Trillions Construction and Business News

Suit Demands Refund and Damages for Abandoned South Carolina Nuclear Plant Project

October 4, 2017

A federal lawsuit filed on September 22 is demanding citizens' money back after a regional energy marketer and supplier allegedly lied about progress on a multi-billion nuclear power plant project.

The lawsuit, filed in Columbia, South Carolina, is a class action suit against SCANA, a regional energy holding company operating in the southeastern United States, violated federal racketeering laws by intentionally misleading the public as to the status of a now-defunct nuclear power project in South Carolina, then continuing to take payments from customers to help support the project, even when they knew the project was in bad shape and might even be cancelled. SCANA, operating in South Carolina via its wholly-owned subsidiary South Carolina Electric & Gas (SCE&G), is the sole defendant in the case. It is a utility subject to regulation of the South Carolina Public Service Commission (SCPSC). According to the case filing, the Plaintiff Class, which consists of residents in South Carolina who buy their electricity from SCANA, represents “a large portion of the residents”.

The nuclear power project in question dates back to a February 2006 plan by SCANA and Santee Cooper, a South Carolina public utility, to build two nuclear reactors at SCANA’s V.C. Summer facility in Fairfield County. The project was abandoned by the partners after they had spent $9.8 billion on the effort. It will also cost approximately $2 billion to shut the project down.

In the case filing, the lawsuit says SCANA and Santee Cooper accepted funding for the project and, by doing so, had the obligation “to act in a reasonably prudent manner in the construction of the Reactor project”. Despite that obligation, the lawsuit said that, at the time SCANA And Santee Cooper made the application to build the project, they should have already known:

  1. The Reactor project design they had selected had never been constructed before;
  2. The Reactor project design they had selected had not been approved by the Nuclear Regulatory Commission; 
  3. That construction of the Reactor project included a substantial risk of failure that SCANA and Santee Cooper actively concealed and/or publicly minimized;
  4. Upon information and belief, the risk of failure of the Reactor project was so great that neither SCANA nor Santee Cooper would have commenced the Reactor project but for the funding pursuant to the Base Load Review Act;
  5. Upon information and belief, SCANA knew or should have known that SCANA’s bottom line would be enhanced if the Reactor project was approved by the SCPSC regardless if the Reactor project was actually finished.

The lawsuit goes on to say that the information provided by SCANA and Santee Cooper to SCPSC was “false or materially false, including...:”

  1. The expected price of the Reactor project;
  2. The expected output of the Reactor project; 
  3. The expected date the Reactor project would come into service; 
  4. The expected need for the Reactor project for future capacity requirements; 
  5. The expected risk of delay in constructing the Reactor project;
  6. The expected risk of failure to cost-effectively construct the Reactor project; 
  7. The expected purpose of the Reactor project to sell electricity to consumers within the State of South Carolina when in fact it was to be utilized to sell electricity to customers outside of the State of Carolina;
The alleged fraud therefore goes beyond knowing about risks and not communicating real status. It also extends to lying about who the project was going to serve, assuming it was to be complete, and billing the citizens of South Carolina for what amounts to an investment that would pay back for use outside of the state. 

The suit goes on to say that, with approval to proceed in hand from the SCPSC, the defendant and its partner Santee Cooper, went ahead taking money from the Plaintiffs knowing full well they were deceiving the public from day one of the work on the reactor. They also make a number of allegations which amount to saying the company mismanaged the project and also hid that from the public, despite the costs and risks of the project going up as a direct result. The lawsuit further claims the nuclear power plant partners raised utility rates a total of 14 times to cover project costs, and gave bonuses to top executives at SCANA for promoting “operational excellence” in developing the plant.

The lawsuit also alleges the true status of the project was kept hidden from regulators and the public, even at the same time as SCANA and Santee Cooper continued to take payments for ongoing work on the project.

On September 25, the first business day following the filing of the lawsuit, the State Law Enforcement Division was asked by South Carolina’s House of Representatives to investigate SCAN for possible criminal fraud related to the partially-complete nuclear reactor project.

In view of the class action suit, SCANA’s stock has fallen dramatically, and further lawsuits are being threatened. One can expect bankruptcy filing to be something already actively under consideration in SCANA’s executive offices. It which would protect management, with the burden of the abandoned project costs and other expenses to remain primarily in the hands of the citizens of the state, followed by employees who may need to be let go and shareholders who knew nothing about what had happened. Unless, of course, criminal fraud can be proven.

If this case proceeds and has some success in bringing justice and some money back to the Plaintiff class, other abandoned nuclear reactor efforts may see some similar actions, simply because of the poor state of project management for nuclear reactors across the country.

Of 253 nuclear reactors ordered for construction in the United States between 1953 and 2008, 48 percent were cancelled, 11 percent were shut down prematurely, and 14 percent had an outage lasting at least a year. With those kind of percentages, it is perhaps most surprising that are not already a lot more lawsuits like the one currently pending in South Carolina against SCANA.

Nuclear energy is unfortunately being promoted today as one of the cleanest sources of energy, and most efficient. With projects like SCANA demonstrating that apparently one of their major purposes is to help the companies building the reactors make money, while bilking customers for hundreds of billions of dollars (in current dollars) for the almost half of reactors which were never completed, this is an obscene misuse of public funds. Had the same amount of money been invested in renewable clean energy sources like solar, wind and tidal, projects would not only have been completed but the payback to the nation would be visible to all, many times over.