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Friends of
Friends of
the Earth
the Earth
July 16, 2009
July 16,2009
VVL ] 7 pn09
JUL I 7 2009 i),,,
Mr. Charles Terreni
Mr. Charles Terreni
Chief Clerk and Administrator
Chief Clerk and Administrator
Public Service Commission
Public Service Commission of South Carolina,
of South Carolina,
101 Executive Center Dr. Suite 100
101 Executive Center Dr.,, Suite 100
29210
Columbia, SC 29210
Columbia,
Articles on Financial DownRradinR
Down radin to SCE&G Pro'ect Docket 2008-196-E
Due to SCE&G Nuclear Proiect (Docket 2008-196-E)
Dear Mr. Terreni,
Dear Mr. Terreni,
writing to behalf of Friends of the Earth, which maintains
I am writing to you on behalf of Friends of the Earth, which maintains
I on-going interest in
an on-going interest in
the matter of oversight of the S.C. Public Service Commission
the matter of oversight of the S.C. Public Service Commission of the costly nuclear
of the costly and risky nuclear
reactor project South Carolina Electric & Gas (SCE&G).
reactor project by South Carolina Electric & Gas (SCE&G).
For docket I request that the attached be posted in docket 2008-196-E
For the docket record, I request that the attached items be posted in docket 2008-196-E on the
PSC website:
website:
1. Nuclear opponents,
1. Nuclear opponents, SCE&G debate The State, July 16, 2009
SCE&G debate costs, The State, July 16, 2009
2. feels bite Charlotte Business Journal, July 15, 2009
2. SCANA feels rating bite on nuclear plant, Charlotte Business Journal, July 15, 2009
3.
3. Fitch Downgrades
Downgrades &
SCANA & Subsidiaries, 25, 2009
Business Wire, June 25, 2009
Business Wire,
4. Cover page of Moody's report New Generation: Pressure
4. Cover page of Moody's report New Nuclear Generation: Ratings Pressure Increasing,
June 2009
June 2009
to formally maintain these items part of the record, at least
It important to formally maintain these items as part of the record, at least via what is posted
It is important what posted
the docket website, the nuclear project the event that scheduling
forward. In the event that scheduling
on the docket website, as the nuclear project goes forward.
on
cost increases are subject to review, these other articles reports will
slippage and cost increases are subject to PSC review, these and other articles and reports will
slippage
essential establishing the progress of the project, noting the context which the
be essential in establishing the progress of the project, in noting the context in which the
project problems it encounters.
documenting any problems it encounters.
project was pursued and in documenting
pursued
Respectfully
Respectfully Submitted—
Submitted -
Tom Clements
Tom Clements
1112 Florence Street ~ Columbia,
1112 Florence Street • Columbia, SC 29201
SC 29201
803.834.3084 phone & fax •~ tomclements329@cs.com corn • www.foe.org
803.834.3084 phone 8 fax tomclements329@cs. ~ www.
foe. org
100% post consumer waste 100% .~
(_) Printed on 100% post consumer waste using 100% wind power. ®_,0 ~
?
g6 ate
Pbetgtate
COLUMBIA
COLUMBIA ~• SOUTH CAROLINA
SOUTH CAROLINA
BUSINESS
THURSDAY, JULY I 6, 2009 ~* PAGE 86
THURSDAY, JULY 16, 2009 PAGE 136
NUKE
Nuclear opponents,
Nuclear opponents, FROM PAGE
FR(!M PAG_E B6
86
'I'hisS is not a cost overrun, "
is
'qhis is not a cost overrun,"
"'
SCE&G
SCEkG debate costs said
spokesman
Eric
Eric
based utility.
based utility.
Boomhower,
Boomhower,
spokesman for the Columbia-
a
In its report, the utility said the
In its report, the utility said the
a
cost could be as much as $562 mil-
much mil-
Utility says there are no units harl climbed $561.9 million to
had climbed $561.9
says there are $6.875 billion, the Office of Regulatory
$6.875 billion,
lion over the initial estimate or
estimate
overruns in estimates it
overruns in estimates it Staff on Wednesday attributed the higher
Wednesday attributed higher
$172 million under.
