Lorraine Simmons can’t always afford to buy the groceries or medicine she needs to stay healthy, in part because her power bill eats up so much of her limited income.
What she can’t understand is why 18 percent of that bill is for two nuclear power reactors that won’t be finished.
“I could take that 18 percent and apply it to my groceries or my medication or my water bill or something else in my life that is a necessity,’’ said Simmons, a 65-year-old Columbia retiree. “If you pay more to the utility, you can’t afford to buy the kind of food to stay healthy.’’
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Simmons, like many other SCE&G ratepayers, will be watching this week as state regulators hear a case that could determine whether the utility must cut the $27-a-month charge that its average customer now pays for the nuclear project. The S.C. Office of Regulatory Staff has asked the state Public Service Commission to halt that charge, currently being assessed for the failed V.C. Summer nuclear plant expansion.
At Tuesday’s commission hearing, SCE&G will try to throw out Regulatory Staff’s request to lower power bills. If the commission denies SCE&G’s motion to dismiss the case, a full hearing would be held later about the $27-a-month charge, most likely next year.
The case before the commission Tuesday is one of two challenging nuclear charges that will be heard over two days. Environmental groups, which also are trying to roll back rates, go before the PSC on Wednesday.
‘Could lead to a bankruptcy’
SCE&G says it could fall into financial ruin if all of the nuclear charges are dropped from its customers’ power bills.
Without the more than $400 million that its customers now pay annually for the nuclear expansion project, SCE&G could be forced into bankruptcy, the company says. The company serves about 700,000 S.C. customers, mostly in the Columbia and Charleston areas.
“Low utility rates do not always serve the public interest,’’ SCE&G said, citing a U.S. Supreme Court decision in its Dec. 7 legal brief to the PSC. “To the contrary, the public interest is adversely affected by decisions that ‘impair the financial ability of the public utility to continue its service.’ Indeed, ratepayers and the public also have an interest in ensuring that utilities remain financially viable and able to provide reliable service.’’
SCE&G, a subsidiary of Cayce-based SCANA, says in legal documents that halting customer payments for the unfinished nuclear power reactors could “cripple’’ SCE&G’s ability to borrow and “potentially make it impossible for SCE&G to function as an effective utility.’’
The company received state approval nearly a decade ago to charge customers for the project’s financing costs. However, critics now question whether those charges are legal and should continue since the reactor project won’t be completed.
Ellen Lapson, a former utility banker and ratings analyst retained by SCANA, said SCE&G could default on $900 million in existing credit agreements if Regulatory Staff’s proposal to cut its rates is approved. That default could force the company to immediately pay off outstanding debts, according to the Dec. 7 legal brief to the PSC.
“Granting ORS’ request could be the first step in a quick cascade that would result in SCE&G’s ... financial distress and could lead to a bankruptcy petition,’’ Lapson said in a sworn statement that predicts “financial calamity’’ if the Regulatory Staff plan is approved.
The loss of money from ratepayers also could make it hard to upgrade the company’s utility system and hurt SCE&G’s ability to help South Carolina recover from hurricanes, tornadoes and floods, the company says.
SCE&G has offered to cut power bills by about $5 a month for the average residential customer as part of a settlement it floated recently. But that plan was met with a chorus of criticism as inadequate.
Paul Patterson, an analyst with Glenrock Associates, said the proposal to roll back the entire $27-a-month nuclear charge “would have a significant financial impact’’ on SCE&G.
“It goes without saying the company would fight this for obvious reasons,’’ he said.
When are they going to get a refund?
Despite SCE&G’s arguments, interest groups, the Office of Regulatory Staff and S.C. Attorney General Alan Wilson say it’s wrong to keep billing people for something they will never get. They argue the charges being made to SCE&G’s customers for the failed nuclear plant legally are suspect and should be halted.
SCE&G and partner Santee Cooper spent $9 billion on the V.C. Summer project over a decade, before deciding July 31 to pull the plug after chief contractor Westinghouse filed for bankruptcy. Ratepayers already have been charged about $2 billion for the project, which would have added two reactors to complement an existing reactor.
Robert Kittle, a spokesman for Wilson, said the attorney general does not want to see SCE&G financially ruined, but people need help.
“He doesn’t think this entire charge should be put on the backs of the ratepayers,’’ Kittle said.
Patrick Cobb, communications manager for AARP of South Carolina, said members like Simmons are frustrated and want financial relief. That organization, along with a handful of other groups, has asked the PSC to be heard during Tuesday’s hearing in Columbia. The Office of Regulatory Staff is expected to make arguments against throwing out its proposal to cut SCE&G’s rates.
“This is taking money out of people’s pockets,’’ Cobb said “For folks on fixed incomes, this is eating them alive. They want to know when they are going to get a refund.’’
Much of the case centers on whether the charges are legal and fair.
SCE&G says it has the right to charge for the new plants under a S.C. law that passed in 2007. That law, which sailed through the Legislature with little debate, made it easier for SCE&G to raise customers’ rates to pay for the nuclear project before it was completed.
Under the 2007 law, the PSC signed off on nine rate hikes to pay financing costs for the project.
SCE&G says many arguments expected to come up Tuesday are based on whether the law is constitutional. That, the utility contends, is not a matter for the PSC, an administrative panel, to decide. Instead, that issue should be decided by a court, SCE&G contends.
All Simmons knows is that SCE&G’s charges sting every time she gets a power bill. The grandmother of six said she’ll be at Tuesday’s hearing, hoping for good results.
“A lot of people are still in the dark’’ about the nuclear plant and its effect on power bills, Simmons said. “Why did SCE&G need three nuclear plants anyway?’’