A Conversation with Steve Byrne, Executive Vice President, Generation and Chief Nuclear Officer of SCE&G

MidlandsBiz:
First of all, tell us a little about the project.

Steve Byrne:

The story really begins several years ago when we as a company began projecting what our future electric generation needs may be. As we began analyzing growth trends in the state for our customer base, it became clear that demand for electricity would outstrip our supply well before 2020. In fact, when we began crunching the numbers, we realized that we would need another large-scale source of electricity by 2016. So we knew we would need something. The question was what?

MidlandsBiz:
So nuclear power was your first choice?

Steve Byrne:

We actually looked at a number of different options before choosing nuclear. This task was not taken lightly. Every option was explored and every alternative carefully analyzed. People may be surprised to know that we looked at alternative sources such as solar and wind. However, they quickly came off the table based on reliability, scale and cost issues. So we turned our attention to more traditional power plants such as those fueled by coal, natural gas and nuclear.

MidlandsBiz:
Tell us more about the criteria.
 

Steve Byrne:

In order to meet future demand and continue to provide our customers with reliable and economical electricity, our next unit of generation had to meet several standards. Taking all the factors into consideration, nuclear power came back as a clear choice for us:

• It had to be reliable. We have built our reputation on being there when you turn your lights on. Believe it or not, some areas of the country haven’t always had that luxury. The brownouts and blackouts that California suffered in recent years is a prime example of what happens when there isn’t enough dependable electrical generation to go around. Nuclear plants are extremely dependable for large scale power plants and can operate at their maximum output 24 hours a day, seven days a week for months on end. In fact, our current V.C. Summer plant just set a continuous run record by operating nonstop for 475 consecutive days.

• It had to be economical. This means all aspects of producing electricity, from building the plant to paying for the fuel. While some generating alternatives are less expensive to build, they aren’t necessarily the best choice over the life of the plant. The inexpensive and stable cost for nuclear fuel makes nuclear power a very cost effective source of generation.

• It had to be large-scale. Even in a down economy, our service territory continues to add customers. Individuals looking for a new place to live as well as businesses searching for a place to expand or relocate have learned what we already know – South Carolina is a great place to be. Our forecasts indicate we will need a large-scale power generator by 2016, and nuclear plants are ideally suited to meet this demand.

• It had to be clean. Concerns about greenhouse gasses and other emissions like sulfur dioxide, nitrogen oxide and mercury will have a significant impact on how future large-scale plants are built. The technology to reduce or sequester carbon is unproven at this point, and nuclear power produces no greenhouse gases or other emissions.

• It had to be proven. The V.C. Summer Station has been in operation since 1982, but the state’s experience with nuclear power is much broader than that. South Carolina boasts seven nuclear reactors at four sites that account for more than 50 percent of the electricity generated here. Nuclear power is a proven technology in our state, and has been for more than 40 years.

In summary, nuclear power is the right choice for us and for our customers. It is reliable, economical, clean and proven. No other generation choice meets these criteria.

MidlandsBiz:
SCE&G and Santee Cooper have put in an application to build two new nuclear plants. Briefly give an overview of the past three-plus years and where you are at today.

Steve Byrne:

In February 2006, SCE&G and Santee Cooper announced the selection of the V.C. Summer Nuclear Station site as the location for constructing two new nuclear units. Since then, we have worked to develop a combined operations license application (COLA) which, if it is approved, will provide us our license to build and operate the plants. That application was completed and submitted March 31, 2008 to the Nuclear Regulatory Commission (NRC). Our hope is that it will be approved in late 2011 or early 2012.

In May 2008, we signed an Engineering, Procurement and Construction (EPC) contract with Westinghouse and the Shaw Group to build the two units using Westinghouse’s AP1000 reactor design. While we can’t begin construction of the reactors and other major components of the plant until the COLA is approved, we are permitted to conduct site preparation – clearing and excavating land as well as building infrastructure like roads, bridges and support buildings. So we have plenty to do prior to receiving our license.

If everything goes according to plan, major construction will begin in 2011, with the first unit to begin commercial operation in 2016 and the second in 2019.

