V.C. Summer Nuclear Station Units 2 & 3
Quarterly Report to the South Carolina Office of Regulatory Staff Submitted by South Carolina Electric & Gas Company Pursuant to Public Service Commission Order No. 2009-104(A) Quarter Ending March 31, 2016-
Introduction and Summary
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Introduction
This quarterly report is submitted by South Carolina Electric & Gas Company (SCE&G or the Company) to the Public Service Commission of South Carolina (the Commission) and the South Carolina Office of Regulatory Staff (ORS). It is submitted in satisfaction of the requirements of S.C. Code Ann. § 58-33-277 (Supp. 2015) and the terms of Commission Order No. 2009-104(A). This report provides updated information concerning the status of the construction of V.C. Summer Nuclear Station (VCSNS) Units 2 and 3 (the Units) and provides the current capital cost forecasts and construction schedules for the Units as of the close of the quarter. All amounts set forth in this Quarterly Report are based on SCE&G's existing 55% interest, except where expressly stated to be based upon 100% of the cost.
In Order No. 2015-661, dated September 10, 2015, the Commission approved updated construction and capital cost schedules for the Units. The current schedules and forecasts presented in this report are compared against those approved in Order No. 2015- 661.
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Transition as a Result of the October 2015 EPC Amendment
The transition to Fluor Corporation (Fluor) as the new construction manager took place during the period. All craft personnel have transitioned to Fluor, which has begun to implement its recruiting and hiring process for additional craft labor.
To mitigate the construction schedule, Fluor has implemented changes to the schedules that construction crews are working. A limited night shift of approximately 300 craft workers is in place. Fluor plans to expand to a full night shift of more than 1,000 craft workers when hiring and training make this feasible. Availability and retention of labor is the principal limiting factor for mitigating the project schedule through a more aggressive labor schedule.
Since the Amendment was signed in the last quarter, Fluor has initiated or proposed a total of 28 Functional Area Assessments (FAAs) to improve project efficiency and schedule performance by assessing and restructuring individual work streams. These FAAs are being conducted in collaboration with Westinghouse Electric Company (WEC), SCE&G and Southern Nuclear Company (SNC). Fifteen FAAs have been initiated; seven FAAs are complete. The results of three are fully implemented. These initial FAAs have focused on safety, change management, quality control programs, commercial grade dedication, field engineering, construction programs/productivity, facilities plans, equipment plans and construction permitting. Fluor's review of the Integrated Project Schedule (IPS) continues and will incorporate changes due to the Amendment, the FAAs, and the analysis of schedule mitigation plans.
The new SCE&G Project Management Organization (PMO) aligns SCE&G's project management oversight with WEC's and Fluor's efforts. It has been implemented and is working effectively.
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Structure of Report and Appendices
The current reporting period is the quarter ending March 31, 2016. The report is divided into the following sections:
Section I: Introduction and Summary;
Section II: Progress of Construction of the Units; Section III: Anticipated Construction Schedules;
Section IV: Schedules of the Capital Costs Incurred Including Updates to the Information Required by S.C. Code Ann. § 58-33-270(B)(6) (the Inflation Indices);
Section V: Updated Schedule of Anticipated Capital Costs; and Section VI: Conclusion.
Appendices 1, 2, and 4 to this report contain detailed financial, milestone and other information updating the schedules approved by the Commission in Order No. 2015-661. For reference purposes, Appendix 3 provides a copy of the capital cost schedule for the project as approved in Order No. 2015-661. Appendix 5 provides a list of the License Amendment Requests (LARs) filed by SCE&G with the Nuclear Regulatory Commission (NRC).A confidential and a public version of this report and its attachments are being provided. Unless otherwise specified, all cost information reflects SCE&G's 55% share of
the project's cost in 2007 dollars. Attached to the end of the report is a glossary of acronyms and defined terms used.
- Construction Schedule and Milestones Milestones. There are 146 specific Base Load Review Act (BLRA) milestones for reporting purposes. As of March 31, 2016, 110 milestones have been completed. Of the remaining 36 milestones, 31 milestones have been delayed by 14 months or less. Construction Costs and Cost Forecasts. Spending through December 31, 2016, in current dollars is forecasted to be approximately $126 million less than the capital cost schedule approved in Order No. 2015-661. The present cash flow forecast provided by WEC indicates that the Company will be able to complete the Units for $5.5 billion in 2007 dollars. These cost forecasts include the cost increases agreed to in the 2015 Amendment to the EPC Contract but do not reflect the exercise of the fixed price option that the Amendment grants to SCE&G and its partner in the project, Santee Cooper. SCE&G continues to evaluate this option. Cost Comparisons. In Order No. 2009-104(A), the Commission recognized that forecasts of Allowance for Funds Used During Construction (AFUDC) and escalation would vary over the course of the project and required those forecasts to be updated with each quarterly report. Escalation indices were issued in November 2015 for the period of January through June 2015 and have been used in forecasting the construction costs for the project that are presented here. Chart A below compares the current capital cost forecast to the forecast presented in the last quarterly report. This chart shows an increase in Gross Construction Costs of
$96 million over the life of the project. With each quarterly update, a quarter that had been subject to the five-year escalation rate becomes subject to the one-year rate. The figures reported on Chart A also include the effect of calculating escalation on an updated cash flow projection for the project.
Chart A: Reconciliation of Capital Cost ($000)Forecast Item | Projected @ 03/31/16 (Five-Year Average Escalation Rates) | Projected @ 12/31/15 (Five-Year Average Escalation Rates) | Change |
Gross Construction | $7,192,883 | $7,096,778 | $96,105 |
Less: AFUDC | $297,301 | $291,755 | $5,546 |
Total Project Cash Flow | $6,895,582 | $6,805,023 | $90,559 |
Less: Escalation | $1,348,337 | $1,335,360 | $12,977 |
Capital Cost, 2007 Dollars | $5,547,245 | $5,469,663 | $77,582 |
Forecast Item | Projected @ 03/31/16 (Five-Year Average Escalation Rates) | As Forecasted and Approved In Order No. 2015-661 | Change |
Gross Construction | $7,192,883 | $6,826,914 | $365,969 |
Less: AFUDC | $297,301 | $279,790 | $17,511 |
Total Project Cash Flow | $6,895,582 | $6,547,124 | $348,458 |
Less: Escalation | $1,348,337 | $1,300,486 | $47,851 |
Capital Cost, 2007 Dollars | $5,547,245 | $5,246,638 | $300,607 |
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