SCE&G probably could survive if its electric rates are slashed, the state’s utility watchdog said in a Friday report, challenging the Cayce-based utility’s claim that it needs to keep charging its customers for a failed nuclear construction project.
“A suspension of revised (nuclear-related) rates – a portion of the total revenues collected by SCE&G – is unlikely to force bankruptcy,” the S.C. Office of Regulatory Staff concluded.
SCE&G quickly disputed the findings, even as lawmakers cited the report as proof the maligned utility again is trying to deceive state leaders and swindle its 700,000 electric customers.
The report, released Friday afternoon, could give S.C. lawmakers the political ammunition that they need to repeal retroactively the 2007 Base Load Review Act, a move sure to challenged in court by SCE&G. That controversial law allows SCE&G to continue charging its customers $27 a month for the unfinished V.C. Summer expansion project in Fairfield County, even though its twin nuclear reactors were abandoned last July.
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However, a repeal of that law would kill Dominion Energy’s $14.6 billion deal to buy troubled SCANA, the corporate parent of SCE&G. The Virginia-based utility has said its buyout offer is contingent on continuing to charge SCE&G’s customers, too.
Still, lawmakers have said they want to stop SCE&G’s monthly charges. (They also want to return some or all of the $1.8 billion that SCE&G customers were charged for the botched project over the past decade. The Regulatory Staff report does not address SCANA’s ability to refund any or all of that money.)
But SCE&G and Dominion officials have said that ending the nuclear-related charges — a $445 million-a-year revenue stream — would bankrupt the Cayce-based utility.
Slicing the 18-percent nuclear surcharge from SCE&G’s monthly power bills either would force SCANA into bankruptcy or cripple its credit rating, raising its cost of business and, ultimately, causing S.C. electric rates to soar even higher, Dominion chief executive Tom Farrell told state lawmakers this week.
Instead, Dominion wants to buy SCANA and offer SCE&G’s electric customers a $7-a-month rate cut and a cash refund worth about $1,000 per household.
‘Too much of a risk to take’
The Office of Regulatory Staff report estimated there is a 35 percent chance that SCANA will file for bankruptcy if it is barred from continuing to charge its customers for the failed nuclear project.
SCANA said late Friday that is too great a risk to take for South Carolinians.
“We don’t agree with all of the financial conclusions reached in the report,” said SCANA spokesman Eric Boomhower. “Even if the conclusions are accurate, a 35 percent chance of bankruptcy is too much of a risk to take. We believe the best course of action is to embrace the known solution of the Dominion Energy proposal.
“Moreover, as has been discussed publicly, suspending the collection of the rates would increase the company’s borrowing costs, which would in turn result in substantially higher costs for customers over the long term.”
Some lawmakers, including Senate Majority Leader Shane Massey, R-Edgefield, have said SCE&G was bluffing with its bankruptcy threats.
“This confirms what a lot of people thought already,’’ Massey, who co-chairs a special state Senate committee that is investigating the nuclear fiasco and its fallout, said Friday. “It is an additional chink in the credibility for SCANA and, to some extent, Dominion, who were trying to use the bankruptcy as a scare tactic to sell the deal.’’
Massey said he wants to see how the state Public Service Commission responds to the report. The PSC is weighing multiple cases asking it to order SCE&G to lower its rates for customers and provide refunds. The audit was intended to help the commission decide those issues.
‘Determined to deceive ratepayers’
S.C. House Speaker Jay Lucas, R-Darlington, said the audit “confirms suspicions that SCANA is determined to deceive ratepayers by manufacturing threats of bankruptcy.”
“Increasing protections for millions of South Carolina energy consumers remains the House’s primary focus,” Lucas said in a statement. “The audit’s findings will continue to be reviewed as the House moves legislation forward that is crafted for the purpose of meeting this critical goal.”
State Rep. Peter McCoy, who chairs the special House committee investigating the nuclear fiasco, said the report wasn’t surprising.
“They’ve attempted to intimidate & scare legislators into protecting their shareholders & not the ratepayer,” McCoy tweeted. “We will not fold & will continue to put the ratepayer first despite deceitful lobbying efforts to the contrary.”
State Rep. Micah Caskey, R-Lexington, said he isn’t sure the report answers the “ultimate question,” but it does offer “another example of SCANA saying one thing and the facts saying another.”
“A 35 percent chance of bankruptcy is a serious and significant concern, but it’s still 65 percent from the certain doom that SCANA executives and lobbyists have been pushing the last few weeks,” said Caskey, who is on the special House committee investigating the nuclear fiasco.
S.C. Attorney General Alan Wilson issued a statement applauding the Regulatory Staff’s findings, “which are backed up by a well-respected bankruptcy attorney with many years of experience.”
The report was based on analysis by Columbia bankruptcy attorney Rick Mendoza.
Mendoza wrote SCANA could offset much of the revenue it would lose by discontinuing the nuclear-related charges by reducing or eliminating the roughly $500 million a year in dividends that it pays its shareholders.