In fight over power bills, SCE&G seeks to dis­par­age ex-em­ploy­ees, re­port

The State (Sunday) - - Front Page - BY AVERY G. WILKS aw­[email protected]­tate.com

When the S.C. Pub­lic Ser­vice Com­mis­sion rules on SCE&G’S elec­tric rates next month, the Cayce-based util­ity doesn’t want those reg­u­la­tors to put too much stock into scathing tes­ti­mony by two of its for­mer em­ploy­ees.

Nor does SCE&G want the com­mis­sion to weigh heav­ily a nu­clear con­trac­tor’s late 2015 as­sess­ment that con­cluded SCE&G’S $9 bil­lion nu­clear con­struc­tion project was founder­ing and way be­hind sched­ule.

Fight­ing al­le­ga­tions of fraud and mis­man­age­ment in this month’s PSC hear­ing into the failed V.C. Sum­mer Nu­clear Sta­tion ex­pan­sion project, SCE&G has sought to dis­par­age its for­mer em­ploy­ees and a high-pow­ered con­struc­tion com­pany that it paid $1 mil­lion.

It is a key part of SCE&G’S de­fense as the state’s util­ity watch­dog, en­vi­ron­men­tal­ists and con­sumer groups cite those wit­nesses to bol­ster their ar­gu­ments that the util­ity’s power bills – which rose by about $27 a month to bankroll the fail­ing project – should be slashed.

That strat­egy likely will be on dis­play again Tues­day when

for­mer util­ity ex­ec­u­tive Car­lette Walker, vice pres­i­dent of nu­clear fi­nance ad­min­is­tra­tion for SCE&G’S par­ent com­pany SCANA, and re­tired SCE&G en­gi­neer Ken Browne tes­tify be­fore the com­mis­sion for the first time in this case.

‘IM­PEACH YOUR OWN PEO­PLE’

Walker and Browne are star wit­nesses for the S.C. Of­fice of Reg­u­la­tory Staff, the state’s util­ity watch­dog.

In sworn state­ments filed with the PSC, both have said SCE&G ex­ec­u­tives mis­led the com­mis­sion in 2015 by tes­ti­fy­ing the project would cost $698 mil­lion more to com­plete – a num­ber sup­plied by the project’s lead con­trac­tor, West­ing­house.

That num­ber was un­re­al­is­ti­cally low and based on a pro­duc­tiv­ity rate that never had been achieved at the Fair­field County con­struc­tion site, Walker and Browne say. A team of SCE&G ac­coun­tants and engi­neers worked for weeks to es­ti­mate the project ac­tu­ally would cost an ad­di­tional $1.2 bil­lion to fin­ish — $500 mil­lion more than West­ing­house had said.

That half-bil­lion-dol­lar dif­fer­ence is key to Reg­u­la­tory Staff’s ar­gu­ment that SCE&G fraud­u­lently won rate hikes and kept its fail­ing nu­clear project alive by pro­vid­ing the PSC with low-balled cost es­ti­mates.

SCE&G’S at­tor­neys and wit­nesses have coun­tered that ar­gu­ment by dis­parag­ing the util­ity’s own in­ter­nal cost-pro­jec­tion team.

The util­ity’s chief ex­ec­u­tive, Jimmy Ad­di­son, tes­ti­fied SCE&G went with West­ing­house’s num­ber be­cause the nu­clear con­trac­tor had more ac­cess to in­for­ma­tion. He de­scribed SCE&G’S team as a “small group of peo­ple” that didn’t speak for the util­ity.

At one point, SCE&G out­side at­tor­ney Jonathan Chally ques­tioned the cred­i­bil­ity of the util­ity’s cost-pro­jec­tion team by not­ing none of its mem­bers ever had worked on a nu­clear plant, as West­ing­house had.

“It’s odd to me that you would im­peach your own peo­ple,” replied Gary Jones, a wit­ness for Reg­u­la­tory Staff with more than 45 years of ex­pe­ri­ence in the nu­clear in­dus­try. In­stead, “You brag on West­ing­house. You brag on a com­pany that never got a sched­ule right in the whole his­tory of the project.”

‘SCRUBBED’

SCE&G also has taken aim at a dam­ag­ing, fall 2015 as­sess­ment of the project by San Fran­cis­cobased Bech­tel Corp., the coun­try’s largest con­struc­tion com­pany.

Bech­tel — paid $1 mil­lion by SCE&G and its mi­nor­ity part­ner, the state-owned San­tee Cooper util­ity — con­cluded the ef­fort to build two new nu­clear re­ac­tors needed sig­nif­i­cant im­prove­ments and was fail­ing.

An Oc­to­ber 2015 draft ver­sion of the re­port pre­dicted the nu­clear con­struc­tion project would not be fin­ished in time to col­lect $2 bil­lion in fed­eral tax cred­its needed to de­fray the cost of the re­ac­tors. But Ge­orge Wenick, an out­side at­tor­ney for SCE&G, said he had that sec­tion of the re­port deleted from the fi­nal, Feb­ru­ary 2016 ver­sion, which SCE&G did not dis­close to state reg­u­la­tors.

Over the first three weeks of the PSC hear­ing, Reg­u­la­tory Staff and SCE&G have spent hours quar­rel­ing about the re­port’s im­por­tance.

Reg­u­la­tory Staff has ar­gued it — along with the PSC — should have been given the re­port, say­ing the doc­u­ment could have sparked a frank dis­cus­sion about whether the project should con­tinue.

But SCE&G’S at­tor­neys and wit­nesses have dis­missed the re­port.

Kevin Marsh — the for­mer CEO of SCE&G par­ent SCANA — tes­ti­fied in a sworn state­ment that the util­ity’s ex­ec­u­tives didn’t con­sider the re­port ac­cu­rate or re­li­able. He also has said Bech­tel’s re­port didn’t tell SCE&G any­thing the util­ity didn’t al­ready know.

Wenick tes­ti­fied Bech­tel used “flawed method­ol­ogy” and lacked ev­i­dence sup­port­ing its con­clu­sion. SCE&G also has said Bech­tel ad­mit­ted it didn’t have ac­cess to data it needed for its as­sess­ment.

But in a newly re­leased sworn state­ment, Bech­tel gen­eral man­ager of nu­clear power Ty Trout­man said, “We, ul­ti­mately, got ev­ery­thing we needed to do the as­sess­ment.”

Jones, the Reg­u­la­tory Staff con­sul­tant, said the com­mis­sion should not let SCE&G dis­miss a $1 mil­lion re­port from “one of the top con­trac­tors in the nu­clear busi­ness.”

He asked why the re­port was edited and with­held from reg­u­la­tors when SCE&G could have told state reg­u­la­tors it ex­isted but the util­ity didn’t con­sider it cred­i­ble.

“It’s just amaz­ing to me that, if you didn’t be­lieve it was sig­nif­i­cant, SCE&G took so many pains to hide it from us,” Jones said. “They scrubbed it. They white­washed it. They flushed it.”

SEAN RAYFORD on­[email protected]­tate.com

SCE&G at­tor­ney David Balser lis­tens to open­ing state­ments dur­ing the first day of the Pub­lic Ser­vice Com­mis­sion trial into SCE&G’S rates fol­low­ing the V.C. Sum­mer nu­clear de­ba­cle on Nov. 1 in Columbia.

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