SCANA’s decision to abandon construction at the long-delayed and far over-budget V.C. Summer nuclear plants has brought pain to many South Carolinians. Legislative committees are meeting, and background negotiations are underway to respond to this very difficult situation. However, if we fail to correct the errors of the past, we will make this awful situation worse. A realistic understanding of the roles of all involved is essential if we are to find a sound way forward.
First, we hear a lot from public officials about South Carolina’s “corporate partners” — generous providers of jobs and property taxes. However, SCANA does not exist to create jobs and pay taxes, or even to generate electricity. Those are means to an end. SCANA, like most corporations, sees its primary mission as producing value for its shareholders. The public interest and that of utilities often intersect. However, sometimes they do not. That is not a reason to hate utilities. It is a reason to regulate them fairly and effectively.
It falls to government to protect us when the public interest is not the same as that of an energy utility that holds a monopoly. The first step in doing this is creating a legal foundation for balancing all interests, including holding utilities accountable for doing their jobs responsibly and prudently. In passing the 2007 Base Load Review Act, our General Assembly violated this principle. That law shifted too much of the risk at V.C. Summer from shareholders to ratepayers, even when there is evidence that increased costs are the result of imprudent project management.
This distorted the regulatory process. The Office of Regulatory Staff is charged with representing the public interest before the Public Service Commission, the decision-making body in utility regulation, by balancing the concerns of the public, utilities and economic development.
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However, the law tied the hands of the Office of Regulatory Staff, making it very difficult to protect ratepayers by holding SCANA accountable for its management decisions, as the company came back for one rate increase after another.
Nevertheless, it eventually became clear that there must be some end to this. In 2016, Regulatory Staff negotiated and the PSC approved a fixed-price agreement with SCANA that makes shareholders, rather than ratepayers, responsible for most cost overruns beyond the projected $15 billion completion cost that had been approved at that time. This has been a reassuring protection for the public.
We now know that the $15 billion projection was far too low. SCANA currently projects costs in excess of $20 billion. The obstacles to resuming construction are therefore immense. SCANA does not intend for its shareholders to pay these extra billions, which could destroy the company.
On the other hand, voiding the 2016 fixed-price agreement and sending those added costs back to ratepayers would be devastating to the people of South Carolina. A new utility brought in to participate in the project also would have to recover its share of these enormous costs. This leaves no easy way forward.
We ask the state to be cautious. Committing substantial public resources to this project would be unwise. Companies elsewhere have shut down fully functional nuclear plants because they are no longer the most cost-effective means of generating power. It’s possible that SCANA would do this in only a few years at V.C. Summer, even if the plant had been completed at great public expense.
We further ask state regulators to identify every avenue to hold SCANA accountable for its management of V.C. Summer, in order to reduce the harm to ratepayers.
Finally, we ask that legislators examine the regulatory system and make any reforms necessary to protect the public interest. All parts of the system should be reviewed to ensure that regulators have the statutory tools to do their jobs. They must be free of conflicts of interest and committed to their role in effective regulation for the benefit of all the people of South Carolina.
Finally, the Base Load Review Act must be amended or repealed, so that we never find ourselves in today’s sad situation again.
Ms. Teague is Vice-President of Issues and Action for the League of Women Voters of SC; contact her at email@example.com.