Thousands of records tell story of failed nuclear plant, could lead to SCE&G refunds

COLUMBIA, SC - In the fall of 2015, inspectors discovered that improperly designed and installed machinery at a massive nuclear expansion project in South Carolina could allow radiation to escape into the surrounding community if problems were not corrected, according to once-secret SCE&G documents.

Such problems weren’t isolated as workers scrambled to build two nuclear reactors northwest of Columbia. Similar flaws are detailed in tens of thousands of documents released recently by SCE&G to environmental groups, whose lawyers hope to use them to prove the utility’s customers deserve refunds for the now-abandoned project.

The legal case, spearheaded by Friends of the Earth and the Sierra Club, could be the fastest route to refunds for SCE&G customers who unwittingly have been forced to pay $2 billion over the past decade for two nuclear reactors that won’t be built.

If the groups can convince the S.C. Public Service Commission that SCE&G spent money foolishly, the commission could order refunds by the end of 2018, if not sooner, Sierra Club lawyer Bob Guild said.

S.C. lawmakers have shied away from proposals to force refunds, saying that legislation probably is unconstitutional. Also, Virginia-based Dominion Energy’s offer to buy out the Cayce-based utility and offer refunds to SCE&G customers could be withdrawn if lawmakers move forward with a plan to stop the SCANA subsidiary from continuing to charge its customers for the project.

The environmentalists’ legal challenge is farther along than some of the more than a dozen federal and state lawsuits against SCE&G over the V.C. Summer project. Guild filed the case for refunds in June 2017, a month before SCE&G decided to walk away from the project.
 

Progress on the PSC case is apparent in the mass of SCE&G documents the environmental groups recently received from the utility — documents some other lawyers still are fighting to obtain.

The 70,000-page records dump, reviewed over the past two weeks by reporters at The State, builds on previous reports about the project's delays and cost overruns, painting a portrait of a mammoth construction effort in disarray.

The documents show some of the nuclear project’s machinery was built poorly or allowed to fall into disrepair.

A contractor’s inability to meet federal quality-assurance requirements and ship major nuclear components to the site on schedule wasted valuable time and drove up costs.

SCE&G complained contractors had filed misleading, confusing or incomplete construction status reports that made it difficult to determine what actual progress was being made, ultimately leading the utility to dispute and withhold payments.

Workers were cited as lazy, and some failed or purposely avoided mandatory fitness-for-duty tests.

SCE&G and its junior partner in the project, state-owned Santee Cooper, fought with contractors over invoices for incomplete work and bickered for months about an expensive no-bid contract granted to a subcontractor’s affiliate.

The documents show SCE&G managers tried in vain to push its contractors to improve, even as the power company’s executives publicly offered rosy comments about the nuclear project.

“Our frustration continues to mount,” SCE&G and Santee Cooper executives ultimately wrote in a 14-page letter of grievances to chief contractor Westinghouse in May 2014, three years before the project collapsed. “You have made promise after promise, but fulfilled few of them.”

Friends of the Earth and the Sierra Club say reckless spending and poor oversight by SCE&G doomed the project. The S.C. Energy Users Committee, a group of large industrial power users, and the S.C. Office of Regulatory Staff, the state agency charged with policing utilities, make similar arguments in their quest to, if nothing else, block SCE&G from continuing to charge its customers $37 million a month for the reactor project.

Guild, who also represents the Friends of the Earth, said his case before the Public Service Commission relies heavily on whether it can prove SCE&G spent money unwisely and recklessly.

Under S.C. law, SCE&G was allowed to charge its customers for the project if its spending was “prudent,’’ a legal term for proper expenditures. But Guild said the records he is seeing reinforce previous evidence that many of the charges were not prudent.

“In terms of our interpreting the documents, I do think what we are looking at here is really a puzzle, where you are putting together smaller pieces,’’ Guild said.

SCE&G spokesman Eric Boomhower did not directly address questions about construction problems at the nuclear site. But, he said, "we look forward to the opportunity to discuss'' with the Public Service Commission the utilities' decision to abandon the project.

Closely watched case

Guild’s case follows last July's shutdown of the V.C. Summer project.

