Two South Carolina energy companies are facing a lawsuit filed by the Securities and Exchange Commission (SEC) for allegedly defrauding investors.
According to the SEC, it is suing SCANA Corp and South Carolina Electric & Gas Co. (SCE&G), now known as Dominion Energy South Carolina Inc.
The federal securities regulator is also suing SCANA’s former CEO Kevin Marsch and former Executive Vice President Stephen Byrne, who also served as SCE&G’s President of Generation and Transmission and Chief Operating Officer.
SEC complaint was related to a nuclear power plant expansion project
In the complaint, the SEC alleged that SCANA and SCE&G repeatedly made false and misleading statements regarding the status of a nuclear power plant expansion project, which the energy companies ultimately abandoned.
According to the federal securities regulator, SCANA decided to expand the Virgil C. Summer Nuclear Station (V.C. Summer) in Jenkinsville, South Carolina by building two new nuclear units. The energy company is operating one nuclear unit at the power plant.
In 2013, SCANA started the construction of V.C. Summer nuclear unit 2 and unit 3. The construction project valued at $10 billion is one of the largest and most expensive in the history of South Carolina.
SCANA concealed that the nuclear power plant expansion project was experiencing problems
SCANA touted the progress of the nuclear power plant expansion project in its periodic filings with the SEC, press releases, earnings calls with Wall Street analysts, video presentations, and during its testimony with the South Carolina Public Service Commission (PSC) between 2015 and 2017.
SCANA’s false statements regarding the progress of the construction of V.C. Summer’s two new nuclear units allowed it to boost its stock price and sell $1 billion in corporate bonds at favorable rates. The energy company’s lies also enabled it to obtain regulatory approval to charge its customers more than $1 billion in increased rates to help finance the project.
In reality, the company’s nuclear power plant expansion project was plagued with substantial delays and cost overruns. It was impossible to complete the project by January 1, 2021, the deadline for receiving the $1.4 billion federal production tax credits. Its executives knew that the project is not feasible without the tax credits.
SCANA and its senior management including Marsh and Byrne concealed the problems affecting the completion of the project on time. Instead of disclosing to the public and to the PSC that the project would be delayed by 18 months to 3 years, the energy company said the delay would only be 60 days.
In the summer of 2016, the project experienced further delay. However, during the energy company’s second-quarter conference call, Byrne misleadingly stated, “The guaranteed substantial completion dates remain in August of 2019 for unit 2 and August of 2020 for unit 3. We don’t see anything to change those.”
SCANA investors and customers suffered significant losses
By the end of that year, SCANA and its senior management knew that it is impossible to complete the project and qualify for the federal tax credits. The project continued to experience serious problems, prompting the energy to abandon it in July 2017.
The failed project resulted in “devastating consequences for SCANA’s investors and customers,” according to the SEC.
When the truth about the project came out, investors lost hundreds of millions of dollars. Customers lost more than $1 billion in higher rates, which the PSC allowed the company to charge to recover financing costs associated with the project.
The SEC alleged that SCANA, SCE&G, Marsh, and Byrne violated the antifraud provisions of the federal securities laws for making false and misleading statements. The Commission is seeking a permanent injunction, return of allegedly ill-gotten gains along with prejudgment interest, and financial penalties from all defendants, and an officer and director bar against Marsh and Byrne.
In a statement, SEC Atlanta Regional Office Director, Richard Best said,”When making statements to the public, executives cannot provide false information or half-truths. This case demonstrates the SEC’s commitment to holding companies and individuals at the highest corporate levels responsible when they mislead investors and fail to provide them with full and fair information.”