SC senators upset by Dominion’s plans to profit from failed nuclear project

S.C. senators Wednesday took issue with Dominion Energy’s plan to pocket – for its shareholders – some of the roughly $2.8 billion it wants to charge SCE&G customers over the next 20 years to pay off a failed nuclear project.

Senate Majority Leader Shane Massey expressed dismay when Dominion Chief Executive Tom Farrell testified his utility doesn’t know how much it would profit from the nuclear charges on S.C. customers’ bills, saying only: “We believe it will add to our earnings.”

“Why is it fair that customers have to pay more than the debt, more than the interest, so that shareholders will get even more money?” asked Massey, an Edgefield Republican.

Farrell replied that nuclear-related profit – baked into the nuclear surcharge on the monthly electricity bills of SCE&G customers – is fair as part of Dominion’s buyout offer for SCANA, SCE&G’s parent company. That deal, he said, offers something to everyone involved, including SCE&G customers, and Dominion and SCANA shareholders. Dominion would pull out of the deal if it can’t earn that nuclear-related profit, he said.

SCE&G currently earns the same level of profit from the $27 a month it charges customers for its abandoned V.C. Summer nuclear expansion project. Of the nearly $1.9 billion thus far that SCE&G has charged its customers in higher power bills for the useless reactors, nearly $1.2 billion was for “return on equity.” That money was passed on – or could have been – to SCANA shareholders, according to the S.C. Office of Regulatory Staff, which regulates utilities.

The Massey-Farrell exchange came as Dominion executives made their third in-person appeal to S.C. lawmakers about their proposed SCANA buyout. The Virginia-based utility wants the General Assembly to support its $14.6 billion proposal to buy Cayce-based SCANA, in dire financial straits after its nuclear construction fiasco.

Lawmakers, essentially, could veto the proposed acquisition if they change a state law that allows SCE&G – or Dominion in the future – to keep charging S.C. customers for two unfinished nuclear reactors in Fairfield County. Dominion says it will walk away from the deal if it can’t keep charging SCE&G’s customers for the abandoned project for 20 more years.

Some lawmakers would rather SCANA or Dominion shareholders eat the nuclear construction debt. But if SCE&G’s 700,000 customers are forced to pay for it, their money shouldn’t be going to Dominion shareholders, Massey said.

Senate Minority Leader Nikki Setzler, D-Lexington, said Dominion should revise its offer for SCANA, cutting shareholder profits and using the savings to reduce what customers have to pay for the abandoned reactors.

“The amount that SCANA has paid their stockholders and the money their institutional investors are going to get out of this is really questionable,” said Setzler, co-chair of the special Senate committee reviewing the Dominion deal. “I don’t know why that money couldn’t be directed to ratepayers instead of these out-of-state investors.”

Farrell said Wednesday that Dominion plans to charge SCE&G customers about $17 a month over the next eight years for the project. That monthly charge would decline over the following 12 years until the $3.3 billion nuclear debt is paid off.

Baked into those monthly charges would be a 10.25 percent rate of return on equity for Dominion. Half of that 10.25 percent would go toward the utility’s borrowing costs. The other half would go to Dominion shareholders.

Dominion spokesman Chet Wade said Wednesday that without that return on equity, “our shareholders would be required to put up their funds for an extended period with no return.”

“Businesses can’t function that way,” Wade said. “And lenders are usually not willing to fund with only debt unless you provide some other security. In this case, lenders would not likely take the unfinished units as security.”

Farrell argued Dominion actually is getting only a 5 percent return for all the money it is putting up in the deal.

The company won’t make a profit on the $1.3 billion in refunds it is offering to SCE&G customers, who collectively have paid almost $1.9 billion already toward the failed project. Dominion also won’t profit from the $1.7 billion in SCE&G’s nuclear debt it will repay or the $575 million it is spending to cut SCE&G’s rates by about $10 a month for the next eight years, the utility says. Nor will it make any money from the $185 million the utility plans to spend to buy a gas-fired power plant in Calhoun County that will generate electricity to replace power once expected from the now-abandoned V.C. Summer reactors.

Massey didn’t buy that argument, saying Dominion is “playing semantics.”

Halfway through Wednesday’s hearing, the special Senate nuclear committee’s co-chairman asked Farrell what Dominion stands to make from continuing to charge SCE&G customers for the nuclear project.

Farrell said his company doesn’t have that number.

“We believe it will add to our earnings,” Farrell said. “It depends on a lot of assumptions how that will turn out. … There’s no good way to answer that question. We do expect Dominion to earn profits on the purchase, yes, sir.”

“No question about that,” Massey replied. “I want a number. Y’all have got a number. I mean, you’ve run the numbers. You wouldn’t have come up with this particular plan over 20 years and these particular rebates unless you’ve got a number on how much you stand to make.”

“Don’t have a number, sir,” Farrell said. “We don’t run numbers out 20 years.”

This story was originally published February 14, 2018 at 1:28 PM with the headline "SC senators upset by Dominion’s plans to profit from failed nuclear project."