S172 million under.
interest
Current interest rates are lower
made to get OK for 2
made figure to how the price was calculated.
get OK for Project opponents charge South Car-
charge South
and when the cost of money is
and when the cost of money is
new Jenkinsville units
new Jenkinsville units olina Electric 8t Gas Co. low-balled the
olina Electric & Iow-balled the
spread out over the life of the pro-
spread out over the life of the pro-
ject, SCE8EG's share of the project
ject, SCE&G's share of the project
for
estimate when it sought approval for the should closer to its initial
should be closer to its initial esti-
project state Public Service
project from the state Public Service
By CRUMBO
CHUCK CRUMBO
By CHUCK
Commission. mate of $6.3 billion, regulators
mate of $6.3 billion, regulators
ccrumbo(, thestate.com
ccrumho(iithestote. corn Commission.
said.
said.
The estimate vvas based using a
The estimate was based on using a
The overall cost of the project,
The overall cost of the project,
by state regulators of
A review by state regulators of five-year average of commodity
five-year average of commodity costs, in- in-
which SCE8EG is sharing with
which SCE&G is sharing with
SCE&G's first quarterly report on the cost
SCESEG's first quarterly report on the cluding interest on construction loans,
cluding interest construction loans,
state-operated Santee Cooper, is
state-operated Santee Cooper, is
of the Jenkinsville nuclear project trig-
of the Jenkinsville nuclear project trig- according to the SCE8 G report. The
according to the SCE&G report. The
gered debate Wednesday over whether $9.8 billion.
$9.8 billion. .
gered debate Wednesday over whether lower price is figured on a 10-year aver-
lower price is figured on a 10-year aver-
Opponents of the plant, though,
Opponents of the plant, though,
the utility is facing hefty cost overruns.
the is facing hefty cost overruns. age, it added.
age, added. said SCE&G has underestimated
said SCE&G has underestimated
While it appears in the report that
While it appears iii the report that
the project's cost.
the project's cost.
SCE&G's costs for adding two i'eactor
SCE8EG's costs for adding two reactor NUKE PAGF. 87
SEF NUKE PAGE B7
SEE "I take this report as a warning
"I take this report as a warning
of greater problems this project is
of greater problems this project is
going to run into, said Tom
"
going to run into," said Tom
with Friends of the
Clements with Friends of the
Clements
Earth. "It's affirmation that we are
Earth. "It's affirmation that we are
getting into unknown and very
getting into unknown and very
risky territory.
"
risky territory."
SOUTH CAROLINA OFFICE OF REGULATORY STAFF'S Dukes Scott, Regulatory Staff
Dukes Scott, Regulatory Staff
SOUTH CAROUNA OFFICE OF REGULATORY STAFF'S executive director, said "construc-
executive director, said "construc-
REVIEW OF THE SOUTH CAROLINA ELECTRIC & GAS COMPANY
REVIEW OF THE SOUTH CAROLINA ELECTRIC 8E GAS COMPANY tion is progressing in accordance
tion is progressing in accordance
MARCH 31, 2009 QUARTERLY REPORT
MARCH 31, 2009 QUARTERLY REPORT with the approved schedule and al-
with the approved schedule and al-
ON THE BUDGET AND SCHEDULE lowed 18-month milestone devia-
lowed 18-month milestone devia-
ON THE BUDGET AND SCHEDULE tion.""
tion.
OF V.C. SUMMER UNITS 2 & 3 CONSTRUCTION
OF V. C. SUMMER UNITS 2 gE 3 CONSTRUCTION SCE8EG is required by state
SCE&G is required by state
regulators to file quarterly reports
regulators to file quarterly reports
on the project's progress.
on the project's progress.
July 14, 009
July 14, 009
In February, state regulators
In February, state regulators
approved the power company's
approved the power company's
plans to build two reactor units.
http: //www. regulatorystaff. sc.gov/ORSReport33109. pdf
http://www.regulatorystaff.sc.gov/ORSReport33109.pdf plans to build two reactor units.
