After 4-year fight, persistent SC county gets $99 million from energy giant Dominion

In 2010, it looked like a great deal: little Fairfield County just north of Columbia would give South Carolina Electric & Gas a huge annual property tax break as an incentive for the utility building a multibillion pair of new nuclear reactors near the Broad River.

In return, Fairfield would get from SCE&G a yearly bonanza — a fixed fee of an estimated several or even tens of millions of dollars a year instead of property taxes when the utility’s new reactors started producing electricity.

Those millions, in a rural county like Fairfield, 20 miles north of Columbia, would go a long way to help build crucial infrastructure Fairfield needed to attract industry, leaders said.

But in mid-2017, SCANA — SCE&G’s parent company — suddenly announced it was abandoning the project. It was only the first of many stunning revelations of mismanagement, incompetence, an FBI investigation and a criminal cover-up by SCANA’s top leaders that would lead to the utility’s collapse and its acquisition by Dominion Energy.

“We were very surprised,” said Fairfield County administrator Jason Taylor.

“We had been expecting between $50 and $100 million a year from the fee in lieu of taxes agreement,” Taylor said. “We’re a small county, and we were going to use that money to improve the lives of our citizens.”

Also, in 2013, the county had already gone into debt, issuing $24 million in bonds, for which it would have to pay up to $1.7 million a year — that and not having the SCE&G future revenue stream left the county in the lurch, Taylor said.

So little Fairfield County, population 22,000, sued SCANA.

Last week, the county announced it had settled its lawsuit with the energy giant that bought SCANA out: Virginia-based Dominion Energy.

The settlement did not happen overnight. It was the result of a nearly-four year hard-fought legal battle.

During that time, first SCE&G and then its successor company Dominion, resisted all efforts to give Fairfield County any compensation for what the county said was owed it as a result of the utility’s failure to build a $9 billion nuclear plant.

Tactics that Dominion used included trying to get Fairfield County’s lawsuit — filed in state court in November 2017 — tossed out of court or failing that, getting any trial moved to a more friendly county, according to court records. Dominion also appealed issues to the S.C. Court of Appeals and S.C. Supreme Court, delaying an eventual trial. The company also tried to exclude testimony and other evidence.

All these motions took up time, delaying a jury trial.

But a week ago, with the matter in formal mediation talks, and with a September jury trial date looming before State Judge Donald Hocker, the county and Dominion agreed on a $99 million settlement.

That money means a lot.

Fairfield County has only 22,347 people, the median household income is $38,213 and 19% of the residents live in poverty, according to U.S. Census figures. (The state average household income is $53,199. )The county’s annual budget is $46 million — far less than the settlement.

“This is transformational — it puts us 15-20 years ahead of where we would otherwise be,” Fairfield County council chairman Moses Bell said in an interview with The State newspaper.

Not only will Fairfield County benefit, but the settlement is structured so that Dominion also stands to benefit.

For example, $45.6 million of the settlement will go to a new wastewater treatment plant and sewer lines, and $6.4 million will go to grading a future industrial park — projects officials hope will attract industry that will raise Fairfield’s standard of living. That in turn will generate new paying customers for the utility, Bell said.

Right now, no new water-using industries or major residential developments can start up in Fairfield County because its lone sewage treatment plant is just about maxed out, said Ty Davenport, the county’s economic development director.

“This is a huge deal,” Davenport said. “We’ll be able to recruit larger industries that invest more dollars in machinery, equipment land and buildings. It will increase revenues for the county dramatically.”

Bigger, better industries will bring “higher-end, higher tech jobs with well-educated, highly trained people so the wage rates will go up. A treatment plant really triggers many different options for growth in the county,” Davenport said. “A sewer plant triggers many options for growth — commercial, residential, industrial — they all feed on each other.”

Why did Dominion settle?

How the settlement was reached is a story with many threads: a poor small county’s persistence, the pluck of its attorneys, the utility’s determined efforts not to pay the county a dime, the uncovering of corruption among SCE&G’s top executives and the ultimate $99 million payout to Fairfield County.

Fairfield’s claim was simple.

In 2010, after SCE&G announced it was planning a multibillion construction project of two new nuclear plants near Jenkinsville, the county government and SCE&G inked an agreement that called for SCE&G to pay to the county each year a sum of money instead of property taxes. This payment, a commonly used device to give industries a tax break, is called “Fee in Lieu of Taxes.” The utility would start payments when the project was up and running.

The exact amount of the annual fee to the Fairfield County government was not specified in the agreement, but in legal filings, the county estimated SCE&G’s payments would be from “several million dollars” a year to tens of millions of dollars a year.

In the agreement, SCE&G pledged it would use “reasonable efforts” to build the nuclear plant and get the reactors up and running.

As the years went on, SCE&G continued construction. In press releases and statements to regulators and investors, the utility said all was going well. The first reactor would go online in 2016, the second one in 2019.

In 2013, relying on the SCE&G’s pledge to pay it millions of dollars annually, Fairfield County issued $24 million worth of bonds for infrastructure and other projects.

Up through mid-2017, although SCE&G announced some delays in construction, it gave no hint the project might be doomed.

On July 31, 2017, SCE&G announced that it was abandoning the project and would not finish it.

