SCANA Corp. is pushing back against a state agency’s finding the Cayce-based utility is “unlikely” to go bankrupt if it is blocked from continuing to charge its customers for a failed nuclear project.
In sworn testimony filed Monday, the utility said the S.C. Office of Regulatory Staff’s conclusions are “wrong and misleading,” stemming from a misunderstanding of accounting rules.
“The accounting conclusions reached in the ORS Report are demonstrably wrong,” new SCANA chief financial officer Iris Griffin wrote in an affidavit filed with the state Public Service Commission, which sets utility rates. She added Regulatory Staff’s opinions based on those conclusions “are not entitled to any weight or credibility in this matter.”
Regulatory Staff responded Tuesday that it didn’t expect SCANA to agree with its findings.
The report, released last Friday, gave ammunition to S.C. lawmakers and state regulators who want to block SCANA from continuing to charge its electric customers about $37 million a month for the V.C. Summer nuclear construction project, which the utility abandoned last July.
The typical customer of SCANA’s electric subsidiary, SCE&G, pays about $27 a month in higher electricity bills for the reactors, which likely never will be finished.
SCANA has said cutting off the $445 million-a-year in revenue that it collects from its customers for the unfinished reactors could cripple its finances, possibly forcing the utility into bankruptcy. The Regulatory Staff report — authored by Columbia bankruptcy attorney Rick Mendoza, who has more than 30 years of experience — estimated a 35 percent likelihood that the utility would go bankrupt if it lost that revenue.
SCANA Friday disputed the Regulatory Staff’s conclusions but added lawmakers shouldn’t take that 35-percent gamble.
On Monday, the company took a harder swing at the report.
In her affidavit, Griffin took aim at the agency’s finding that SCANA could choose not to write off its $4.7 billion investment in the now-useless reactors, even if the project stops bringing in revenue.
Accounting rules would require SCANA to write off the value of that investment if the utility can’t charge customers for the project, Griffin wrote. A write down of that size would throw the utility’s balance sheet out of whack, violating terms for its loans and leading creditors to demand immediate repayment of certain debts, she said.
That would sink the company’s credit ratings to junk status “and set in motion a cascading series of events that could be financially detrimental to the Company,” Griffin wrote.
Regulatory Staff is aware of SCANA’s position on the report, the agency’s acting director, Nanette Edwards, said in an emailed statement Tuesday.
“ORS did not expect SCANA to accept an independent analysis that contradicted its claim that a temporary suspension of revised rates revenue would force the company into bankruptcy,” Edwards said.
In her affidavit, SCANA’s Griffin noted that the Regulatory Staff report is unsigned and says it was not verified by anyone licensed to practice public accounting in South Carolina. Regulatory Staff said Tuesday its report was read over by a certified public accountant on its staff, ORS director of auditing Jay Jashinsky.
In its Monday letter to the Public Service Commission, SCE&G deputy general counsel Chad Burgess said the commission should not rely on ORS’ conclusions. The commission has yet to rule on whether the utility can continue to charge customers for the scuttled project.
“Setting aside the flaws in the ORS report,” SCANA spokesman Eric Boomhower said, “a greater than one-in-three chance of bankruptcy is simply too much of a risk to take. And even if bankruptcy could be avoided, the fact remains that suspending the collection of the rates would increase SCE&G’s borrowing costs, resulting in substantially higher costs for customers over the long term and possibly damaging the company’s ability to continue serving customers safely and reliably.”