COLUMBIA, S.C. _ After working nine years to expand a nuclear power plant in South Carolina, utilities Santee Cooper and SCE&G said Monday they are pulling out of the $14 billion reactor project in the wake of rising costs, falling demand for energy, construction delays and the bankruptcy of lead contractor Westinghouse this past spring.
SCE&G said in a news release that a comprehensive review of the nuclear project _ a review that began after Westinghouse filed for bankruptcy _ caused the company to conclude that finishing the two nuclear reactors "would be prohibitively expensive."
The end of the project in Fairfield County is likely to cost thousands of workers their jobs, but utility officials said they had little choice in walking away. SCE&G and Santee Cooper have together spent about $9 billion on the project, which is about one-third complete. Ratepayers of SCE&G have already paid about $1.4 billion through higher monthly utility bills.
"We arrived at this very difficult but necessary decision following months of evaluating the project from all perspectives," SCANA Chairman and CEO Kevin Marsh said in the news release. SCANA is SCE&G's parent corporation.
Marsh said several factors beyond the company's control have changed since the construction project was launched, including the Westinghouse bankruptcy. SCE&G had considered building just one of the reactors but rejected that plan after Santee Cooper withdrew from the effort.
Santee Cooper officials said the project had been delayed by the inability to get major construction pieces on time, as well as problems dealing with Westinghouse. The company blamed much of the project's troubles on Westinghouse. Those troubles contributed to the project costing 75 percent more than originally projected, the state utility said. Santee Cooper also said falling demand for energy made the need for the two reactors less urgent
"The winds of time ... have certainly changed the way that the world looks today for completing these units," Santee Cooper chief executive Lonnie Carter said after the Santee Cooper board voted Monday to pull out of the project. "We are disappointed that our contractor has not fulfilled their obligations to us."
Carter said the federal government should seriously consider helping to build nuclear power plants if federal officials believe atomic energy is worthwhile to pursue.
"Generation diversity remains an important strategy for Santee Cooper, but the costs of these units are simply too much for our customers to bear," said Leighton Lord, Chairman of the Santee Cooper Board of Directors.
Monday's decisions mean SCE&G customers will have paid about $1.4 billion for a project that won't be finished. Under a state law passed 10 years ago, SCE&G was allowed to charge customers for the project before it was finished. About 18 percent of an SCE&G customer's bill goes for the nuclear project. It was unknown Monday how SCE&G charges might be affected by the companies' decision.
But Carter said the state utility would try to hold future rates down. Nearly $1 billion pledged to Santee Cooper by the Toshiba Corp., Westinghouse's parent, could be used to offset future rate increases that would have been assessed to pay for the project, Santee Cooper officials said. The question is whether Toshiba, itself in financial trouble, can make good on the pledge, Carter said.
"It wouldn't be a direct rebate; they would actually just see it in their power bills through lower costs," Carter said.
Meanwhile, shutting down the project will leave as many as 5,000 workers unemployed at the site. Some already were being told Monday to leave the premises.
At Gill's convenience store near the plant, about 50 plant workers gathered in the parking lot to talk about the decision Monday afternoon. They said they had been at the plant working as normal when they were told about 1:30 p.m. to turn in their badges and leave the premises.
The decision to abandon the project will be "devastating" for Fairfield County, said former state Rep. Boyd Brown.
"We've been waiting for this windfall of money for years," said Brown, a Democrat. "They were planning decades ahead to change Fairfield County forever _ water projects, sewer projects. ... It's going to be devastating, simply devastating."
Former state Sen. Creighton Coleman, a Democrat from Fairfield County, said the nuclear project is "like a city in a city _ 6,000 workers. Tons of raw materials ready to go in the reactors. I'm shocked they made that decision."
The Santee Cooper board of directors' vote, held during a special meeting at the Nelson Mullins law firm in Columbia, followed a closed door meeting of more than 90 minutes. Board members did not discuss their reasons for voting to end the project.
Shortly afterward, SCE&G issued a news release saying it, too, was withdrawing from the project.
Monday's developments followed increasing uncertainty about whether the nuclear reactors could be finished affordably _ and whether the energy they would provide is needed.
Both Santee Cooper and SCE&G said in a news release last week that the project faced "significant challenges" as a result of higher-than-expected costs and a longer timetable to complete the work. The utilities launched efforts to build the project nearly a decade ago and began construction in 2012.
Analysts who advise SCE&G investors have become increasingly nervous about how the rising cost of the nuclear project would affect the company. The stock price of SCE&G's parent company, SCANA, fell to a 52-week low Friday as speculation mounted about the project.
But the stock rebounded after Monday's announcements, climbing $3.08, or 5 percent, to close at $64.37.
Prime contractor Westinghouse, which designed the South Carolina project and one in Georgia, filed for bankruptcy in March, and its owner, Toshiba, is in such dire financial shape that it also is a candidate for bankruptcy.
Santee Cooper executives said last week they fear Toshiba won't be able to make good on $2.2 billion in payments it has pledged to SCE&G and Santee Cooper to compensate for the Westinghouse bankruptcy.
In addition to concerns about money, critics have blasted both power companies for building the reactors at ratepayer expense when it's questionable whether the energy from the two units will be needed anytime soon.
The demand for energy has fallen since the utilities launched the project nearly a decade ago, and forecasts show both utilities will have more energy capacity than is typically needed by utilities.
With two new nuclear units creating some 2,200 megawatts of energy, Santee Cooper would have had up to 44 percent reserve capacity, about three times the amount the utility says is needed, according to records reviewed by The State newspaper. Records show the reserve margin for Santee Cooper would remain in the 30 percent range for more than a decade.
SCE&G and Santee Cooper launched the nuclear expansion effort in 2009 after the state Legislature passed the Base Load Review Act, which took away much of the financial risk to investor-owned SCE&G. The law has led to nine rate increases for SCE&G customers.
Monday's decision marks the second time in a decade that Santee Cooper has abandoned plans for a major new power source. In 2009, the company dropped plans to build a coal-fired power plant in South Carolina's Pee Dee region after determining the plant was not needed. A handful of electric cooperatives the company served switched to Duke Energy, which reduced the demand for power.
Tom Clements, an adviser for Friends of the Earth, said he hopes to learn more about what went wrong with the project at Tuesday's Public Service Commission session with SCE&G. Clements' group opposes the project and says ratepayers should be reimbursed for what they've paid for the reactors.
After Monday's Santee Cooper board vote, Clements said his group and the Sierra Club will push to have ratepayers paid back for some of the costs they have put into the project. He said money has been wasted on the project.
"It's absolutely essential that the company, and Santee Cooper, now be put on the hook for a lot of these costs they tried to (put) on the ratepayers," Clements said. "This is a sad day for South Carolina. This has just gone on and on for almost a decade."
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