South Carolina regulators have a couple of billion-dollar decisions to make on Friday.
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The Public Service Commission will determine how much to cut rates for 737,000 South Carolina Electric & Gas customers who have already paid more than $2 billion for a pair of nuclear reactors abandoned during construction, and whether to approve a roughly $15 billion cash and stock bid from Virginia-based Dominion Energy to buy SCE&G’s parent company SCANA Corp.
It’s a pivotal point in the unraveling of South Carolina’s nuclear debacle, which started in the summer of 2017 when privately-owned SCANA and its minority partner, state-owned Santee Cooper, gave up on the reactors they had spent a decade planning and building. The main contractor, Westinghouse, went bankrupt as it failed to make good on its promises of cheaper, easier construction methods. Projections of soaring electricity demand never materialized, thanks to energy efficiency and the advent of cheap natural gas.
Commissioners have two important judgments on their agenda. First is whether SCE&G executives knew the project was failing and lied so that regulators would approve additional rate hikes to keep customers paying for it. Second is whether Dominion’s offer is good enough for ratepayers, or still leaves them on the hook for too much of the debt for the never-finished reactors.
“Let me be blunt. You have a utility that bet the farm and lost. SCE&G poured $5 billion into a project and got nothing for it. By the end of this year, customers will have paid $2.2 billion for absolutely nothing — not a single watt of electricity,” said lawyer Scott Rubin, arguing on behalf of the AARP and its members — many of them consumers on fixed incomes — at the start of three weeks of hearings held by regulators in November.
For most of the past 18 months, political leadership in South Carolina told SCE&G and Dominion they weren’t doing enough to ease the ratepayers’ burden. But now Attorney General Alan Wilson and House Speaker Jay Lucas are backing Dominion’s latest offer, which the state’s own consumer advocate and environmental and consumer groups says falls short.
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Dominion’s latest offer gets rid of the $1,000 rebate checks to SCE&G customers that dominated much of the merger discussion in 2018. Instead, Dominion wants to keep SCE&G rates at the same level set by legislators who passed a temporary 15 percent rate cut earlier this year that knocks about $22 off the typical monthly bill. In 20 years, SCE&G customers would add $2.3 billion to the $2 billion they already paid for the mothballed project.
Most of the consumer advocacy groups are still pushing for more. Watchdogs in the state’s Office of Regulatory Staff want about a 20 percent rate cut, removing closer to $30 from monthly bills, and eliminating most of the extra charges for the reactors. Consumers and environmental groups want a bigger cut.
Dominion Energy said a larger rate cut would force them to walk away from the SCE&G deal, although they made the same threat when lawmakers considered the temporary cut. When that passed, they altered their merger proposal.
SCE&G said a significant rate cut without the extra money from the Dominion deal means bankruptcy, although utility executives testified before regulators they could not guarantee that is what they would do.
Public Service Commission Chairman Randy Comer said the regulators’ hands remain tied by a law passed in 2007 that greatly reduced their ability to scrutinize rate hikes.
The Base Load Review Act allowed the utility to get rate increases to essentially pay in advance for the reactors without risk to its shareholders, and sets a high bar to get that money back. There have been legal challenges, but the law is still in place.
“For about the last year, we’ve been on the receiving end of a lot of criticism. Some by people looking for a good sound bite on TV or in the newspaper,” Comer said at the end of the November hearings. “We’ve been unable to respond.”
On Friday, the commissioners get to speak as loudly as they want.
