SC Supreme Court: SCE&G has right to raise rates

The S.C. Supreme Court endorsed SCE&G’s rights under state law Wednesday to raise customers’ utility rates in order to pay for ongoing construction cost increases for two new reactors at the V.C. Summer nuclear plant in Fairfield County.

The ruling came as the result of an appeal to the court filed by a coalition of conservationists in April who said the S.C. Public Service Commission erred two years ago when it allowed SCE&G to pass a $283 million increase along to beleaguered ratepayers under the controversial Base Load Review Act, rather than to their parent company, SCANA, and their private investors.

Critics immediately attacked the decision saying it means there now are no constraints on the cost of the Summer plant expansion, which started out in 2009 at an estimated cost of $9.8 billion.

“This is the Legislature’s fault. I put it squarely in their lap,” said Susan Corbett, S.C. Chapter Sierra Club chairwoman. “They made the decision to pass this Base Load Review Act. The Legislature bowed to the utilities, allowed this thing to be passed, and now we’re all suffering from it.”

To date, SCE&G has been granted eight electric rate increases since 2009 by the Public Service Commission in order to pay upfront for finance costs of the expansion at V.C. Summer. Last month, contractors there told the utility company construction costs of the plants would rise at least another $1.2 billion, figured in 2007 dollars – meaning that amount also will escalate.

“In our opinion, they gave the utilities a blank check to spend as much as they want on this plant, with obviously no constraints,” Corbett said. “We tried to use the constraints that seem to be inherent in the legislation and there are no real constraints. It’s just kind of a blank check to the utilities.”

For its part, SCE&G earlier this month said it has not agreed to any cost increase estimates for the V.C. Summer plant, nor to any delayed construction schedules for the plant, but the utility has widely acknowledged problems at the plant.

SCE&G is building two 1,117-megawatt Westinghouse reactors that carry new designs. It co-owns the plant with state utility provider Santee Cooper – 60 percent to 40 percent, respectively.

At issue in the Supreme Court case, was a $283 million capital cost increase SCE&G pushed to its S.C. ratepayers in November 2012, when the utility revised the completion dates for the two new reactors under construction at the plant.

The utility also cited in the increase request the need for redesign of significant component parts of the two-reactor project and site condition problems specific to the Unit 2 reactor site at the plant.

The Sierra Club, joined by the South Carolina Energy Users Committe, an association of large industrial SCE&G customers, and one SCE&G residential customer, Pamela Greenlaw, had asked the Public Service Commission in October 2012 to deny SCE&G the cost increase.

After the PSC denied the group a rehearing of their case in February 2013, saying the case lacked merit, the Supreme Court heard their case in April this year.

The group labeled SCE&G’s cost increase requests and newly projected construction schedule delays as imprudent overruns the company should have been able to anticipate and include in their initial construction budget.

Further, the group told the Supreme Court the Public Service Commission had an obligation under the Base Load Review Act to reconsider whether it remained prudent for SCE&G to continue building the two new reactors, in light of the rising costs and new alternative energy options becoming more feasible.

“Nuclear has become, now, the most expensive form of energy in the world,” Corbett said. “This is just what the industry did in the ’80s – they couldn’t get their economic act together and from what I’m seeing now, they’re doing worse, because they’re truly being propped up by the taxpayers.

“This is not a free market of energy. This is a monopoly,” Corbett said, adding her group had hoped for at least a split decision by the court in the case.

The court, however, sided with the PSC and its review of SCE&G’s actions foursquare.

“The BLRA contemplates changes to an initial base load review order and provides mechanisms to accomplish such changes,” the court stated in its decision. “A utility may petition the Commission for an order modifying any of the schedules, estimates, findings, class allocation factors, rate designs, or conditions that form part of any base load review order,” the justices agreed.

As for the prudency claims, the court said utilities had been open to litigation and relitigation after starting a massive project prior to the Base Load Review Act, racking up added risks, costs and financing charges before completion.

“In response, the General Assembly sought to mitigate such uncertainty by providing for a comprehensive, fully litigated and binding prudency review before major construction of a base load generating facility begins,” the justices again agreed.

Conducting a review of whether the Summer plant expansion is prudent at this stage, when modifications are necessary, is “unavailing,” the Court said. Yet, it did not prevent groups from going back to the PSC or from coming back to the court, if necessary, for further future consideration as conditions may warrant.

“We are not going away. We are going to continue to raise public awareness about the ever-increasing cost of nuclear, especially now that we know we have other alternatives, and that are cheaper, cleaner, faster, safer,” Corbett said.

“The imprudence of this decision is looming greater and greater everyday, and yet the public service commission does not seem have the collective will to stand up to this imprudent decision and the Supreme Court is just basically backing them up.”