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Early signs of 'incompetence at every level' went unheeded as South Carolina rushed toward 'sexy' nuclear future

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COLUMBIA -- The scaffolding wasn't there when welders arrived. So they stood around.

Construction orders for dozens of ironworkers weren't handed out until mid-afternoon. So they pushed brooms.

Workers couldn't tighten bolts to steel beams because of questionable engineering. So they spent hour after costly hour doing workarounds.

Seasoned laborers who worked on two now-cancelled nuclear reactors in South Carolina described the $9 billion construction effort as one of the most dysfunctional jobs they have ever done.

“Incompetency at every level,” said one construction worker, who like others asked not to be named for fear of being blacklisted in the industry.

The soon-to-be-abandoned construction site at the southern tip of the Monticello Reservoir in Fairfield County, where roughly 5,000 employees once labored, was spared no expense.

Workers erected a blue 560-foot-tall crane that looms over the two unfinished reactors. It was capable of lifting more than 2 million pounds. Workers built two new plants to continuously pour concrete for the reactors' bases. They constructed a giant assembly garage that could store 7-story-tall reactor components as they were prepped.

VC Summer Plant07.jpg (copy)

Cranes surround the construction of one of two new reactors being built at the V.C. Summer Nuclear Power Station in 2016. Work came to a halt in July. File/Grace Beahm Alford/Staff

In July, state-run Santee Cooper and investor-owned SCANA Corp. abandoned the nuclear reactors. Electric customers, state regulators and South Carolina politicians all responded with astonishment.

But the failure of the two reactors near Jenkinsville didn't happen overnight, and the serious problems that occurred with the one of the first nuclear builds in the nation in roughly 30 years wasn't without its warning signs.

Laborers with decades of experience building other power plants across the country told The Post and Courier the project was failing for years — in no small part, because the reactors were being built before the blueprints for construction were even finalized.

SCANA applied to build the reactors with a “generic” schedule that couldn't adequately forecast costs and completion dates. Only 40 percent of the construction-ready designs were completed by the time the Nuclear Regulatory Commission gave the go ahead to start pouring concrete and erecting steel.

When the two utilities pulled the plug last month, they still didn’t have a fully-integrated construction schedule — a tool that links labor, supply chains and budgets together for planning purposes. Such a schedule is crucial for a project of this scope because there are so many moving parts and inter-related tasks that hinge on one another. It had been promised for years as temporary timelines were extended and cost overruns mounted.

Worse, the pre-fabricated pieces for the reactors that were meant to revolutionize nuclear construction and prevent cost overruns were manufactured incorrectly from the beginning. The complete Westinghouse reactor design didn't get approved by federal regulators until three years after the state allowed SCANA to start charging its electric customers.

The decade-long saga that led to the financial crisis now facing South Carolina is complex.

It includes corporate-friendly politicians, an ambitious for-profit utility, an untested nuclear design, utility regulators who didn't raise questions, investors who had nothing to lose, a state-operated financial partner and a small state looking to be on the leading edge of a nuclear renaissance.

Leaders of SCANA and Santee Cooper, the two partnering utilities, have laid much of the blame for the unfinished reactors on Westinghouse, the lead contractor and designer of the reactors. The storied company filed for bankruptcy earlier this year.

But SCANA held “ultimate responsibility” for constructing the reactors and executing the related contracts, state regulators told the utility in 2009. And, Santee Cooper had signed a deal that gave SCANA “primary responsibility” over the construction and startup of the plants. As a result, Santee Cooper had just three permanent employees on site, even as they issued roughly $4 billion in bonds for their share of the project.

Power to the people

Dozens of construction workers Monday prepare the site where one of two new nuclear reactors will be built at the V.C. Summer Nuclear Station in Jenkinsville, S.C. SCE&G and Santee Cooper will jointly operate the reactors.

Laborers that worked on the reactors from the beginning compared the oversight of the project to a parent giving their child an unlimited credit card without bothering to check the monthly statements.

“SCANA wants to sit back and holler about overrun budgets. SCANA let this take place,” said Glenn Hagan, an ironworker of 39 years who worked as a lead training instructor at V.C. Summer. “You are the owner. That is your money.”

'Into the fast lane'

In June 2012, more than 700 miles away from the construction snafus at V.C. Summer, Kevin Marsh was wooing a crowd of investment analysts in New York. Marsh had just been promoted to CEO of the burgeoning utility. He wanted them to know that his leadership would propel the company and its shareholders to new heights. 