SCE&G and Santee Cooper quit the construction effort after spending $9 billion and about a decade working on two new reactors to complement an existing reactor at the site. They blamed the project’s failure on the March 2017 bankruptcy of chief contractor Westinghouse and rising costs.

Since the shutdown left more than 5,000 people out of work, scores of documents and reports have surfaced outlining problems at the site. Among those are the Bechtel Corp. report, a long-secret document that SCE&G withheld from state regulators and the public until Gov. Henry McMaster obtained the report from Santee Cooper and made it public last September.

That $1 million report, completed in the fall of 2015 and finalized in February 2016, concluded the project suffered from flawed construction plans, inadequate or incomplete schedules, faulty designs, poor management of contractors, low worker morale and high turnover.

Productivity was abysmal, mostly due to bad engineering designs, complicated work packages and an aging workforce, Bechtel found. The engineering firm’s assessment laid blame with the contractors for misleading the power companies on their progress, and with the utilities for failing to verify the contractors' progress reports were accurate.

A 2016 report by Fluor Corp. reinforced those findings.

Newspaper reports since the project’s abandonment have shown the utilities were aware, even before Westinghouse’s bankruptcy, that the project was unlikely to meet critical tax deadlines necessary to defray customers' costs.
 

The most recent batch of documents provides even more detail.

Lawyers across the state are keenly interested in what the environmental groups are finding as they prepare their own legal cases against the S.C.-headquartered utilities.

Brian Gambrell, a Columbia attorney who filed suit against SCANA last fall, said he still is struggling to obtain records from the power company as part of his case. Guild’s success in getting documents, so far, should be important to any lawyer who is suing SCANA, he said.

“For so long in this process, both SCANA and Santee Cooper were opaque; they were not revealing internal information about what they knew and when they knew it,’’ Gambrell said, adding the information Guild has dug up “is going to be pretty useful.’’

The project’s rising costs are central to Guild’s case before the PSC.

In March 2009, the Public Service Commission authorized SCE&G’s original $4.5 billion budget for the V.C. Summer project.

By 2016, a year before the project was shut down, the utility had asked – and received – permission for four budget increases totaling $2 billion, according to records provided by the Office of Regulatory Staff.

That included a $174 million hike in 2011, a $278 million jump in 2012 and a $699 million increase in 2015. SCE&G also came back in 2016, eventually getting approval to raise the budget by $831 million.

All told, the hikes swelled SCE&G's overall budget for the project, including construction costs and interest, to $7.6 billion, Regulatory Staff records show.

Along the way, the utility returned to the PSC nearly every year to raise rates on its customers. Those nine rate hikes now cost SCE&G residential customers about $27 a month.

The project originally was to cost SCE&G and Santee Cooper about $10 billion. By the time it was abandoned, estimates showed the overall cost could be twice that amount.

Details emerge in records cache

Guild is unsure what records he will use in the PSC case to argue for refunds. But he has plenty to pull from. Records obtained by the environmental groups and released to newspapers show that troubles preceded many of the budget increases.

An internal management report, for instance, found 47 deficiencies in November 2015 with the V.C. Summer project.

Among those problems were incorrectly drilled bolt holes, gaps between walls that shouldn’t have existed, rust on stainless steel piping, improperly imbedded beams and stud failures.

A formerly confidential October 2015 report by Westinghouse said potential radiation releases also could have resulted because contractors installed vents without putting in monitoring equipment to warn of escaping radiation.

Among a host of other problems detailed in the document dump:
 

▪ An audit of shipping containers destined for the site found some were missing identifying information or came with incorrect costs, SCE&G manager Abney Smith wrote to Westinghouse official JoAnne Hyde on June 4, 2013.

▪ Progress reports that were only partially completed by Westinghouse made it difficult for SCE&G to track actual progress at the Jenkinsville site, Smith wrote to Hyde the next day. Smith said the incomplete reports didn’t answer basic questions, such how much work had been completed, how much work should have been completed and how much the power companies should have paid, based on the actual work done.

▪ A construction supervisor failed a “random fitness-for-duty” test on March 10, 2014. His access to the nuclear plant was revoked.