SCE8EG now needs the OK from
SCE&G now needs the OK from
the federal Nuclear Regulatory
the federal Nuclear Regulatory
Commission to proceed.
Commission to proceed.
The first unit is scheduled to
The first unit is scheduled to
begin commercial operation some-
begin commercial operation some-
time in 2016; the second unit in
time in 2016; the second unit in
2019.
2019.
Charlotte Business Journal
Charlotte Business Journal
http: //charlotte. bizjournals. corn/charlotte/blog/power city/2009/07/scana
http://char__tte.bizj_urna_s.c_m/char__tte/b__g/p_wer-city/2__9/_7/scana-fee_s-rating-bite- feels rating bite
on nuclear plant.
on_nuclear_plant.html html
SCANA feels rating bite on nuclear plant
SCANA feels rating bite on nuclear plant
John Downey
John Downey
jdowney@bizjournals.
jdowney@bizjournals.com corn
Wednesday, July 15, 2009
Wednesday, July 15, 2009
Moody's Investor Services lowered SCANA Corp.'s 's bond rating this week and listed the outlook
Moody's Investor Services lowered SCANA Corp. bond rating this week and listed the outlook
as negative because of the S.C. utility's joint ownership of a $12 billion nuclear project under
as negative because of the S.C. utility's joint ownership of a $12 billion nuclear project under
construction.
construction.
Moody's warned investors two weeks ago that it was likely to take a negative view on nuclear
Moody's warned investors two weeks ago that it was likely to take a negative view on nuclear
by power companies. Some in the nuclear industry have taken with that
development by power companies. Some in the nuclear industry have taken issue with that
development
policy. But Moody's stood it when explaining its decision on SCANA.
policy. But Moody's stood by it when explaining its decision on SCANA.
"We remain concerned with the ..
"We remain concerned with the .... risks associated with a project of this magnitude
associated with a project of this magnitude for
for a
company of this size, " Moody's Senior Vice President Hempstead.
company of this size," said Moody's Senior Vice President Jim Hempstead.
subsidiary
SCANA subsidiary S.C. Electric & expanding the V.C. Summer Nuclear Station with Santee
S.C. Electric & Gas is expanding the V.C. Summer Nuclear Station with Santee
the existing nuclear
Cooper. The power companies are adding two AP100 nuclear reactors at the existing nuclear
Cooper. power companies adding two AP100 nuclear reactors
plant.
plant.
Schedule slips
Schedule slips
Meanwhile, the S.C. Office of Regulatory Staff notes in a report filed Tuesday that several parts
Meanwhile, the S.C. Office of Regulatory Staff notes report filed that
of the project have slipped off schedule. The staff points out that SCE&G says none of the
of the project off schedule. The staff points out that SCE&G says of
delays are serious enough to affect the anticipated completion date for each unit.
enough to affect the anticipated completion for unit.
"SCE&G indicates that this is a result of the creation of the first fully integrated project schedule
"SCE&G indicates this is a result of creation of the first fully integrated project
its contractors and is not a trend, " the staff writes. "If these changes do indicate a pattern,
by its contractors
by is not a trend," the staff writes. "If these changes indicate a pattern,
then a trend of this sort this early in the project is cause for concern.
then a trend of this sort this early in the project is for concern."
"
Overall, the staff says, the project appears to be on budget and on time. SCE&G now estimates
Overall, the staff says, the project appears to be on budget and on time. SCE&G now estimates
—
its share of the project may cost more than originally projected -- $6.8 billion rather than $6.3
its share of the project may cost more than originally projected $6.8 billion rather than $6.3
billion. But that is not the result of any cost overruns. The company updates its calculations of
billion. But that is not the result of any cost overruns. The company updates its calculations of
future prices and financing charges every quarter, and those new calculations account for the
future prices and financing charges every quarter, and those new calculations account for the
higher costs.
higher costs.
Costrecoverv concerns
Cost recovery concerns
uncertainties
But uncertainties surrounding
surrounding nuclear
nuclear construction clearly having the
are clearly having an impact in the capital
markets. those issues are reflected in Moody's downgrade.
markets. And those issues are reflected in Moody's downgrade.