MidlandsBiz: 
What about state approval? Tells us a bit about that process.

Steve Byrne:

The Public Service Commission of South Carolina conducted a very thorough analysis of our application for approval to move forward with the project in 2008. It included a nearly three-week-long public hearing in December of that year. During the process, we had to show that project was necessary and that we approached our planning with prudence. The PSC ultimately approved our project in February 2009.

Our application was filed under provisions of the Base Load Review Act (BLRA), a state law enacted in 2007 to add structure and consistency to the process all state regulated utilities must follow when building nuclear or coal power plants. The BLRA allows for annual adjustments to rates during construction of the units as a means of recovering financing costs associated with the project.

We estimate that our customers will see an average rate increase of about 2.5 percent per year during construction of the units. Paying financing costs while construction is ongoing, as opposed to waiting until the project has been completed, lowers the cost of building the new units by about $1 billion, which in turn reduces the amount customers will have to pay through rates for such things as the cost of capital, depreciation, property taxes and insurance associated with the project. We estimate this will save our customers at least $4 billion in electric rates over the life of the new units.

MidlandsBiz:
You and Santee Cooper are working together on this project. Tell us about that set-up.

Steve Byrne:

SCE&G and Santee Cooper will be joint owners and share operating costs and generating output of the new units, with SCE&G accounting for 55 percent of the cost and output and Santee Cooper the remaining 45 percent. SCE&G will operate the plants. The companies also co-own the existing 966-megawatt V.C. Summer plant. Total projected cost to build the two units is $9.8 billion; SCE&G’s share of that total is $5.4 billion.

MidlandsBiz:
How do you plan to finance your portion of the cost? Will government loan guarantees come into play?

Steve Byrne: 

SCE&G intends to finance the project 50 percent from debt and 50 percent from equity. Whether the 50 percent that is to be funded by debt will be backed by a government loan guarantee has yet to be determined. SCE&G applied for a loan guarantee in Nov. 2008,
and submitted the second part of the application in Feb. 2009. The Department of Energy (DOE) has narrowed the list of first-wave contenders to four with SCE&G’s project being among those.

We have long said that a loan guarantee is not absolutely necessary for us to move forward with the project. The bottom line is that we are doing everything to stay active in the process if we can make the terms work for us and our customers. If they don’t, we are pursuing other options that will allow us to fund the project without the guarantees.

MidlandsBiz:
The first wave of nuclear construction was hit hard by cost and schedule overruns, to the point of nearly killing the industry. How will this next wave be different?

Steve Byrne:

The streamlined process to apply for a construction permit and operations license to the NRC has removed much of the red-tape of the old method. Back when we were siting the first unit at V.C. Summer, there were two separate application processes for building and operating the plant. It took several years to get a construction permit, yet there was no guarantee that you could operate the plant. That was a separate process entirely and took several more years.

The new combined operations license application has combined the construction and operations applications into one, allowing for a more definitive timeframe on review and approval.

In addition, construction techniques for the new generation of plants have been improved and standardized. The AP1000 is designed to utilize more efficient construction techniques like those used in ship building. Activities that had to be done in a specific sequence in the past will now be performed in parallel, greatly reducing the construction schedule.

MidlandsBiz:
What economic benefits will come with the new plants?

Steve Byrne: 

There is no question that nuclear plants are economic drivers. In addition to the 800 employees who currently work at the plant, the two new units will create up to 3,000 temporary jobs during construction and will result in several hundred full time jobs when the plants are operational. The new employees, much like the current employees, will likely live in the area, so their paychecks will support local attractions, stores and restaurants.

Also, the plants will contribute millions of dollars to the local economy through property taxes that will help support schools, roads, and other important aspects of local communities. SCE&G currently pays Fairfield County more than $19 million a year in property taxes. Adding two more units will increase the tax base substantially.

MidlandsBiz: 
Moving away from nuclear, what other investments in energy technology has SCE&G made in recent years?

Steve Byrne:

Over the last several years, we have made substantial investments in environmental upgrades at our largest coal plants to operate in an environmentally responsible manner and meet federal and state regulations. Since 2007, we have invested roughly $600 million in clean air technologies.

