14 November 2013

Construction Start at VC Summer Reactor Unit 3

It was announced on 4 November 2013 that the pouring of concrete for the basemat of the AP1000 Pressurized Water Reactor unit 3 at VC Summer in South Carolina had been completed. Construction of unit 2 began in March 2013. Both reactors are owned by South Carolina Electric & Gas Company (SCE&G) and South Carolina Public Service Authority (Santee Cooper). The 43 hour operation to pour the concrete is to provide the basemat, which provides a foundation for the containment and auxiliary buildings that are within the nuclear island.

Unlike the two AP1000 reactor projects at Vogtle in Georgia, the VC Summer project has not yet secured a Department of Energy (DOE) Federal Loan Guarantee. Santee executives have also admitted that the original decision to build the reactors in 2006 was made when economic prospects for the utility looked better and that if they had known what they know now they would not have committed to cover 45% of the costs. The rising nuclear generated debt threat for the utility is also perceived by Wall Street credit agencies as a major risk unless it can reduce its ownership share of the new reactors, as consequence Santee Cooper has had its credit rating downgraded.
However, efforts over the past 3-4 years to sell more than half its share of the project has failed to secure a buyer. The one remaining utility in discussions with Santee, Duke Energy, has indicated that it is interested in a 10 percent purchase, but having just delayed a decision on a new reactor project at Lee, there remain major uncertainties as to whether it will commit to become a partner in the VC Summer project.
Santee Cooper recently announced that it has borrowed $1.34 billion, a record amount for a public agency in South Carolina, with additional multi-billion heavy borrowing predicted in the coming few years. The bulk of the money is required for financing of the VC Summer reactors. Rate increases for the utility’s customers is also predicted.
SCE&G and Santee Cooper estimates for the total cost of completing the two reactors at VC Summer have already proven inaccurate with a 10% cost increase in less than four years. Yet other estimates suggest total costs will be 25-80% higher than the current US$10 billion reported by the utilities. These costs are already being passed on to the ratepayers of South Carolina through the Base Load Review Act and the associated Construction Works in Progress which as analysis has shown alters the principles of consumer protection at the heart of utility regulation by guaranteeing the utility advanced recovery of costs for nuclear reactor construction, concluding that the economics of the project are abysmal.
In June 2013, SCE&G, with a 55 percent controlling interest in the project, announced that the schedule for operation of VC Summer reactor unit 2 would be delayed by one year to early 2018, with a similar delay for unit 3. The delays were expected to add US$200 million to the project cost.