The Nuclear Story and Facts
For more than 80 years, Santee Cooper has been a driving force in making South Carolina better for everyone who lives here – just like our mission says we should. Our low electric rates and successful economic development incentives improve the quality of life across this great state.
The Santee Cooper Story
As a not-for-profit, state-owned utility, Santee Cooper is one of 2,011 public power companies delivering reliable and affordable electricity to 49 million people in 49 states and 5 U.S. territories. Public power utilities account for 60 percent of all electric utilities in America. Because public power utilities are nonprofits, the electricity they provide typically costs less than that provided by for-profit utilities.
Santee Cooper is one of the largest public power utilities in the country and the largest provider of electricity to South Carolina among all utilities in the state. Some 2 million South Carolinians depend on Santee Cooper as the source of their electricity. Our power costs remain up to 31 percent less than the state and national averages, depending on customer class. Our reliable transmission and distribution systems routinely earn national accolades.
Because we have no shareholders, our focus is on our customers and the state. Working with the state’s electric cooperatives, we have helped South Carolina attract more than $14 billion in capital investment and more than 75,000 jobs since 1988, by Volvo, Google, Samsung, Nucor and many more industry leaders. Santee Cooper introduced Green Power to South Carolina’s grid, built the state’s first solar farm and has a coal ash recycling program that has attracted national attention.
The Nuclear Story
We are always exploring new ways to provide our customers with reliable, low-cost electricity that also supports industry and jobs. Our customer needs are at the heart of every decision we make. This was true for our 2008 decision to join SCE&G and build V.C. Summer Units 2 and 3 - and also true for our 2017 decision to suspend construction on those units.
We have a good history with SCE&G with V.C. Summer Unit 1, which is Santee Cooper’s lowest-priced base load power. We chose to add nuclear power based on our then-projected need for additional electricity and on proposed legislation and regulations that were putting more emphasis on carbon restrictions. At the time, building new nuclear units was clearly the right decision.
The 10 years since included a tsunami-induced nuclear disaster in Japan that delayed our project and added design and process requirements, a recession, and a complete political reversal on carbon regulation trends. More than anything else, though, in 2017 the contractor hired to design and build the two nuclear power units declared bankruptcy and said it would reject our fixed-price contract.
Santee Cooper and SCE&G – the project’s majority owner and managing partner – selected Westinghouse to lead the consortium designing and building this project. Westinghouse was a strong company with a strong reputation, and they had the best design to meet our projected needs.
Even with the best intentions and best information, construction of a project this size is challenging. As the minority owner, we worked with SCE&G to raise concerns about Westinghouse’s performance. As early as 2013, we pushed for changes in who was fabricating the modules when we saw increasing delays in getting those modules delivered to the site. As delays became more widespread, the owners began withholding payments to Westinghouse. Our focus remained on completing the project, so we could deliver the benefits of economical, reliable, emissions-free electricity to our customers.
Unfortunately, Westinghouse refused to provide Santee Cooper with details that would have let us fully assess the projects. We knew the problems were growing (and the Bechtel Co. assessment we pushed for later validated those problems), and so we pushed for an amended contract with Westinghouse in 2015. That amended contract, signed in late 2015, was intended to improve performance, speed up the construction process and protect customers from risks of increased delays and costs through a fixed-price option.
On March 29, 2017, however, Westinghouse filed for bankruptcy. At this point, we finally had access to all of the cost and schedule information that Westinghouse had previously refused to provide. We dug into a four-month analysis that showed us completing the units would actually cost Santee Cooper customers another 41 percent in rate increases by 2030 – and another nearly $7 billion on top of the $4.7 billion spent to date.
As that analysis continued, Santee Cooper considered several options to keep the project viable, including appealing in person to federal leaders for support and scaling back the project to focus on one unit. It was clear that federal support was not immediately available, and the project analysis showed one unit would not be economical either. Ultimately the Board made the only responsible decision, which was to suspend construction to protect our customers. And now, we’re doing everything we can to mitigate the effects the suspension has on our customers and the state.
Why Didn't We Stop the Project Sooner?
