FIXED-PRICE OPTION

SCE&G’s Fake “Fixed-Price” Option

Included in SCE&G’s request to the Public Service Commission for another $846 million for building the nuclear plants is something they call a “fixed-price” option ($505.5 million).  The utility says that by taking this option offered by its vendor, Westinghouse, it will cover all the remaining construction work on the two plants and guarantee that the first unit will go online by August 2019.

By committing to pay $505.5 million now, SCE&G says that it will save customers money.

The REALITY

The executive director of the S.C. Office of Regulatory Staff, which is charged with reviewing the SCE&G proposal and making a recommendation to the Public Service Commission, told The State, “This is not a fixed-price contract….You can put a hamburger patty between two slices of bread and call it a cheeseburger all the way, but it’s not.  It’s got some aspects of a cheeseburger—you got a patty and a bun”

SCE&G has made poor management decision throughout this process.  This “fixed-price” is yet another bad deal for the consumer:

  1. It will not guarantee that non-construction costs, not included in the “fixed price” contract” won’t go up
  2. It can not guarantee that the nuclear units will be brought online as scheduled.  Every month of delay will cost the consumers about $10 million more for “owner costs” not covered by the “fixed-price” contract.
  3. It will not guarantee that Westinghouse won’t force a renegotiated contract if it starts going into the red.  Previous SCE&G contracts on this project have been renegotiated to the benefit of the vendor.

Instead, SCE&G should insist that Westinghouse complete the projects by the same dates as requested and keep additional expenses down below the “fixed contract” price.  Additional costs can be requested by SCE&G over the next 4 years just as they have been doing.

The Public Service Commission should reject the “fixed-price” contract and reduce the additional cost requested by SCE&G to build the plants to $341.1 million instead of $846 million.