SCANA : SCE&G Files BLRA Status Report for 4th Quarter, 2016

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.‌‌‌‌

   The construction and capital cost schedules and forecasts presented in this report are compared against those approved in Order No. 2016-794 dated November 28, 2016.

3. Structure of Report and Appendices‌‌

   The current reporting period is the quarter ending December 31, 2016. Unless otherwise stated, the information set forth in this report is current as of December 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. 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 (BLRA) milestones left to complete. Recent schedule information from Westinghouse Electric Company, LLC (WEC) indicates that the substantial completion dates of the Units remain within the 18-month contingency provided in the Order. Construction Costs and Cost Forecasts. As of December 31, 2016, the company has spent approximately $100 million less than the capital cost schedule approved in Order No. 2016-794. These cost forecasts include the cost increases agreed to in the 2015 Amendment to the Engineering, Procurement and Construction Agreement (EPC) Contract as well as the exercise of the Fixed Price Option that the Amendment grants to SCE&G and its partner in the project, Santee Cooper. 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 2016 for the period of January through June 2016 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

   $4.6 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 @ 12/31/16 (Five-Year Average Escalation Rates)	Projected @ 09/30/16 (Five-Year Average Escalation Rates)	Change
   Gross Construction	$7,678,324	$7,673,698	$4,626
   Less: AFUDC	$343,045	$340,234	$2,811
   Total Project Cash Flow	$7,335,279	$7,333,465	$1,814
   Less: Escalation	$530,528	$528,714	$1,814
   Capital Cost, 2007 Dollars	$6,804,751	$6,804,751	$0

   Chart B compares the current capital cost forecast to the forecast on which the Commission relied in adopting Order No. 2016-794. The cost of the plant in future dollars has increased by approximately $20 million since Order No. 2016-794 was issued. Chart B: Reconciliation of Capital Cost ($000)

   Forecast Item	Projected @ 12/31/2016 (Five Year Average Escalation Rates:	As Forecasted and Approved In Order No. 2016-794	Change
   Gross Construction	$7,678,324	$7,658,210	$20,114
   Less: AFUDC	$343,045	$321,322	$21,723
   Total Project Cash Flow	$7,335,279	$7,336,888	($1,609)
   Less: Escalation	$530,528	$532,137	($1,609)
   Capital Cost, 2007 Dollars	$6,804,751	$6,804,751	$0

   Chart C below shows the current forecast of the cost of the Units compared to the cost forecasts underlying the initial BLRA order, which was issued by the Commission in 2009, and the update orders that the Commission issued subsequently. The decline in capital cost forecasts in 2007 dollars between Order No. 2010-12 and 2011-345 reflects the removal of Owner's contingency amounts from the forecasts as required by the opinion of

   the Supreme Court of South Carolina in South Carolina Energy Users Comm. v. South Carolina Pub. Serv. Comm'n, 388 S.C. 486, 697 S.E.2d 587 (2010). This chart shows that cost of the project in future dollars is approximately $1.365 billion above the initial forecast.

   Chart C: Summary of Nuclear Filings (billions of $)

   Forecast Item	Order No. 2009-104(A)	Order No. 2010-12	Order No. 2011-345	Order No. 2012-884	Order No. 2015-661	Order No.	Currently Projected
   						2016- 794
   Capital Cost, 2007 Dollars	$4.535	$4.535	$4.270	$4.548	$5.247	$6.805		$6.805
   Escalation	$1.514	$2.025	$1.261	$0.968	$1.300	$0.532		$0.531
   Total Project Cash Flow	$6.049	$6.560	$5.531	$5.517	$6.547	$7.337		$7.335
   AFUDC	$0.264	$0.316	$0.256	$0.238	$0.280	$0.321		$0.343
   Gross Construction	$6.313	$6.875	$5.787	$5.755	$6.827	$7.658		$7.678

5. Escalation Rates

6. As provided in Order No. 2009-104(A), the most current one-year inflation indices are used to escalate costs expected to be incurred in the twelve-month period after the date of each quarterly report. The most current escalation indices are found in the Handy-Whitman July 2016 update that was issued in November 2016 and reports data for the period January to June 2016. Those rates are reflected in this report. The approved capital cost targets have been adjusted to reflect the currently reported historical escalation rates.

   Appendix 4 shows historical utility construction cost escalation rates. Current escalation rates are shown below on Chart D.