First, we were obligated under our contract with Westinghouse, which anticipated Westinghouse would finish the project. We continued our work to complete what we started, and do it in a way that most benefited our ratepayers. We saw problems and we addressed them. We capped our ratepayers’ exposure, incentivized timely, quality performance, and put the project on a path to completion under terms that served our ratepayers’ best interests, as embodied in the 2015 amendment to the contract. That contract amendment also allowed Fluor Corp. to be brought in as construction manager in January 2016, and the pace of work improved. It was only after Westinghouse declared bankruptcy in March 2017 and said it would reject the fixed price contract that the project became uneconomical for customers and the state.
We have put very little of the cost of the project into rates, and customer increases tied to nuclear are just 4.3 percent to date. We had proposed additional rate increases in 2018 and 2019 that also addressed nuclear spending, and we have already withdrawn those proposed increases. We also just secured nearly $900 million related to Toshiba’s parental guaranty of the Westinghouse project, and we intend for that money to offset rate increases in the near future, offset debt in the long term and pay our fair share of the mechanics’ liens. Santee Cooper will also look at selling our share of the project and other measures to offset what we have spent.
We understand customers are upset – not with our decision to stop the project, but with the money already spent on the project. We stopped spending money as soon as we had proof that continuing would be uneconomical, and again, we are working hard to offset that spending.
The Bottom Line
Here’s the bottom line: Santee Cooper customers will continue paying rates that are competitive and up to 31 percent lower than the state and national averages. We will work with local and state agencies to retain and grow business in South Carolina, and we will continue to be good environmental stewards. Santee Cooper will continue to hold true to our mission.
By continuing to hold true to our mission, Santee Cooper will work to regain the confidence of our customers and the state.
Questions and Answers
Santee Cooper and SCE&G announced in 2005 plans to consider expanding our nuclear generation and filed an application to build Units 2 and 3 in 2008. When we began:
- 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 they are today and forecasted to stay high
- Congress was considering legislation that would limit greenhouse gases emitted by coal and natural gas units
- Then-presidential candidate Barack Obama was campaigning against new coal-fired generation
- In 2007, Santee Cooper’s Board approved a goal to meet 40 percent of customer energy needs by 2020 with non-greenhouse gas-emitting resources, renewables, conservation and energy efficiency
- Nuclear power is the only reliable base load resource that is virtually emissions free
For all of these reasons and more, nuclear power was the most economical generation resource at the time.
Our contractor, Westinghouse Electric Co., declared bankruptcy in March 2017 and failed to deliver on our fixed price contract. Without that fixed price, finishing these units became uneconomical. An Interim Assessment Agreement executed in conjunction with Westinghouse’s bankruptcy gave us access to cost and schedule details. Santee Cooper conducted a comprehensive, four-month analysis that showed completing the project would require additional rate increases of at least 41 percent and cost customers a total of $11.4 billion, 75 percent more than we originally planned.
We estimate it could cost as much as $11.4 billion including interest to complete both reactors, or 75 percent more than originally planned.
Our detailed analysis showed that completing the project would increase electric rates by at least an additional 41 percent by 2030. This would be uneconomical and a burden to existing customers, as well as an obstacle to economic development efforts bringing additional industry and jobs to the state.
Rate increases for the project have totaled 4.3 percent. We have canceled plans to increase rates in 2018 and 2019.
We spent approximately $4.7 billion in construction and as of the suspension date. Most of that has been financed. We have recovered $540 million from customers, including $160 million from residential, commercial and industrial customers, as of the project suspension.
We are considering many options, including selling part or all of our share. We will take the steps that bring the most benefit to our customers.
Not at all. At the beginning of the project, we anticipated a big increase in customer demand based on how the state had been growing. The Great Recession slowed growth considerably. We also worked with our largest customer to shift some of that load off our system, and increasing energy efficiency has also tempered demand. Santee Cooper now projects we can meet customer needs and continue to recruit new industry and jobs through 2036 without additional generation.
Santee Cooper has been diversifying our generating portfolio to better respond to economic conditions and market pressures, and increasing nuclear capacity was a key part of that initiative. The state and federal governments are also supportive of building new nuclear power. Additionally, Congress and the federal government continued to pursue restrictions on carbon emissions from electricity generation through 2016. The Obama administration approved a Clean Power Plan that would require significant reductions in carbon emissions, making nuclear power the best generating source for us to comply. The Trump administration moved away from the Clean Power Plan earlier this year and is also reducing other environmental regulations that made nuclear power attractive. Additionally, we were obligated under our contract with Westinghouse, which anticipated Westinghouse would finish the project. The units were economical until Westinghouse's bankruptcy.