The rating agency reduced senior unsecured
The rating agency reduced SCANA's senior unsecured debt rating one notch to Baa2 from Baa1.
debt rating one notch to Baa2 from Baa2.
The report cites weakened
The report cites a weakened balance sheet for SCANA its subsidiary.
balance sheet for SCANA and its subsidiary. It notes South
It notes South
in 2007, creates
Carolina's Baseload Act, passed in 2007, creates a supportive
Carolina's Baseload Act, supportive regulatory
regulatory environment
environment for
for
construction
construction of the nuclear plant. But it warns that it does not believe guaranteed
of the nuclear plant. But it warns that it does not believe SCANA is guaranteed to
to
recover all of its construction
recover of its construction costs.
costs.
Two weeks ago, Fitch downgraded
Two weeks ago, Fitch Ratings also downgraded to BBB+ from A-. Fitch also cited
SCANA to BBB+ from A-. Fitch also cited
"financial pressure increased risk from SCE&G's to construct finance two
"financial pressure and increased business risk from SCE&G's plans to construct and finance two
nuclear
nuclear generating units.
units."
"
25, 2009
June 25,2009
Business Wire
Business Wire
Fitch Downgrades
Fitch Downgrades SCANA & Subsidiaries'
SCANA & Subsidiaries' IDRs to BBB+
IDRs to BBB+
NEW YORK--(BUSINESS WIRE)-Fitch Ratings has downgraded
NEW YORK-(BUSINESS WIRE)--Fitch downgraded the Issuer Default Ratings (IDRs)
the Issuer Default Ratings (IDRs)
of
of SCANA Corp.
Corp. its subsidiaries
(SCANA) and its subsidiaries South Carolina Electric & Gas Co. (SCE&G) and
South Carolina Electric & Co. (SCE&G)
Public Service Co. of North Carolina to 'BBB+' from 'A-'. Fitch also downgraded
Public Service Co. of North Carolina (PSNC) to 'BBB+' from 'A-'. Fitch also downgraded the the
ratings one notch shown the list of rating actions at the end of this release.
individual issue ratings one notch as shown in the list of rating actions at the end of this release.
individual
of
The short-term IDRs of SCANA, SCE&G and PSNC and commercial paper ratings of SCE&G, PSNC
The short-term SCE&G commercial paper ratings of SCE&G,
South Carolina Company are affirmed at 'F2'. The Rating Outlook for each entity is
and South Carolina Fuel Company are affirmed at 'F2'. The Outlook for each entity
Stable.
Stable.
The downgrades
The downgrades are driven the financial pressure increased risk from SCE&G's
are driven by the financial pressure and increased business risk from SCE&G's
to construct and finance two nuclear units for service 2016
plans to construct and finance two nuclear generating units for service in 2016 and 2019,2019,
in credit measures over past 18
respectively, and a decline in credit quality measures over the past 18 months. SCE&G will own
SCE&G
55% of an estimated cost of $6. billion.
55% of the two units at an estimated cost of $6.33 billion. The nuclear investment, together with
two units investment, together
of $500
maintenance capital expenditures of approximately $500 million annually, will more than
million annually,
SCE&G's existing
double SCE&G's existing net investment in property equipment.
plant and equipment. Expenditures
Expenditures are
expected to the years 2012 to 2014. Management
expected to peak in the years 2012 to 2014. Management expects to fund approximately
expects 50%
50%
of
of the expenditures debt.
with new debt.
The credit impact of the incremental
The credit impact of the incremental debt burden
debt burden softened
is softened by legislation
legislation South Carolina,
in South Carolina,
the Base Load Review Act which permits utilities to recover capital costs, including
the Base Load Review Act (BLRA), which permits utilities to recover capital costs, including a
return equity, during construction.
return on equity, during construction. Other risk mitigants
Other risk mitigants include contract that fixes
include an EPC contract that fixes a
portion of the plant cost substantial
portion of the plant cost and a substantial equity commitment.
equity commitment. Although
Although the credit quality of
the credit quality of
subsidiary
subsidiary PSNC not directly affected the events at SCE&G, the weakening
PSNC is not directly affected by the events at SCE&G, the weakening consolidated
consolidated
credit quality of accounts for the lower rating for
credit quality of SCANA accounts for the lower rating for PSNC.
