SCANA says it will cut customers’ power bills and purchase a gas-fired power plant as part of a $4.8 billion “solution” for its failed attempt to build two nuclear reactors in Fairfield County.
Met with swift criticism from the governor and state officials, the proposal is the embattled utility’s first attempt at making amends with customers.
SCANA proposed Thursday a 3.5 percent cut to its electric rates for customers of its subsidiary, SCE&G. The cuts would save average customers more than $5 a month by canceling out two of the nine rate hikes SCANA has used to finance the now mothballed and way-over-budget nuclear reactors.
In the peace offering to customers, now furious about the project’s high costs and failure, SCANA and its shareholders also would cover the $2.2 billion in V.C. Summer construction costs the utility had previously planned to charge those customers.
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“We’ve heard our customers’ frustrations about paying for a power plant and having nothing to show for it,” said Keller Kissam, a SCANA official who will become chief operating officer on Jan. 1. “This proposal gives customers additional power generation while also lowering rates for customers.”
SCANA executives said they hoped the proposal would win support. Instead, it was immediately slammed by S.C. elected officials working to block SCE&G from charging customers any further for the abandoned nuclear venture. The $5 per month power bill reduction was viewed as a token gesture by some public officials and interest groups.
“The governor asked SCANA over a month ago to stop charging customers for this failed project and to give them their money back,” said Brian Symmes, a spokesman for Gov. Henry McMaster. “Today’s proposal does neither, and that’s completely unacceptable.”
SCANA says customers will receive a $4.8 billion benefit as a result of four key actions, including foregoing some shareholder earnings, acquiring the natural gas plant and cutting customer rates by 3.5 percent.
SCANA will absorb the $2.2 billion in construction costs that it originally wanted to charge customers by reducing shareholder earnings, Kissam said. But customers will continue to pay for some of the financing costs. The question is how much.
About 18.3 percent of a customer’s bill currently goes toward financing the failed project. SCE&G’s plan, unveiled Thursday, would immediately drop that figure to 14.8 percent.
Kissam said that percentage should drop to 9 percent of a customer’s bill within three years and gradually decline over the next 50 years as shareholders pay off the construction costs.
At no cost to customers, SCANA shareholders also will pay about $180 million for a nine-year-old, 540-megawatt natural gas plant in Calhoun County, Kissam said.
SCANA needs that electricity – the plant will produce about 40 percent of the power that was to come from the abandoned twin nuclear reactors – and SCE&G customers need something in return for the $1.7 billion they have been charged already for the nuclear project, Kissam said.
“Our customers deserve this solution, and this is a forward-looking solution,” Kissam said.
The proposal was intended as an olive branch to incensed SCE&G customers.
But beyond the initial $5 monthly reduction, customers should not expect lower bills, as SCE&G must grapple with rising operating expenses, Kissam said.
That did not sit well with Frank Knapp, the chief executive of the S.C. Small Business Chamber of Commerce, which has fought SCE&G’s rate hikes before the Public Service Commission.
“We want our 18 percent back, and we want to claw back the $1.7 billion they’ve already collected,” Knapp said. “This 3.5-percent reduction is nothing.”
‘An insult to ratepayers’
S.C. House Speaker Jay Lucas, R-Darlington, said the proposal provides “further proof that SCANA has consistently prioritized the company’s profits over protecting its consumers.”
“Ratepayers have demanded a serious approach to the V.C. Summer nuclear facility collapse, and the House has succeeded in meeting their demands,” Lucas said. “We will continue to move our utility ratepayer protection package through the legislative process to ensure South Carolina consumers receive the protections they deserve.”
State Sen. Hugh Leatherman, R-Florence, called the proposal “an insult to ratepayers” and “not a rate reduction at all.”
“You can’t reduce something that shouldn’t have been there in the first place,” Leatherman said. “This proposal is simply unacceptable and does not restore taxpayers’ hard earned dollars that they have already paid. ... I don’t know where we are going, but this isn’t it.”
State Rep. Peter McCoy, a Charleston Republican who chaired the House committee that investigated the V.C. Summer fiasco, said SCE&G customers deserve better.
“The SC House plan puts ratepayers first and provides a serious plan moving forward to right the wrong SCANA has inflicted on citizens of our State,” McCoy tweeted. He referenced House proposals that would block SCE&G from charging its customers any more for the project and that could order the company to refund its customers up to $1.7 billion.
State Rep. James Smith, a Columbia Democrat running for governor, called SCANA’s proposal the “absolute minimum that should be done.”
“The consequences of this poor business decision ought to be borne by shareholders,” Smith said.
State Sen. Mike Fanning, whose district includes the Jenkinsville construction site, called the proposal too little, too late.
“The citizens here in Fairfield County, the citizens all across South Carolina deserve more than a $5 payoff after a decade of being bamboozled,” Fanning said.
Travis Miller, an analyst with Morningstar, said the $5 dollar power bill reduction appears to be part of a negotiating strategy by SCE&G.
“I’m sure they are trying to get something out there to say they are doing something,’’ Miller said. “I don’t disagree that this could be far short of where we are going to be.’’
SCANA’s stock price started at $45.23 per share Thursday morning and leaped to $46.89 just after the announcement. The stock price closed for the day at $45 per share.
Company officials said they hope to gain support from others in their proposal to the state Public Service Commission.
“We hope interested parties will endorse the proposal so that we can obtain approval from the Public Service Commission and get this relief to customers,” said Jimmy Addison, who is currently SCANA’s chief financial officer and will become its chief executive officer Jan. 1. “Current projections indicate that if this proposal is adopted, we would not need an additional generation source for several years. This is a key step to meeting South Carolina’s robust economic growth.”
Dukes Scott, director of the state Office of Regulatory Staff, said his agency will have to examine SCE&G’s plan to cut rates. His office has asked the Public Service Commission to stop SCE&G from continuing to charge customers the $27 per month they are now paying for the failed project. SCE&G has previously balked at that proposal.
“This is the first we have heard of the proposal,’’ Scott said. “I don’t know when we are going to see the details.’’
SCANA and junior partner Santee Cooper walked away from the project July 31 after nearly 10 years and more than $9 billion spent.
State-owned Santee Cooper has not proposed cutting its rates but has frozen them for at least two years. The agency’s chief executive, Lonnie Carter, retired a month after the project’s abandonment, and the Moncks Corner-based utility last month proposed slashing its own budget to save about $120 million over three years.