SCE&G customers who have already paid $1.4 billion for a failed nuclear construction project would pay at least $2.2 billion more to close out the effort, according to plans presented to the state Public Service Commission.
The $2.2 billion, however, is only a portion of what customers might pay for two nuclear reactors that will never be built. The amount doesn’t include interest or a return on investment SCE&G stockholders would receive, according to the state Office of Regulatory Staff. Customers would be charged over the next 60 years to recover costs the utility put into the project.
SCE&G, which has more than 700,000 electricity customers, is seeking to recover costs from ratepayers under a 2007 state law that takes away much of the risk for utilities that want to build nuclear power plants. The company’s plan would not result in rate increases right away, but could at a later date.
The law allows SCE&G to get money back through customer rates, even if a nuclear project fails and is never completed. The law, adopted by the state Legislature to help springboard nuclear plant construction, also allowed SCE&G to charge customers upfront for some of the project’s costs.
As a result, customers have paid about $1.4 billion through nine separate rate hikes to cover the upfront cost of the now abandoned project. That translates to about $27 per month on the average bill.
Charging customers more money to recover costs didn’t go over well with one state lawmaker and a leading utility lawyer. Ratepayers will continue to cover the cost of the failed plant for decades, Sierra Club lawyer Bob Guild said
Guild said he’s concerned that some of the money SCE&G is seeking to recover would go to stockholders. That might happen because SCANA invested some of its own money into the project. The company’s stockholders now are receiving a more than 10 percent return on their investment, according to the state Office of Regulatory Staff.
“This shows that SCE&G and their investors will pay no price whatsoever for what represents the largest management blunder in American utility history,’’ Guild said.
SCE&G and partner Santee Cooper quit the project Monday, blaming high costs and the recent bankruptcy of chief contractor Westinghouse. The utilities had been working on the reactor project for nine years, but construction was only about one-third complete.
The shutdown left some 5,000 people without jobs at the V.C. Summer nuclear station in Fairfield County. The two reactors under construction would have complemented an existing reactor at the site.
The construction project initially was projected to cost about $11 billion. But the estimates ballooned over the years, and the most recent projection placed the cost at more than $20 billion.
SCE&G’s decision to abandon the project has created such an outcry that many state lawmakers called Friday for a special legislative session to examine whether they can block further electric rate increases.
“SCE&G needs to focus on fixing the damage they have done to their ratepayers, their constituents and their customers a lot more than they need to focus on their equity holders’’ or stockholders, State Rep. Kirkman Finlay, R-Richland, said.
Finlay said he relayed that concern to company executive Kevin Marsh during a meeting Friday. Marsh, who met with Finlay for about 45 minutes, is chief executive officer of SCANA, the parent corporation of SCE&G.
“I think Kevin Marsh understands intensely the pressure that is coming their way. They need to quit telling us about Westinghouse and they need to start telling us how they are going to fix ratepayers.’’
The additional $2.2 billion the company will seek to recover is part of about $5 billion SCE&G had sunk in the project. The amount was revealed during testimony by Marsh and other ranking SCANA executives at the state Public Service Commission this past week.
The utility filed a petition Tuesday with the PSC to formally abandon the V.C. Summer project and recover money it has spent on the work.
Company officials emphasized that their plan to abandon the project does not include rate increases over the next several years, but they couldn’t promise that over the long-term. They also said this past week that they would not rebate the $1.4 billion they’ve already charged customers.
Records show that SCE&G would use about $700 million of a $1.1 billion payment from the Toshiba Corp. to keep utility bills from going up in the near future. A more than $2 billion tax break also would help defray costs.
Company officials say the long payback period will keep customer rate increases at a minimum. Toshiba, the parent corporation of Westhinghouse, is on shaky financial ground, but SCE&G officials have said they believe the company is good for the money. SCE&G referred questions this week to a transcript of Tuesday’s meeting between company executives and the Public Service Commission.
“Funds available would allow SCE&G to offset rate increases to customers arising out of the abandonment for a number of years,’’ SCANA chief financial officer Jimmy Addison told the PSC.
Addison said state law allows the company to get back what it paid for the project if its abandonment proposal is “prudent.’’ The utility regulatory board, criticized for failing to limit rate increases for the nuclear project, is expected to consider the SCE&G plan later in the fall.
“SCE&G believes that its decision to abandon the project at this juncture is prudent,’’ Addison said. “Accordingly, SCE&G will be proposing a plan for recovery of its investment.’’
Guild, who has handled rate cases at the PSC for parts of 40 years, said SCE&G is asking customers to pay for mistakes it made trying to build two reactors. The project, only 34 percent complete when it shut down, is filled with partially constructed buildings and equipment.
“They are making a profit off of a bunch of equipment rotting in a field,’’ Guild said. “It is unbelievable.’’