2 August 2017

Utilities Abandon V. C. Summer AP1000 Reactor Construction Following Westinghouse Bankruptcy

Utilities Abandon V. C. Summer AP1000 Reactor Construction Following Westinghouse Bankruptcy

WNISR, 1 August 2017

On 31 July 2017, Santee Cooper (formally, the South Carolina Public Service Authority) and SCANA Corporation announced that they were halting construction of the V. C. Summer project in Jenkinsville, South Carolina. The two entities hold 45 percent and 55 percent stakes of the project respectively.

The following day, on 1 August 2017, SCANA executives briefed the state’s Public Service Commission, which had approved earlier cost escalations, and announced plans to charge its customers billions for the abandoned project.
Both corporations attributed their decisions primarily to the expected cost and time overruns, if the project had been completed. Santee Cooper said that its analysis showed “the project would not be finished until 2024, four years after the most recent completion date provided by Westinghouse, and would end up costing Santee Cooper customers a total of $11.4 billion”. Likewise SCANA’s evaluation of “the project costs and schedules” led it to conclude “that completion of both Units would be prohibitively expensive”. The announcement caused an increase in the share prices of SCANA and financial analysts upgraded its stocks.

The decision to abandon V. C. Summer has been a credible option ever since Toshiba-owned Westinghouse Electric Company, filed for Chapter 11 bankruptcy protection in the U.S.(see WNISR, Westinghouse: Origins and Effects of the Downfall of a Nuclear Giant). Indeed, as SCANA Chairman and CEO, Kevin Marsh, put it on 31 July 2017, “the bankruptcy of our primary construction contractor, Westinghouse, eliminated the benefits of the fixed-price contract to our customers, investors, and other stakeholders”. But this statement puts a more positive spin on SCANA’s decision; when Westinghouse filed for bankruptcy, SCANA chief executive Kevin Marsh, had expressed a clear preference for continuing with the project: “Our commitment is still to try to finish these plants. That would be my preferred option. The least preferred option, I think realistically, is abandonment”.

Westinghouse’s bankruptcy, in turn, was not unexpected either, when viewed in light of the history of spectacular cost overruns with nuclear power plant construction projects and the painful economic realities learnt by overly optimistic nuclear reactor vendors, which offered unworkable fixed price contracts. The bankruptcy filing also resulted from Toshiba’s unrealistic business case, which a decade ago had assumed that 130 GW of new reactor capacity would be built by 2020. That has, of course, not happened.

The suspension of V. C. Summer recalls the history of 40 other stranded nuclear reactor projects in the United States, whose construction started in the 1970s, and which were abandoned between 1977 and 1989, as can be seen from the Global Nuclear Power Database. Some commentators have termed the decision to abandon V.C. Summer as the equivalent of throwing “billions down the drain”, but the construction-completion option was akin to throwing additional billions into a barrel without a bottom.