The flue gas desulfurization equipment alone for our two largest coal-fired facilities (Wateree and Williams Stations) cost more than a half billion dollars to construct. The equipment, commonly called scrubbers, reduces sulfur dioxide emissions – more than 95 percent – and will also remove a substantial amount of mercury.  These upgrades are the driving force behind our recently announced request for a rate increase.

MidlandsBiz:
You are referring to the proposed rate increase announced in January?

Steve Byrne: 

Yes. That increase is to pay for those costs already incurred to pay for these federally mandated environmental upgrades. It is also to pay for the costs incurred to maintain the reliability of our electric system. While this is a particularly difficult time for many of our customers, we have already delayed this request once because of the bad economy. We investigated the possibility of requesting this increase last year, but decided not to in hopes that the economy would turn for the better. We also propose to phase-in the increase in three parts each separated by six months.

We understand that there is really never a good time to raise rates. However, this is capital we have already spent, so more delays will negatively impact customers and could have an adverse affect on the financial health of the company. This in turn could affect our ability to deliver dependable and reliable service that our customers count on.

MidlandsBiz:
Let’s finish with some thoughts on renewable energy and conservation. Where does SCE&G stand on those topics?

Steve Byrne: 

No one source of energy can meet the challenges of a sustainable energy future alone. Conservation, alternative forms of generation (like biomass and wind), and nuclear power will all play a part in meeting South Carolina’s future energy needs. Each of these will be essential to provide a diversified group of resources to meet the energy challenges that lie ahead.

While alternative energy sources are not suited for the type of large scale generation that nuclear provides, there is room for it in our system. About 1.5 percent of our generation capacity comes from the operation of a co-generation plant in Charleston that produces electricity through the use of biomass – woodchip byproducts from the paper manufacturing industry.

Through our net metering program, we provide a way for customers interested in generating their own renewable electricity to power their homes or businesses and even sell the excess energy back to SCE&G. We have had several customers take part in this program, using solar panels and even wind turbines.

We have also teamed up with other regional power suppliers to form Palmetto Clean Energy (PaCE), a non-profit organization dedicated to supporting the development of renewable energy resources in our state. For as little as $4 per month, our customers can support the future development of green energy resources.

On the conservation front, we filed a portfolio of nine proposed energy efficiency programs with the South Carolina Office of Regulatory Staff and the Public Service Commission of South Carolina in June 2009. We should hear something later this year on a decision by the PSC, and will begin implementation of approved programs shortly thereafter. But even ahead of that, we have already begun offering programs. Information about the specific programs can be found at www.sceg.com/myenergy .

MidlandsBiz:
Any parting thoughts?

Steve Byrne:

One of our goals at SCE&G is to provide reliable electricity to our customers at affordable rates. With the growth we expect to have in future years, nuclear power is the best way to meet those needs and wean ourselves from carbon intensive generating sources.

 

Steve Byrne is Executive Vice President, Generation and Chief Nuclear Officer at South Carolina Electric & Gas Company. A native of West Hartlepool, England, Byrne graduated from Wayne State University in Michigan with a bachelor of science degree in chemical engineering.

In his current role, Byrne is responsible for a diversified fleet of nuclear, coal, gas, hydro and pumped storage facilities. He has also served as general manager of nuclear plant operations at Virgil C. Summer Nuclear Station and vice president of nuclear operations from 2000 to 2004. Byrne has more than 24 years of experience in the nuclear industry, including 12 years at the Davis-Besse Nuclear Power Station in Ohio, where he received the Nuclear Regulatory Commission’s senior reactor operator’s license.

Byrne is the current president of the Carolinas Virginia Nuclear
Power Associates, Inc. Decommissioning Project and chairman of the nuclear industry’s New Plant Working Group. In addition, he serves on the South Carolina Governor’s Nuclear Advisory Council, University of South Carolina Nuclear Engineering Advisory Board, Westinghouse Quality Fuels Council, Greater Columbia Chamber of Commerce Executive Committee, United Way of the Midlands Food, Shelter, Security & Transportation Community Care Council and Community Impact Council.

Byrne is a past president of the Fairfield County Chamber of Commerce.

 

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