VC Summer Jan 31 2018 IMG_3685B.jpg

An aerial shows the the V.C. Summer nuclear project. High Flyer/Provided

COLUMBIA — Attorneys opposing S.C. Electric & Gas won a vital victory last week, likely spoiling the utility's attempts to block a critical audit from being used against it and weakening the company's position as it seeks to charge customers $3.3 billion for its failed nuclear project in the coming decades.

As they have for nearly a year, SCE&G's attorneys argued in federal court the once-secret audit by Bechtel Corp. can't be used as evidence because the utility hired a lawyer in Atlanta to commission the study of the struggling reactor project. They say its protected by attorney client privilege. 

But U.S. District Judge Michelle Childs ruled otherwise last Tuesday, marking one of the first official decisions to allow the consequential audit to be used as evidence in the long list of lawsuits and regulatory cases filed against SCE&G.

Bechtel's audit remains at the center of every major legal battle surrounding the V.C. Summer nuclear project. The company's findings were explosive: They criticized the utility's oversight. They suggested the reactor designs were often unbuildable. And they concluded the construction schedule in 2015 was unrealistic.

None of it was revealed until the project was cancelled last summer.

Since then, SCE&G protested its project partner Santee Cooper turning over Bechtel's final report to Gov. Henry McMaster. The company's leaders declined to discuss Bechtel's findings during legislative hearings. And they have yet to turn over related documents in state court.

Lawyers facing off against SCE&G and its parent company, SCANA Corp., believe the judge's decision is the first major domino to fall in the battle for information about the $9 billion nuclear failure. The audit is now likely to be used as a sledgehammer against the company in federal court, a number of state lawsuits and cases being decided by the seven utility regulators on the South Carolina Public Service Commission.

"I think it's one more nail in the company's coffin," said Bob Guild, an attorney for Friends of Earth and the Sierra Club who is challenging SCE&G in front of the utility commission. 

The Bechtel audit is likely to play a huge role in deciding whether SCE&G or its more than 700,000 electric customers foot the bill for the reactors after December. Those ratepayers have already paid more than $2 billion to finance the project since 2008 in what many people consider the biggest economic failure in state history. 

SCANA's spokesman Eric Boomhower declined comment, referring The Post and Courier to the arguments laid out by the utility's attorneys in court. They continued to maintain Bechtel's work is protected by attorney-client privilege. 

In an ironic turn of events, it was SCE&G's own actions that allowed the Bechtel report to be used in court. SCE&G's attorneys publicly shared the document and other internal notes about Bechtel's work with the state's utility regulators in early June.

As a result, they undermined SCE&G's argument the audit was confidential, said Matthew Richardson, a Columbia attorney who represented the South Carolina Senate in federal court and is assisting the Office of Regulatory Staff, the state's utility watchdog.

"They continue to try to put the cat back in the bag," Richardson told Judge Childs during the federal hearing last Monday.

But the power company is pushing back in an attempt to show the Office of Regulatory Staff actually knew of the audit in the lead up to regulatory cases in 2015 and 2016. SCE&G's attorneys formally asked the state agency on Thursday when it learned about the Bechtel report, what it heard about the findings and why state officials didn't pursue the document harder. 

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Essentially, SCE&G's attorneys are trying to show that state officials should have been more aggressive in past years. 

But testimony in federal court last week showed the limited number of people, even with SCE&G, who were looped in on Bechtel's work. 

SCANA's deputy general counsel, Chad Burgess, admitted under oath he only became aware of Bechtel's audit in late August 2017 — nearly a month after the reactor project was canceled and a few days before The Post and Courier published the audit online.

The company's new chief financial officer, Iris Griffin, also took the stand and told a packed courtroom she's never read Bechtel's analysis, even after taking over the company's finances and relations with Wall Street investors. Griffin worked as an accountant for SCANA in the years prior to being promoted earlier this year, after two of the company's top executives resigned in the wake of the nuclear fiasco.  

"She's sticking her head in the sand if she's not reading the Bechtel report," Richardson announced during the hearing. 

Scott Elliott, an attorney representing large industrial electric customers in the utility case, hopes the federal judge's decision will increase the pressure on SCE&G and speed up the regulatory hearings scheduled for November. 

"That would eliminate a great deal of legal wrangling. It is a big plus," Elliott said. "It's a huge document, so the fact that it has been accepted into evidence will open the floodgates, so to speak."

Reach Thad Moore at 843-937-5703. Follow him on Twitter @thadmoore.