SCANA Corporation (NYSE: SCG) subsidiary South Carolina Electric & Gas Company (SCE&G) has filed a petition with the Public Service Commission of South Carolina (SCPSC) seeking approval to update the construction milestone schedule as well as the capital cost schedule for the two new nuclear units being constructed at the V.C. Summer Nuclear Station in Jenkinsville, South Carolina. Although negotiations continue with Westinghouse Electric Company and Chicago Bridge & Iron (NYSE: CBI) (Consortium), this updated filing was necessary at this time as several project milestone dates previously approved by the SCPSC have now exceeded their allowable contingency time periods. In making this filing, SCE&G does not waive any claims related to delay and other related contested costs with the Consortium.
The construction schedule reflected in the petition, without consideration of all mitigating strategies, indicates a substantial completion date for Unit 2 of June 2019 and a substantial completion date for Unit 3 of June 2020. These estimated completion dates are based upon information received from the Consortium. This petition includes incremental capital costs that total $698 million (SCE&G's portion in 2007 dollars), of which $539 million are associated with these delays and other contested costs. The total project capital cost is now estimated at approximately $5.2 billion (SCE&G's portion in 2007 dollars) or $6.8 billion including escalation and allowance for funds used during construction (SCE&G's portion in future dollars). As noted in the petition, the construction and capital cost schedules are subject to continuing review and negotiations by the parties.
"Substantial progress has been made towards the completion of the units," said SCANA Chairman and CEO Kevin Marsh. "As outlined in the petition, eighty five percent of the major equipment for Unit 2 has been received on site, the containment vessel bottom heads of both units have been set, and all three of the steel rings that comprise the vertical walls of the Unit 2 containment vessel have been completed or are near completion. Also, the first ring for Unit 2 has been set in place and a total of twenty three million man-hours have been worked with an excellent safety record."
Marsh added "However, we are not pleased with the delays in the construction schedule for our new nuclear plants. These delays and related cost increases are principally due to design and fabrication issues associated with the production of submodules used in construction of the units. We continue to negotiate with Westinghouse and Chicago Bridge & Iron regarding the responsibility for delay costs associated with the submodules. Despite these challenges, we remain firmly committed to completing these plants that will bring clean, safe, and reliable electricity to meet the long-term energy needs of South Carolina. With a construction project of this scale we knew there would be challenges along the way. While some of the contractual project construction costs have increased, we have enjoyed lower escalation on the project to date, and we have locked in significantly lower long-term financing costs than projected on a large portion of the project's debt financing. We also expect more production tax credits to benefit our customers once the units are online. Our commitment to the Public Service Commission of South Carolina in 2008 was to keep them informed regarding changes in the construction schedule and related cost of the project. Today's filing and our subsequent appearances before the Commission will allow us to fulfill our commitment to transparency."
SCE&G filed its application for an order under South Carolina's Base Load Review Act (BLRA) in 2008, which the SCPSC approved in 2009. Although the capital cost schedule for which approval is being sought includes higher costs than were approved in that original BLRA order, important elements of the costs to customers from the project have been reduced from the projections that were presented during initial approval.
- Inflation has been significantly lower than originally anticipated and escalation is now projected to be over $200 million less than initial estimates
- Interest rates have also been significantly lower than those incorporated in the original projections, resulting in approximately $1.2 billion of expected benefits to be realized by SCE&G's customers
- Fewer new nuclear projects than expected have been pursued in the United States, and SCE&G now anticipates that an additional $1.2 billion in fuel cost reductions will be realized by its customers through the application of the production tax credits, based upon current construction schedules and current tax law
Although construction cost estimates have increased, these favorable changes in the financing costs, inflation and production tax credits are expected to offset the ultimate cost to customers.
Based upon the filing date, SCE&G anticipates a hearing date this summer with an order due by September 12, 2015. The petition will be available on the Company's website, www.scana.com, as well as the SCPSC's website.