“I have to tell you that we’ve gotten on the interstate and we shifted into the fast lanes and we're moving comfortably down the road,” Marsh told his audience at the company’s annual investment conference.

Nuclear Plant South Carolina

Kevin Marsh, CEO of SCANA Corp., speaks to the media at the V.C. Summer Nuclear Station near Jenkinsville, S.C., during a media tour of the facility Wednesday, Sept. 21, 2016. SCE&G is seeking a 3.1 percent residential raise that would be the largest single rate increase since the utility began charging its 700,000 customers for the reactors' construction. The hike, which would take effect at the end of November if approved, would be the ninth such increase to pay for the $14 billion reactors since 2009. (AP Photo/Chuck Burton)

The promise of SCANA building two nuclear reactors in South Carolina had already boosted the small regional utility’s prospects. Three years before, SCANA joined the S&P 500 — one of the premier listings on Wall Street — a sign of its growing stature.

Marsh's rosy "fast lane" comments came just months after the Nuclear Regulatory Commission gave final approval and federal licenses for Westinghouse's AP1000 reactor design.

Investment analysts at the conference listened attentively as the executives from the Cayce-based utility and Westinghouse took turns at the microphone explaining how the new reactor design ensured the nuclear cancellations that plagued utilities in the 1970s and 1980s wouldn’t be repeated.

The secret to the Westinghouse design was all about modular construction.

A large part of the nuclear reactors would be built in a specialized factory in the United States, shipped to the site and pieced together there.

The idea was akin to building a pre-fabricated home.

“The concept of using modular build sounds sexy, and it is,” said Ric Perez, the former president of Westinghouse, during his presentation to investors. “You get engineers that start drooling over the stuff.”

Perez, who would leave Westinghouse later that year, promised his company’s design could “de-­risk the project by fundamentally changing the game in construction.” The same type of reactors were already being built in China, he assured the investment community.

SCANA senior vice president Steve Byrne echoed Perez, saying the company’s completed NRC license would remove a huge part of the risk from the construction at V.C. Summer that was only just beginning.

But even at that early stage, the nuclear expansion in South Carolina washaving problems with a supply chain that stretched from Italy to South Korea. 

The modular units — the ones engineers couldn’t resist — were a serious issue even before the reactors began rising from the bedrock. The plant in Lake Charles, Louisiana, that was manufacturing the house-sized submodules was immediately plagued by thin welds, warped parts and improperly placed steel. 

The NRC cited the plant not long after production began. Work was stopped as they tried to fix the manufacturing process. Federal regulators would later fine the plant's contractors for retaliating against workers who raised safety concerns. One ironworker had alleged that nearly every module delivered to the construction site early on had to be torn apart and re-welded.

SCANA initially dismissed these and other delays as "startup issues." SCANA didn’t put its own dedicated inspector at Lake Charles until March 2012, the same month it got its NRC license.

Westinghouse and other contractors at V.C. Summer and the sister reactors being built in Georgia would later transfer the fabrication of those modules to facilities in Florida, Oregon, Japan, North Charleston and the V.C. Summer site itself.

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But in earnings calls, promotional videos and media events, SCANA focused more on the grand nature of the construction and its status as one of only two utilities building new nuclear reactors in the United States.

The blue crane used to lift the modules, they liked to point out, was one of the largest heavy lift derricks in the world. They announced themselves as the first utility to pour concrete at a nuclear plant in the United States in 30 years. They “made history” by setting the first nuclear reactor vessel into place in three decades. The peak construction period for the reactors was always right around the corner, according to company earnings calls.

SCANA’s executives talked about reactor's “baby pictures”: the huge modules workers hoisted into place; aerial photographs of thousands of workers at the site; and images of shrink-wrapped nuclear components shipped through the Port of Charleston and trucked up South Carolina highways. They announced to the Governor's Nuclear Advisory Council in 2016 that the large firing range for security officers at the reactors had been completed. 

But buried in stacks of quarterly reports to the Public Service Commission was a different tale, one that would stun the lawmakers who made the project possible: Westinghouse had no firm schedule, benchmarks or budget.

It's akin to signing a mortgage on a new home with only the blueprints for the foundation ready — there's little guarantee the estimated price or move-in date will be accurate.  

Warnings ignored

A decade before South Carolina's nuclear ambitions came crashing down lawmakers in Columbia were setting the stage for V.C. Summer.

Republicans and Democrats in the legislature were busy passing the Base Load Review Act, a piece of legislation that shifted the risk of building two untested reactors from their utilities to their customers.

