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Santee Cooper files cross-claims against SCE&G for breach of contract

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Santee Cooper files cross-claims against SCE&G for breach of contract

Santee Cooper filed several cross-claims against South Carolina Electric & Gas Co. for breach of contract and gross negligence tied to the July 2017 abandonment of the V.C. Summer nuclear plant expansion.

Santee Cooper, known legally as South Carolina Public Service Authority, filed its cross-claims Dec. 27, 2018, in the South Carolina Court of Common Pleas for the 14th Judicial Circuit. In its answer to a civil lawsuit filed by customers, Santee Cooper said, "[A]llegations about [South Carolina Electric & Gas', or SCE&G's] wrongdoing and unjust enrichment are woven into the fabric of plaintiffs' claims against Santee Cooper and allegations of damage to Santee Cooper's customers."

A group of South Carolina cooperatives and residential ratepayers are suing Santee Cooper over cost recovery for the scrapped nuclear reactors.

In its 2017 annual report, Santee Cooper said most of its 45% share of the more than $9 billion spent on the abandoned nuclear project was "financed with borrowed funds." SCANA Corp. subsidiary SCE&G owns 55% of the scrapped reactors and was acquired by Dominion Energy Inc. on promises of rate relief and lower nuclear cost recovery.

South Carolina regulators determined that SCE&G's abandonment of the nuclear units was prudent based on the March 2017 bankruptcy of primary contractor Westinghouse Electric Co. LLC and Santee Cooper's decision to withdraw from the project.

"Santee Cooper sought to keep the project on track and within budget and made multiple proposals to SCE&G to improve project oversight and performance and protect the project from a potential [Westinghouse] bankruptcy," the utility wrote in its cross-claims. "SCE&G, which was responsible for managing the project, ignored Santee Cooper's proposals."

Santee Cooper, which has asked the court dismiss claims against it, also alleges SCE&G "willfully and intentionally" failed to confront Westinghouse or the other project contractors over "their failure to manage the project in ways that would be effective."

"Santee Cooper is entitled to damages arising from SCE&G's breach of the [design and construction agreement] accompanied by a fraudulent act in an amount to be determined by the trier of fact," the utility wrote.

SCE&G rebuffed Santee Cooper's allegations.

"Santee Cooper was a co-owner and active participant in the decision-making process and oversight of the V.C. Summer project," SCE&G said in a written statement. "We believe any claim from Santee Cooper lacks legal merit and ignores its accountability for the termination of the project and the significant losses suffered by both companies."

Separately, the South Carolina Office of Regulatory Staff filed a petition for rehearing or reconsideration Dec. 28, 2018, with the Public Service Commission of South Carolina tied to Dominion Energy's acquisition of SCANA. The utility watchdog argued, among other claims, that regulators failed to find that SCE&G "acted imprudently" in supervising the costs and construction of the V.C. Summer project while concealing a critical project audit.

In addition, the utility watchdog said the PSC erred by its "failure to find that revised rates revenue increases corresponding with capital cost recovery in 2015 and 2016 and all revised rates collected after August 1, 2017, should be returned to customers." (SC PSC dockets 2017-207-E, 2017-305-E and 2017-370-E)

Dominion Energy said it believes that the PSC's "thoughtful, well-reasoned order speaks for itself."