Utilities Pull the Plug at VC Summer

Wednesday, August 2nd, 2017

The decision to cancel any further work on the reactors is a major blow to the effort to revive the nuclear industry in the U.S.  The AP1000 design was intended to be a jewel in the crown for the nuclear industry.

Westinghouse had at one time hoped not only to build two at V C Summer, and another two at the Vogtle site in Georgia, but also as many as six to eight more units in the U.S. over the next two decades.  Four AP1000s are under construction in China and are expected to load fuel by the end of this year.

The stop work order in South Carolina increases the odds that Georgia Power and its partners at the Vogtle site will have to think harder about whether to proceed. Unlike the V C Summer project, the Vogtle effort has an $8.3 billion load guarantee from the federal government.

Also, the utilities in Georgia are expecting a cost estimate to complete the two reactors at  from two EPC contactors who would propose a path forward for the project.  It is not clear when these proposals will come in. They were reported earlier to be due in mid-August.

Last Friday Georgia Power said Georgia Power said it inked an agreement to replace bankrupt contractor Westinghouse as the lead manager on its troubled Plant Vogtle nuclear expansion project.

“We are already in the midst of a seamless transition for the thousands of workers across the site, allowing us to sustain the progress we are making every day on both units,” Mark Rauckhorst, Georgia Power executive vice president for the Vogtle 3 and 4 project, said in a statement on Friday.

The company said “construction momentum has continued uninterrupted” since Westinghouse’s March 29 bankruptcy filing, which followed heavy losses on the Vogtle project and similar work in South Carolina. The Vogtle project is more than 3 years behind schedule and more than $3 billion over original budget.

Toshiba has agreed to pay Southern $3.6 billion related to delays and contractor disputes involving Westinghouse.  It’s unclear what additional claims may be filed against Westinghouse as part of bankruptcy proceedings.  Last January this blog predicted that financial difficulties with Toshiba and Westinghouse would create huge risks for US reactor projects. Westinghouse is seeking to wipe the slate clean of debt and related financial obligations ties to the South Carolina reactor project.

South Carolina Electric & Gas, and its parent firm SCANA, which has a 55% stake, had wanted to proceed with completing one of the reactors, but the utility’s partner on the project, Santee Cooper, refused to go along.

The model was that TVA eventually completed Browns Ferry, but also several decades late. However, Watts Bar II, also a project restarted long after it was mothballed for lack of electricity demand, came in at twice the original cost estimated to complete it.

SCANA CEO Kevin Marsh said in a statement that no other financial backers came forward to invest in completing one reactor now and another at some future date.  Congress never acted to impose a tax on carbon which further sank prospects for success. (SCANA press release)

Marsh said that killing the project was the “least desired option,” but said that he had no other choice. In addition to the spiraling costs, low gas prices, and flat demand for electricity, Marsh laid the blame on manufacturing failures and design changes in the reactors as major factors.

Santee Cooper CEO Lonnie Carter said that when the project got started eight years ago, he never anticipated natural gas would be so cheap.

Efforts by both utilities to find a way to complete the reactors by the end of 2020, the deadline for qualifying for federal tax credits, were not successful and there is apparently no likelihood that the deadline will be extended just for this project. The reason is that Congress has doubts that the reactors would be completed even if the deadline were extended by several years.

The first reactor was supposed to come online in 2016 and the second in 2019 which would have been plenty of time to meet the tax credit deadline. The latest estimate is that the first reactor would not be completed until 2023.

The two utilities also faced an uphill battle to convince the South Carolina Public Utilities Commission to accept a new round of costs that would have to be absorbed by ratepayers to complete the reactors. South Caroline ratepayers have already been charged $1.4 billion for the project.

Meanwhile Toshiba agreed late last week to pay the two South Carolina utilities $2.2 billion. The payment is intended to close out the Japanese firm’s liabilities for Westinghouse costs.  The first payment is $976 million this year with remaining payments to be made through 2022. Santee Cooper said it would use the funds to pay back ratepayers with lower costs for power. The firm also said it would pursue claims for excessive costs on the project by Westinghouse through the bankruptcy court.

Santee Cooper said the two unfinished reactors would be mothballed in place in case another investor at some future time wants to take over the project should economic conditions change for the better.

Westinghouse CEO Jose Gutierrez told the Pittsburgh Post Gazette that “the company is disappointed in the decision” to kill the project. He said that over 5,000 people are working at the site and all of them will lose their jobs.

Last week Westinghouse reportedly submitted a 5-year plan to the bankruptcy court which included assumptions that the V C Summer project would continue with the firm being a vendor, but not the EPC project manager.  The firm said it will have to re-evaluate the plan to emerge from bankruptcy now that the V C Summer project is dead in the water.

Courtesy The Energy Collective.