructible resulting in a significant number of changes and causing delays."

Asked about the audit, Bechtel told POWER: "We don't intend to comment on ongoing legal matters."

A Legislative Nightmare

The Bechtel audit has been the focus of at least four South Carolina legislative committee hearings. At one point, state lawmakers threatened to subpoena if the utilities didn't release it.

At the one recent hearing at the House Utility Ratepayer Protection Committee on September 15, asked about Bechtel's reputation, special counsel for the Utility Ratepayer Protection Committee Scott Elliot said the firm was "large and well-regarded," and its "damming" report could not have been biased.

"I think it's fair to ask, would there be bias?" Elliot said. "What I have contemplated in their making of this report like this is that it might have benefited them. There's plenty of work to go around in plants like these-maybe it would have gotten their foot in the door a little further. But after they sounded off on the owner the way they did in this report, they could not have expected [SCANA subsidiary SCE&G] to appreciate their services so much that they'd give them some construction oversight or management oversight of the project, I don't think."

At the same hearing, SCANA Senior Vice President Steve Byrne explained that while the partners did not agree with all Bechtel's findings in the $1 million report, they appointed a construction oversight board and implemented several of the report's highlighted design changes as well as increased the number of workers onsite as recommended.

However, at a Senate hearing of the V.C. Summer Nuclear Project Review Committee held on September 18-where SCANA head Marsh reiterated that the company never misrepresented the project status to regulators-Santee Cooper CEO Lonnie Carter told lawmakers he was at "wit's end" over Westinghouse's failures to meet construction schedules.

"I gave up on them in 2014," he said.

Riddled with Class-action Lawsuits

According to Santee Cooper's federal subpoena, all requested documents must be turned over in person to the U.S. Grand Jury for the District of South Carolina, or to investigative agents on the case, or mailed with certification.

It isn't clear how the investigation will play into at least two class-action lawsuits related to the nuclear expansion.

One was filed on August 11, 2017, against SCANA subsidiary South Carolina Electric & Gas CO. (SCE&G) on behalf of South Carolina ratepayers, alleging that the utility had overcharged its customers for nearly a decade by raising rates to pay for the half-built nuclear project. The other was filed on August 29 on behalf of SCE&G customers; it accused the utility of fraud and negligence in the years before the decision to abandon the project.

-Sonal Patel is a POWER associate editor (@sonalcpatel, @POWERmagazine)

Updated, Sept. 22: Adds comments by Bechtel

The post Feds Subpoena Documents Related to 2016 Bechtel Audit of V.C. Summer Nuclear Expansion appeared first on POWER Magazine.