▪ A Feb. 12, 2015, report found a "significant" breakdown in subcontractor Chicago Bridge & Iron’s quality-assurance program could have led to a defect with reactor submodules. No defects had been identified by that date, however.

▪ A May 3, 2015, report from CB&I showed some work packages were missing necessary documentation. The same report noted a pipe project had been delayed four weeks because a supplier had provided false information. It also said counterfeit parts had contributed to another construction delay. That delay was lengthened because the employee responsible for ordering replacement parts waited a month to do so.

▪ In May 2015, SCE&G objected to paying more money for storage tents that were needed because important materials couldn’t yet be installed, a cost the utility blamed on contractors’ “unexcused delays.”

▪ An Aug. 3, 2015, report found the contractors weren’t properly storing equipment and materials, sometimes allowing them to rust. The inspector said CB&I was not consistently holding weekly meetings to plan for incoming equipment and materials that would need preventative maintenance, and Westinghouse only had checked on those materials one time during an 11-month span. The same inspector said the lack of oversight reduced the likelihood a defective part would be fixed before it malfunctioned.

A dysfunctional relationship

The documents detail the dysfunctional relationship between the utilities and their contractors, which only deteriorated as the project’s budget swelled and more ratepayer money poured in.

SCE&G and Westinghouse clashed throughout the construction effort over incomplete progress reports, rejected invoices and the question of who should pay for the project’s rising costs.

SCE&G complained about late progress reports from Westinghouse as early as October 2012, telling the contractor that inconsistencies in its data made it harder for the utilities to monitor the project. Reports on productivity changed drastically with no explanation, SCE&G manager Smith wrote, while performance metrics sometimes were inaccurate.

Other fights centered on SCE&G's refusal to pay for work it couldn't confirm had been completed or for costs that it blamed on the contractors.

One of the most heated debates centered on SCE&G's objection to an expensive no-bid contract that would pay CB&I Services, an affiliate of one of the project’s contractors, for work on a reactor shield building.

That dispute dragged out for months as the contractors tried to defend CB&I Services and its qualifications. Ultimately, CBI Services offered to reduce its original fee.

And on June 19, 2014, SCE&G’s Ronald Jones complained to Westinghouse’s Chris Levesque that the contractors were being paid for work they hadn’t yet completed. He said the utilities would no longer pay for extra costs that stemmed from the contractors’ poor performance.

'Neither equipped nor qualified'

Many of the documents released to the environmental groups highlight SCE&G and Santee Cooper’s frustrations with a subcontractor’s performance in building and shipping submodules. Those were the Lego-like components that were supposed to be fabricated off site, shipped to South Carolina and then assembled at the Summer site.

But the Shaw Group, the subcontractor chosen for that work, was slow to begin construction and woefully late in building and delivering crucial parts, causing delays that helped doom the project, documents show.

As early as January 2011, the U.S. Nuclear Regulatory Commission had to cut short an inspection of Shaw’s Lake Charles, La., manufacturing facility because there was so little work being done there. The NRC later cited Shaw several times over the next three years for failing to meet quality-assurance requirements and then failing to correct those problems.

Shaw missed its first submodule shipment deadline in June 2011. By September 2012, fewer than half of the components for one of the project’s “supermodules” had been delivered, prompting a letter from the utilities expressing concern the delays would push back the expected completion dates for the reactors.

By August 2013, Santee Cooper chief executive Lonnie Carter believed the submodule delays were putting “the project’s future in danger,” he wrote in a letter to Kevin Marsh, chief executive of SCANA, SCE&G's parent company.

That email came just two weeks after SCE&G’s top nuclear official, Steve Byrne, told reporters at a media day that the Shaw problems largely had been resolved. “They’re getting their act together. They appear to have turned a corner.”

The utilities pressed their contractors for weekly updates on the submodule deliveries. But within two months, the power companies said, the contractors were slacking on the weekly calls.

In May 2014, however, the utilities wrote to Westinghouse that Shaw – a company picked by the contractors – “proved to be neither equipped nor qualified to produce the modules.”