Reeling from its failure to complete two nuclear reactors, Cayce-based SCANA is on the ropes, struggling to survive as the only major investor-owned power company headquartered in South Carolina.
Angry ratepayers are filing lawsuits, federal and state agencies are investigating, and politicians are promising to bar the utility from getting any more money from customers to pay for the bungled V.C. Summer reactor project, northwest of Columbia.
The state Office of Regulatory Staff also took steps Tuesday that could force SCANA to repay up to $1.7 billion that it has collected from customers for the project. The agency takes its case Thursday to the state Public Service Commission.
Once a pillar of Columbia’s business community, questions now are being raised about whether SCANA will be forced to file for bankruptcy or if a larger, out-of-state utility will seek to acquire SCE&G’s parent company.
SCANA’s troubles have sent its stock price plummeting to its lowest point in months – closing at $51.22 a share Wednesday, down from $75 in early summer.
Some state lawmakers say they want to see SCANA remain an S.C.-headquartered business. But they also are incensed over the nuclear reactor project’s failure.
“There has been a lot of concern about this and does it hurt South Carolina to lose its only investor-owned utility,’’ said Rep. James Smith, D-Richland. “However, the utility is reaping what they have sown.’’
Smith, a member of a House committee investigating the nuclear project’s failure, said “accountability is essential.’’
‘A much harsher stand’
SCANA and its junior partner, the state-owned Santee Cooper utility, shut down the two-reactor project they were building July 31.
The bankruptcy of chief contractor Westinghouse was a major reason the project could not be finished, the utilities said, adding the project had become too expensive and was not needed, as energy demand leveled off.
By then, however, the companies had spent $9 billion on the project and raised customers’ rates 14 times to pay for the work.
Securities analysts interviewed by The State newspaper said they doubt SCANA, a relatively small utility, would be an attractive target for a bigger utility to buy – at least now. There is too much uncertainty surrounding the company, they said.
Neil Kalton, with Wells Fargo Securities, said a key drawback for SCANA is the lack of clarity over whether the company will be able to recoup its costs associated with the nuclear plant. The company previously had said it wanted up to $2.2 billion from ratepayers to help offset the costs of the failed plant.
“Really, this whole cost-recovery issue needs to be resolved before (other) parties might come in,’’ Kalton said of SCANA’s attractiveness as a takeover target.
News last week of a criminal investigation and this week’s action by the Office of Regulatory Staff add to the uncertainty, Kalton said.
The ORS petition asks the Public Service Commission to suspend charges currently being made to SCE&G ratepayers for the failed nuclear project. That could cost SCE&G $37 million a month.
The Regulatory Staff petition also asks the PSC to order SCE&G to pay back $1.7 billion that customers already have been charged – if the Legislature changes a law that allowed construction of the nuclear project to start.
“The ORS request is the most jarring thing,’’ Kalton said, noting the agency has worked with SCE&G in the past. “The ORS with this filing is taking a much harsher stand.’’
SCANA spokeswoman Rhonda O’Banion said this week’s action by the Office of Regulatory staff contributed heavily to the drop in the company’s stock price. SCANA has said it will oppose the ORS request to the PSC. O’Banion said the company continues to focus on “what is in the best interest of our customers.’’
“We truly understand many people’s frustration and disappointment, and we are sorry we were unable to complete the new nuclear units,’’ she said in an email, pledging that the company will work with federal and state investigators looking into the project.
‘Cut costs, save the company’
SCANA officials refused to discuss the company’s future, but took steps Wednesday to help defray some of the costs of the nuclear plant. SCANA and Santee Cooper sold a nearly $2.2 billion IOU from Westinghouse’s parent company, Toshiba, in an effort to raise cash faster.
Toshiba had promised to pay the money over five years as compensation for not finishing the project. But the sale allows SCANA and Santee Cooper to receive $1.84 billion up front. SCE&G previously had said it would use the Toshiba money to help shield its customers from paying more for the nuclear project.
Whether SCANA will file for bankruptcy is unknown. But Columbia utility lawyer Scott Elliott said it might be the best way to stabilize the company.
Bankruptcy would grant SCANA relief from lawsuits by ratepayers and stockholders seeking damages, while giving it time to reorganize, said Elliott, who represents the S.C. Energy Users Committee, a group of industries that use large amounts of electricity.
Should a larger utility acquire SCANA and stabilize electricity rates, it could be a win for customers, some legislators say.
North Carolina’s Duke Energy, Dominion Energy of Virginia and the Southern Co. of Georgia have been mentioned as possible suitors.
“Duke has been a good operator in South Carolina,’’ said Sen. Greg Gregory, R-Lancaster. “They would be capable of taking over SCE&G and running it.’’
Rep. Kirkman Finlay, R-Richland, said providing customers with more affordable power rates and less devotion to stockholders would cure a lot of SCANA’s ills.
“Their linemen are getting screamed at, their employees are getting screamed at, and they had nothing to do with this,’’ Finlay said. “We need somebody who can come in there, cut costs, save the company and restore its credibility.’’
Attorney says McMaster considering him to help run Santee Cooper
Columbia attorney Steve Hamm said Wednesday that Gov. Henry McMaster contacted him several weeks ago about whether Hamm would help out with Santee Cooper’s leadership.
Hamm, executive director of the S.C. Ethics Commission, said the governor has not extended a formal offer. But Hamm said he would consider an offer.
“This is not something that I have sought,” said Hamm, who once was the state’s longtime consumer advocate, sometimes arguing electric-rate cases.
Santee Cooper’s current chief executive, Lonnie Carter, announced last month he will retire early next year.
The state-owned Santee Cooper utility was the junior partner with SCANA in the aborted attempt to build two nuclear plants in Fairfield County.
Santee Cooper is managed by a board of directors whose members are appointed by the governor – who has said he wants to sell the utility – with the consent of the state Senate. The board chooses the CEO.
Hamm said he would take the job without any preconditions. “I don’t have any marching orders.”
Before recommending any action, Hamm said, he would want to work with experts to study Santee Cooper’s obligations and debt.