SCE&G is asking state regulators to approve an $852 million increase in the projected cost of building two nuclear reactors in Fairfield County, but the company says the potential for any other cost increases is limited.
Critics of the requested increase — which would be paid for by customers — call the request “stunning.” If the state Public Service Commission approves the higher cost, South Carolina Electric & Gas Co.’s 702,000 electric customers would likely face higher rates.
But SCE&G says its contract with the project’s new construction company essentially “fixes” the reactors’ cost in place. “The fixed-price option provides substantial value to our customers, investors and our company by limiting the risk of future cost increases,” said Eric Boomhower, SCE&G spokesman.
The S.C. Office of Regulatory Staff said Monday it is skeptical. The agency represents the public’s interest in utility regulation and must make a recommendation on SCE&G’s request to the S.C. Public Service Commission by Sept. 1.
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“This is not a fixed-price contract,” said Dukes Scott, the agency’s executive director. “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.
“(This proposal’s) got some aspects of a fixed price, but there’s stuff in there that’s not fixed and we are going through that now.”
The latest proposed increase follows the company’s decision in October to replace the construction project’s contractor with Westinghouse Electric Co. After a review of the project, Westinghouse and SCE&G agreed on the new contract with the higher projected cost. The project’s new total cost would be $14 billion, about 43 percent higher than the $9.8 billion price tag announced in 2008.
SCANA, parent company of SCE&G, and Santee Cooper, the state-owned utility, have partnered to build Reactors 2 and 3 at the V.C. Summer plant in Jenkinsville. SCANA owns 55 percent of the project.
The 2005 Energy Policy Act provides a production tax credit for electricity produced by new nuclear power plants. But to qualify for the nuclear production tax credit, a new nuclear power plant must be in service by Dec. 31, 2020.
The Unit 2 and Unit 3 reactors under construction at the Summer plant are eligible for the tax credits. But construction delays, which also drive cost overruns, have plagued progress and some are concerned about the project qualifying for the tax credits.
South Carolina’s electric cooperatives have asked to intervene in SCE&G’s latest cost increase request to be sure the reactors at Summer are completed on time. Twenty of the state’s electric cooperatives get their power from Santee Cooper.
“Our interest is not for or against SCANA,” said Mike Couick, president of CEO of the Electric Cooperatives of South Carolina. “Our interest is a fact-finding exercise of finding out what the risks are – upside and downside – of a fixed price contract. And also understanding things it might do to the time frame of it being completed.”
SCANA says both reactors will be completed by 2020.
SCE&G’s residential customers pay an average of $143.67 per 1,000 kilowatt hours used, according to the Office of Regulatory Staff. Of that amount, $23.17 or 16.13 percent of the bill is caused by financing costs of construction at the Summer plant, it said.
Within 30 days, SCE&G will outline an electric rate increase request to the PSC under the state’s Base Load Review Act, which allows utilities to collect construction finance costs on nuclear construction projects prior to completion of the plants. SCE&G said the practice saves ratepayers additional costs later on.
The company also said its electric ratepayers should end 2016 with no net increase to their monthly bills, even with the upcoming annual request, because of lower natural gas prices since April.
But critics aren’t happy. “The amount that SCE&G customers are unjustly forced to pay in advance for the nuclear project has become a significant burden, as revealed by” Scott’s office, said Tom Clements, director of Savannah River Site Watch, a watchdog group.
“That SCE&G customers are now paying over 16 percent of the bill for a project that may face more delays and cost overruns should cause alarm about skyrocketing rates, rates that are certain to go even higher due to the nuclear project.”
Roddie Burris: 803-771-8398