South Carolina Electric & Gas worried that a highly critical audit of its nuclear project could be used against it even before the report was written — fears that intensified because it regarded the review as too cursory to fully unpack the project's problems.
SCE&G says it now fosters even deeper concerns about the long-secret report, which has formed the crux of several lawsuits alleging the utility papered over problems with the V.C. Summer expansion until it failed.
The power company says it harbors doubts about the author, Bechtel Corp.'s motivations and the report’s impartiality. It says Bechtel, an engineering and construction giant, quietly worked to lock down a long-term contract consulting on the troubled project. It even says that Santee Cooper, the minority owner of V.C. Summer, worked behind the scenes to help Bechtel win the job.
That's the case SCE&G made this week in a new filing with South Carolina regulators. The Cayce-based utility is at once seeking to downplay the report's significance and keep documents related to it from being used in the hearings that will determine how much it can charge ratepayers.
The filing represents SCE&G's most full-throated defense yet of its handling of the Bechtel report, which became public last September. And it sets the stage for a fight over what evidence regulators will consider when they decide whether the utility can collect $3.8 billion for the failed V.C. Summer construction project over the next two decades.
"The record clearly shows that the Bechtel report is not a 'smoking gun' on this project," SCE&G said in its filing.
Lawyers opposing SCE&G have disagreed with that assessment. The Bechtel report laid out a litany of problems at V.C. Summer, like designs for reactor parts that couldn't be built, a construction schedule that was slipping further away and disorganized contractors that struggled to keep up. And its findings have been cited in a bevy of lawsuits filed by ratepayers and investors.
"SCE&G says it will provide the full account but hasn't done so yet. We look forward to getting all the drafts and communications about the previously secret report," said Matthew Richardson, an attorney for the Office of Regulatory Staff, the state's utility watchdog agency.
SCE&G has said the problems Bechtel identified were no secret, even before they were written into the report, and it says the auditors' analysis was relatively shallow because they didn't have access to all of the project's records. It also says it tried to remedy most of them by signing a new deal with its contractor, Westinghouse Electric, that limited some of its risk.
That's what gave SCE&G and Santee Cooper's lawyer, George Wenick, pause. He thought the report might torpedo their chances in court if they chose to sue Westinghouse.
Months before auditors arrived at the construction site, he wrote the utilities to emphasize "the importance of protecting Bechtel's eventual report from disclosure," according to internal emails released by SCE&G. He warned that he'd seen similar reports backfire when they weren't kept private under the protection of attorney-client privilege.
"The same could happen here, with the Bechtel report," Wenick wrote. "We should give careful thought to whether we want to put Bechtel in the position of possibly deciding any eventual dispute, based on a seven-week review."
The next day, Santee Cooper's general counsel, Mike Baxley, responded that the CEOs of Santee Cooper and SCE&G were starting to think it would be more useful to share the report with Westinghouse rather than use it to build a lawsuit.
The utilities ultimately decided to have Wenick hire Bechtel in an attempt to keep the report private. In a statement, SCE&G spokesman Eric Boomhower said it did so because "the threat of litigation with the Westinghouse consortium was real."
And while the group was hired by Wenick, Bechtel continued to talk to Santee Cooper directly, which SCE&G says is cause to doubt the report's impartiality. Santee Cooper wanted to have Bechtel stay on as a consultant once the audit was done, and Bechtel appeared to send its executives notes about how to get SCE&G on board.
SCE&G now says it believes Bechtel had an incentive to write an "unfavorable report as a means to pitch for additional work." The company also said that Bechtel's efforts to win more work involved "drafting a report that justified such a role."
Santee Cooper and Bechtel rejected that assessment.
Santee Cooper spokeswoman Mollie Gore said the state-owned utility did call for outside help to oversee the project, but made "no commitment to any particular firm." And in an email, Bechtel spokesman Fred DeSousa said the company undertook its assessment of the V.C. Summer project "with diligence and professionalism."
"We vehemently disagree with any suggestion to the contrary, and our work speaks for itself," DeSousa said.