Fitch has downgraded
Fitch has downgraded SCANA and subsidiaries'
SCANA and its subsidiaries' follows:
ratings as follows:
ratings
Corporation
SCANA Corporation
-IDR to 'BBB+' from 'A-';
--IDR to 'BBB+' from 'A-';
-Senior Unsecured debt to 'BBB+' from 'A-'.
--Senior Unsecured debt to 'BBB+' from 'A-'.
SCE&G
SCE&G
— to 'BBB+' from 'A-';
--IDR to 'BBB+' from 'A-';
IDR
-First Mortgage bonds to 'A' from 'A+';
--First Mortgage bonds to 'A' from 'A+';
-Senior Unsecured debt to 'A-' from 'A';
--Senior Unsecured debt to 'A-' from 'A';
-Preferred Stock to 'BBB+' from 'A-'.
--Preferred Stock to 'BBB+' from 'A-'.
PSNC
PSNC
-IDR to 'BBB+' from 'A-';
--IDR to 'BBB+' from 'A-';
-Senior Unsecured
--Senior Unsecured debt to 'A-' from 'A'.
debt to 'A-' from 'A'.
Fitch has affirmed SCANA andits subsidiaries' ratingsasfollows:
Fitchhasaffirmed SCANA its subsidiaries'ratings as follows:
and
SCANA Corporation
SCANA Corporation
—
--Short-termIDRat 'F2'.
Short-term IDR at 'F2'.
SCE&G
SCE&G
--Short-termIDRat 'F2';
-Short-term IDR at 'F2';
— Commercial Paper at 'F2'.
--CommercialPaperat 'F2'.
PSNC
PSNC
--Short-termIDRat 'F2';
-Short-term IDR at 'F2';
-Commercial Paperat 'F2'.
--CommercialPaper at 'F2'.
Fitch's rating definitions and the termsof use of such ratings are available on the agency's
Fitch'sratingdefinitionsandthe terms of useof suchratingsareavailableon the agency's
public site, www.fitchratings.com.Published ratings, criteria and methodologies
publicsite, www. fitchratings. corn. Publishedratings,criteriaand methodologies are available
are available
from this site, at all times. Fitch'scodeof conduct, confidentiality, conflicts of interest, affiliate
from this site, at all times. Fitch's code of conduct,confidentiality,conflictsof interest, affiliate
firewall, complianceandother relevant policiesandproceduresare alsoavailablefrom the
firewall, compliance and other relevant policies and procedures are also available from the
'Codeof Conduct'sectionof this site.
'Code of Conduct' section of this site.
Contacts
Contacts
Fitch Ratings, New York
Fitch Ratings, New York
Robert Hornick, 212-908-0523
Robert Hornick, 212-908-0523
Schmidt, 212-908-0644
Jill Schmidt, 212-908-0644
or
or
Media Relations:
Media Relations:
Francoise Alos, +33 1 44 29 91 22,
Francoise Alos, +33 1 44 29 91 22, Paris
Email: francoise. alosofitchratings.