Lobbyists and the bill's supporters promised the industry-drafted legislation would save customers money and place South Carolina at the leading edge of a new era of nuclear power.

If that didn't work, they warned lawmakers that rolling brownouts would sweep South Carolina. Homes and businesses would see their power fade in and out without the legislation. It was a dire warning that bill sponsor and former Republican Senate President Glenn McConnell voiced at the time.

"We don't need blackouts like in Baghdad here in South Carolina," said McConnell, who is now president of the College of Charleston. "The bottom line is, if our electric generating companies and co-ops do not plan for the future, we're not going to have enough power."

Looking back: Glenn McConnell at CofC (copy)

College of Charleston President Glenn McConnell. File/Paul Zoeller/Staff

In a statehouse where SCANA and other major utilities hold sway, few objections were raised as the bill was fast-tracked through the Senate and House. Only seven legislative days passed between the bill being advanced out of a Senate subcommittee and 104 lawmakers voting for it on the House floor.

Representatives saw no need to run the bill through a committee, where they could vet it.

Few stood in opposition, but former House Majority Leader Jim Merrill offered a prescient warning to his fellow lawmakers. “We are going to end up regretting this," he said. "Not many of us in here understand the entire ramifications of this. It's too big to know. And it's moving mighty quick.”

Safeguards were in place, McConnell reassured. The state has utility regulators.

SCANA was aware of those regulators too. In their interactions with Wall Street analysts, they often talked about the great relationship they maintained with members of the Public Service Commission and the state Office of Regulatory Staff — the two government bodies charged with overseeing investor-owned utilities.

“I believe we’ve got more interest in our story than we’ve have had in years,” SCANA’s chief financial officer Jimmy Addison told analysts in April 2009, after the PSC approved the generic nuclear construction plan. “I think our story’s starting to get out, and people are starting to really understand the details and all the legislative and regulatory support.”

SCE&G asks for rate hike

Workers are shown in 2011 doing early site work on the expansion of V.C. Summer Nuclear Generating Station north of Columbia. SCE&G has taken a pay-as-you-go approach with the project.

The utility executives liked to brag that state regulators had all but rubber-stamped their requests for rate increases every time they had asked to hike customer bills since 2005. Prior to that point, the state had a consumer watchdog solely devoted to advocating for the interests of customers.

But in 2004, state lawmakers axed that public advocate and turned the job over to the Office of Regulatory Staff, which advises the Public Service Commission. 

ORS was tasked with a different mission. Monthly electric bills, the state’s economy and utility profits. They have to promote all three — often contradictory tasks. 

In the past nine years, state utility regulators signed off every time SCANA asked to increase the total project cost and push back the completion date for V.C. Summer. 

In 2011, it was an extra $174 million.

In 2012, another $283 million.

In 2015, $698 million.

In 2016, $831 million and fixed-priced contract with the soon-to-be-bankrupt Westinghouse. 

At the same time, they allowed the completion date for the project to slide from 2016 to 2020.

All were unanimous votes. 

A legitimate construction schedule never appeared, but commissioners continued to gush over the project. "It’s a big undertaking for a small state, but I’m 100 percent behind it,” former commissioner Randy Mitchell assured the lawmakers on the Public Utility Review Committee when he was reapplying for his job in 2013.

Many of the commissioners that were elected by lawmakers emphasized the “blessing” of the Base Load Review Act and thanked the legislature for their “wisdom” in passing the law. Commissioner Butch Howard assured lawmakers the nuclear construction was “scrutinized severely."

Rep. Bill Sandifer, a member of PURC and an advocate of the Base Load Review Act, asked few questions along the way about the project's impact on customers' bills. Instead, his questions in hearings appeared to be laser-focused on whether state regulators were meeting the needs of utility investors.


Back at the site

As lawmakers and regulators missed one chance after another to rein in the project, mismanagement at the plant continued, workers said. 

The pieces for the turbine building's upper floor showed up before the steel supports did. Nobody seemed to know what their budgets were. The logo on workers' hardhats changed three times as different companies took over construction; the disorder remained.  

Glenn Hagan, the longtime ironworker, has since found himself on another track — to retirement.

He wanted to tell his kids how he helped build the reactors that spurred a nuclear renaissance in the United States. His frustration will recede over time, he said. The same can't be said for South Carolina. 

“The impact on this state is what is going to hurt," he said. "This isn’t a quick fix. They are going to feel this for years.”

Reach Andrew Brown at 843-708-1830 or follow him on Twitter @andy_ed_brown.

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