In a February 2018 affidavit filed in the lawsuit, Fairfield County administrator Taylor said, “At no time prior to the abandonment did any representative of SCE&G inform my staff or me that there were problems with the project.”

In January, 2019, Dominion Energy acquired SCANA, which owned SCE&G. From then on, Dominion would direct legal strategy in the Fairfield County lawsuit.

In February 2019, in an answer to Fairfield County’s lawsuit, Dominion — which had absorbed SCE&G — denied all of the county’s allegations and raised 31 separate legal defenses as to why Fairfield should lose the lawsuit. The utility said all of the utility’s actions were “taken in good faith ... authorized by law ... (and) reasonable ... therefore, Plaintiff (Fairfield) is precluded from recovery.”

Bad deeds come to light

By 2019, however, newspapers had reported that SCE&G had had serious internal troubles for years leading up to the July 2017 abandonment of the nuclear plant. For one thing, a secret SCE&G independent report by Bechtel had surfaced revealing that for several years, the project had major operational flaws that could sink it. An FBI investigation had begun to see if civil or criminal fraud had been committed by SCE&G executives.

In 2020, as pretrial legal battles continued in Fairfield’s lawsuit, public knowledge of SCE&G’s missteps increased in a way that favored Fairfield’s claims:

▪ In February 2020, the federal Securities and Exchange Commission filed a lengthy complaint in U.S. District Court in Columbia against two former top executives of the now-defunct SCANA Corp. alleging massive fraud.

“SCANA and its senior executives repeatedly deceived investors, regulators, and the public over several years about the status of a $10 billion nuclear project. When the truth was revealed, it resulted in hundreds of millions of dollars in losses to SCANA’s investors and to South Carolinians,” the SEC said in its complaint.

▪ In July 2020, top SCANA/SCE&G executive Stephen Byrne pleaded guilty in federal court to crimes connected to a massive cover-up of the utility’s troubles that led to the 2017 abandonment of the nuclear project.

Byrne’s guilty plea showed that SCE&G’s failure to build the two nuclear reactors was the result of not just mismanagement or incompetence, but criminal conduct at the company’s highest levels, prosecutors said at his guilty plea hearing.

In October 2020, Fairfield County filed an amended version of its lawsuit. It cited material developed in both the criminal and the SEC federal investigations.

In November 2020, former SCANA CEO Kevin Marsh agreed to plead guilty to federal conspiracy fraud charges, go to prison for at least 18 months and forfeit $5 million in connection with SCANA’s $9 billion nuclear failure, according to papers filed in federal court.

Marsh helped lead a two-year cover-up, from 2016 to 2018, of the serious financial trouble that was jeopardizing the success of not only the ongoing Fairfield County nuclear project but also the troubled financial health of SCANA, according to records and evidence in the case.

In December 2020, Dominion and SCANA, SCE&G’s parent company, agreed to pay a $25 million civil fine in the SEC fraud case.

The settlement was announced at a Fairfield County council meeting last Monday night.

An actual written settlement has not yet been made public. Typically, settlements contain language stipulating that no side admits fault and by a settlement, both sides avoid more lengthy, expensive legal action with an uncertain outcome.

Fairfield County administrator Taylor said the settlement wasn’t a “punitive action” against Dominion but a mutually beneficial “win-win” for both the utility and the county.

“We are in business with Dominion, and we want a relationship and that is strengthened, not one that is sour,” Taylor said, pointing out that Dominion still has one nuclear reactor in Fairfield and provides electricity to most of the county.

“The settlement money is Dominion reinvesting in their own territory,” Taylor said. During negotiations, that point was stressed to the utility — that the settlement “would create taxpayers for Fairfield, and ratepayers for Dominion.”

In a statement to The State newspaper, Dominion said, “Since combining with SCANA Corporation, Dominion Energy has sought to resolve all outstanding legal issues surrounding the cancellation of the V.C. Summer Units 2 and 3 construction project so that the company could focus on providing reliable energy safely and efficiently to 1.1 million electric and gas customers in the Palmetto State.

“This agreement is a welcome step in that process,” the statement said.

Dominion declined to say how much money it and SCE&G had paid to its lawyers to fight Fairfield’s lawsuit.

The company’s lawyers included Columbia attorneys Steven Pugh, Ben Carlton, I.S. Leevy Johnson and George Johnson, as well as Jonathan Chally of the King & Spalding law firm in Atlanta.

Fairfield’s private lawyers, who include Terry Richardson, Daniel Haltiwanger, Brady Thomas, Jack McKenzie and Bob McKenzie, will receive $27 million in fees and for legal expenses in the case. Their money will come out of the $99 million settlement.

A statement from Fairfield’s attorneys called the settlement “a business deal to resolve this debacle.” The statement also praised Dominion Energy’s top executive Keller Kissam for “his willingness to look beyond the litigation to solutions which will serve all.”

The statement continued, “We attorneys should be mindful that clients do not love the courtroom as we do, but do want to solve problems. Fairfield was relying on the commitments made in the Fee in Lieu Contract. This settlement relieves much of that burden,” the lawyers’ statement said.

Other projects the $99 million will go to include: $1 million for a Martin Luther King Jr. statue, $2.2 million for a teachers’ housing village, $7.5 million to help with bond payments; $2.5 million for a Ridgeway Park and Recreation Center.