SCANA : SCE&G Files BLRA Status Report for 2nd Quarter, 2017

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POW E R FOR L I V I N G

K. Chad Burgess Director & Deputy General Counsel

chad .burqess@scana.com

August 14, 2017

VIA ELECTRONIC FILING

The Honorable Jocelyn Boyd Chief ClerklAdministrator

Public Service Commission of South Carolina

101 Executive Center Drive Columbia, South Carolina 29211

RE: Quarterly Report of South Carolina Electric & Gas Company Concerning Construction of V.C. Summer Nuclear Station Units 2 and 3

Dear Ms. Boyd:

South Carolina Electric & Gas Company ("SCE&G" or "Company") is required under S.C. Code Ann . § 58-33-277 (2015) to file reports quarterly with the South Carolina Office of Regulatory Staff concerning, among other things, the progress of construction of V.C. Summer Nuclear Station Units 2 and 3. SCE&G must also file, pursuant to Order No. 2009-104(A), a copy of its quarterly reports with the Public Service Commission of South Carolina.

Today is the deadline for filing the Company's quarterly report for the quarter ending June 30, 2017. In compliance with its legal obligations referenced above, enclosed you will find a copy of SCE&G's report for the quarter ending June 30, 2017.

Ifyou have any questions, please do not hesitate to contact us.

Very truly yours,

j( Cd,ffj;

K. Chad Burgess

KCB/kms Enclosure

cc: Shannon Bowyer Hudson, Esquire Jeffrey M. Nelson, Esquire

(both via electronic mail and U.S. First Class Mail)

V.C. Summer Nuclear Station Units 2 & 3

1. Introduction and Summary
2. Introduction

   This quarterly report concerning the status of the construction of V.C. Summer Nuclear Station (VCSNS) Units 2 and 3 (the Units) is submitted by South Carolina Electric

   & Gas Company (SCE&G or the Company) to the Public Service Commission of South Carolina (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 (2015) and the terms of Commission Order No. 2009-104(A). 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 light of the bankruptcy filing by Westinghouse Electric Company, LLC (WEC or Westinghouse), and the decision by the South Carolina Public Service Authority (Santee Cooper) to suspend its participation in the project, SCE&G determined on July 31, 2017, to instruct its contractors Fluor Corporation and Westinghouse to cease work on the project except for work necessary to safely demobilize the workforce and stabilize the site. On August 1, 2017, SCE&G filed with the Commission its Petition for Prudency Determination Regarding Abandonment, Amendments to the Construction Schedule, Capital Cost Schedule and Other Terms of the BLRA Orders For VC Summer Units 2 & 3 And Related Matters (Abandonment Update Petition). On August 9, 2017, ORS moved to dismiss the Abandonment Update Petition. A hearing date on that matter has not been set.

   In light of the current status of the matter, the financial schedules presented here reflect amounts spent through June 30, 2017 and do not include forecasted amounts thereafter.

3. Structure of Report and Appendices

   The current reporting period is the quarter ending June 30, 2017. Unless otherwise stated, the information set forth in this report is current as of June 30, 2017. 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. 2016-794. For reference purposes, Appendix 3 provides a copy of the capital cost schedule for the project as approved in Order No. 2016-794. Appendix 5 provides a list of the License Amendment Requests (LARs) filed by SCE&G with the Nuclear Regulatory Commission (NRC).

   Attached to the end of the report is a glossary of acronyms and defined terms used.

4. Construction Schedule and Milestones Milestones. Order No. 2016-794 established that the substantial completion dates of the two Units are the only Base Load Review Act (BLRA) milestones left to complete. In light of the decision to abandon the project, substantial completion of the Units is no longer contemplated and construction milestones have not been updated. Construction Costs and Cost Forecasts. Spending through June 30, 2017, reflects actual amounts. In addition, the approved capital cost targets have not been adjusted to reflect the currently reported historical escalation rates.
5. Progress of Construction of the Units
6. Westinghouse Bankruptcy

   On March 29, 2017, WEC filed for bankruptcy in the Southern District of New York. In its filings, WEC stated that it intended to exit the new nuclear construction business. In connection with the bankruptcy filing, SCE&G, Santee Cooper and WEC entered into an Interim Assessment Agreement (IAA) to allow the construction and design of the Project to continue pending SCE&G's and Santee Cooper's evaluation of their options for continuing or cancelling the project. The IAA was for a 30-day term. On April 28, 2017, the IAA was amended. The primary amendment was the extension of the term of the IAA through June 26, 2017, subject to bankruptcy procedures. The IAA was subsequently extended to August 10, 2017.

   After the end of the period, on July 27, 2017, SCE&G and Santee Cooper signed an agreement with Westinghouse's parent company, Toshiba Corporation, whereby Toshiba

   will pay a total of approximately $2.2 billion in damages for Westinghouse's breach of the Engineering, Procurement, and Construction Agreement (EPC Contract). SCE&G's 55% share of these prospective payments is approximately $1.2 billion. Those payments will be made over several years.

   During the period, SCE&G completed its quantitative evaluation of options for continuing or abandoning the Units. Management was evaluating the qualitative risk factors when Santee Cooper's board voted to "suspend construction" on the project. SCE&G had previously determined that it was not beneficial or feasible for the Company to continue the project without Santee Cooper bearing its share of the costs and risks of construction. On July 31, 2017, in response to Santee Cooper's decision, SCE&G's board voted to file a plan of abandonment for the project with the Commission under S.C. Code Ann. § 58-33-280(K) and instructed Westinghouse and Fluor to cease their construction efforts accordingly. On July 31, 2017, SCE&G and Santee Cooper gave notice of the termination of the IAA.

7. Construction
8. Workforce: There were approximately 5,100 contractor and subcontractor personnel on site prior to abandonment. Project Completion: At the close of the period, WEC reported the project to be 66.6% complete. During the period, completion of the construction advanced by 2.5%. Chart E provides completion percentage and change in completion percentages by functional area. CHART E

   Completion Percentages
   % Complete 1st Quarter 2017	% Complete 2nd Quarter 2017	% Change
   Engineering	96.0%	97.1%	+1.1%
   Procurement	88.2%	91.8%	+3.6%
   Construction	34.3%	36.0%	+1.7%
   Start-up	8.6%	9.6%	+1.0%
   Total1	64.1%	+66.6%	+2.5%

   1 Each Phase has its own Phase Percent Complete out of 100% and its own calculation method. The Phase Percent Completes are weighted and aggregated to become the Total Percent Complete.