We were obligated under our contract with Westinghouse, which anticipated Westinghouse would finish the project. Prior to 2017, we addressed problems with Westinghouse and saw some improvements. As early as 2013, we pushed for changes in who was fabricating the modules when we saw increasing delays in getting those modules delivered to the site. As delays became more widespread, the owners began withholding payments to Westinghouse. One key correction was the amended contract with a fixed price option we negotiated in 2015 and which took effect in 2016. That allowed Fluor to come in as construction manager, and the pace of work improved. When Westinghouse declared bankruptcy in March 2017 and said it would reject the fixed price contract, we launched a four-month analysis of previously unavailable data from Westinghouse, Fluor and other subcontractors, related to cost and schedule. Our analysis showed that finishing the project would require additional rate increases of 41 percent by 2030, which made the project uneconomical for customers and the state. We completed that analysis in early July, negotiated a parental guaranty settlement with Westinghouse’s owner Toshiba Corp. and then suspended the project on July 31.
No. The Base Load Review Act applies to investor-owned utilities that are regulated by the South Carolina Public Services Commission. Santee Cooper is a state-owned, public power utility. Our rates are set by an independent Santee Cooper Board of Directors, whose members are nominated by the Governor and confirmed by the legislature.
Yes. By 2010, we were actively talking to several other utilities in the Southeast about selling a part of our share of the project. We entered into an agreement in which SCANA, the majority partner, would purchase a 5% undivided ownership interest in the project from Santee Cooper.
We understand how important low power costs are to our customers, and Santee Cooper’s rates are 6 to 31 percent lower than the state and national averages, depending on customer class. Specific to this issue, Santee Cooper received a settlement from Toshiba Corp., parent to Westinghouse, for nearly $900 million related to Westinghouse’s failure to meet contractual terms for the project. We will apply the proceeds of that settlement to offset costs to customers. Additionally, we are cutting our budgets and have withdrawn proposed rate increases for 2018 and 2019. We will continue to pursue resources to offset remaining costs, including the sale of our part of the project, the sale of equipment, and continued efforts to bring in additional federal resources that would make the project economical.
No. Santee Cooper is financially sound, and our credit ratings are in the top quarter for electric utilities across the country.
We involve expert consultants who help us project energy demand based on statewide growth and other considerations. The analysis also looks at proposed federal government regulations and environmental considerations that would impact energy generation. When we began the nuclear project, the economy and environmental climate were much different than they are today.
Santee Cooper was created by the South Carolina General Assembly, and only the General Assembly can sell all or part of Santee Cooper or its assets. For more than 80 years, we have pursued our mission to be the state’s leading resource for improving the quality of life for the people of South Carolina. To fulfill this mission, Santee Cooper is committed to:
- Producing and distributing low-cost, reliable energy, water and other essential services
- Providing excellent customer service
- Operating according to the highest ethical standards
- Maintaining a quality workforce
- Being a steward of the environment
- Being a leader in economic development
As a not-for-profit, state-owned utility, Santee Cooper provides electricity to about 2 million South Carolinians directly and through the electric cooperatives and our other wholesale customers. Our power costs remain up to 31 percent less than the state and national averages, depending on customer class. Our reliable transmission and distribution systems routinely earn national accolades.
Because we have no shareholders, our focus is on our customers and the state. Working with the state’s electric cooperatives, we have helped South Carolina attract $12 billion in capital investment and 70,000 jobs since 1988, by Volvo, Google, Samsung and Nucor and many more industry leaders. Santee Cooper introduced Green Power to South Carolina’s grid, built the state’s first solar farm and has a coal ash recycling program that has attracted national attention.
We believe any objective evaluation of selling Santee Cooper will demonstrate our value to our customers and the state.
Santee Cooper is a state-owned, nonprofit corporation. We do not have shareholders, and so we do not have to provide dividends. We make a yearly payment to the state, and we do not receive any taxpayer money. We operate solely from customer payments. Santee Cooper also plays an important role in the state’s economic development, offering loans, grants and other support for projects that have proven to bring investment and, since 1988, roughly 70,000 jobs to South Carolina. Santee Cooper is managed by a Board of Directors representative of the entire state. For all of these reasons, the Board is and employees are focused on the interests of customers and all South Carolinians.