Emaih francoise.alos@fitchratings.com corn
http: //www. businesswire. corn/portal/site/google/?ndmViewld=news view&newsld=20090625
http://www.businesswire.c_m/p_rta_/site/g__g_e/?ndmview_d=news-view&news_d=2__9_625
006060&newsLang=en
O06060&newsLang=en
f
~ ~ ~ ~ ~ e
Special Comment
Special Comment
june 2009
June 2009
of Cordents:
Table of Contenls: New Nuclear Generation:
New Nuclear Generation:
Summary
Summary 1
1
Overview
Overview 2
2 Ratings Pressure Increasing
Ratings Pressure Increasing
Nuclear's "bet~farm"
Nuclear's "bet-the-farm" risk 2
2
rating trends are
Historical rating trends are not good 3
3
consbuction pressure
Plant construction can pressure metrics 5
5
Piecedents olfer limited insight
Precedents offer limited insight 5
5 Summary
Summary
meaningful improvement
Metrics show no meaningful improvement 7
7
8 w Moody's considering taking a negative view for those issuers
Moody's is considering taking a more negative view for those issuers
Benefits of near4erm limited
Benefits of near-term recovery are limited 8
Power
Public Power and Cooperatives are seeking to build nudear power plants
seeking to build new nuclear power plants
positioned with fiexible cost recovery
positioned with flexible cost recove_
• Rationale premised on material increase in business and operating risk
Rationale is premised on a material increase in business and operating risk
mechanisms rale pressure is 8
mechanisms but rate pressure is expected 8
Is size an issue?
Is size an issueV 9
9 tI once operating, nudear
Longer-term value proposition appears intact, and, once operating, nudear
Longer-term value proposition intact,
Conclusion
Conclusion 9
9 viewed favorably due their economics and no-carbon emission
plants are viewed favorably due to their economics and no-carbon emission
plants
A: Historical rating ac@one
Appendix A: Historical rating actions 11
11 footprint
footprint
Moody's Related Research
Moody's 13
13
Historically, most nudear-building utilities suifered ratings downgrades-
Historically, most nuclear-building utili0es suffered ratings downgrades_
— facilities
and sometimes several while building these facilities
and sometimes several_while building
Analyst Contacts:
Analyst nudear
Poli_cal and policy conditions are spurring applications for new nuclear
Polical policy conditions spumng applications for
first time in years
power generation for the first time in years
power generation for
New York
New York 1.212.553.1653
1.212.553.1653
s Nevertheless, most utilities now seeking to build nuclear generation do not
Nevertheless, most utilities seeking build nuclear generation not
Jim Hempstead
Jim Hempstead financial policies, a negative
appear to be adjusting their financial policies, a credit negative
to adjusting
Senior Vice President
Senior Vice President
away, and economic, political
First federal approvals are at least two years away, and economic, political
federal approvals
Aschenbach
Dan Aschenbach before
and policy equations could easily change before then
and equations
Senior Vice President
Senior Vice President
slowly on Guarantees, which will provide
Progress continues slowly on Federal Loan Guarantees, which will provide
J.
A. Sabatelle
A.J. Sabatelle
lower-cost source of funding but only modestly mitigate incieasing
a lower-cost source of funding but will only modesthj mitigate increasing
Senior Vice President
Senior President business
business and opera_ng risk profile
operating risk profile
Mike Haggarty
Mike Haggarty
= Partnerships, strengthening, bolstering liquidity reserves and
Partnerships, balance sheet strengthening, bolstering liquidity reserves and
Vice President — Oscar
Vice President - Senior Credit O#'¢er
Senior to core
"back-to-basics" approaches to core operations could help would-be
=back-to-basics" could
Schumacher
Laura Schumacher ratings
nuclear utilities maintain their ratings
utilities maintain
Vice President- —
Vice President Senior Analyst
Senior Analyst
This _cial Comment is addendum prior research re_
This Special comment is an addendum to our prior resea_ associated
reports associated
WIlliam L. Hess
William L. Hess
the U. S. These
implications of building new
with the credit implications of building new nuclear generation
with in the U.S. These
Team Managing
Team Managing Director
entitled "New Nuclear
prior reports, entitled =New Nuclear Generating Capacity:
Capacity: Potential Credit
Potential Credit
"New
Implications for U. S. Investor Owned Utilities" published in May 2008 and "New
Implications U.S. Investor Utilities" published May 2008
Nudear Generation
Nuclear Generation the States: Open Addressing
in the United States: Keeping Options Open vs Addressing
October 2007 are referenced in the back
An Inevitable Necessity" published in October 2007 are referenced in the back
inevitable Necessity" published
Research.
under the section Moody's Related Research.
section Moody's
.._IR_P-.
~V,' M
%~4
SenrIce
Investors Service
MoocIy's Investors
Moody's
