Saying state officials are misguided in seeking to cut power bills for a bungled atomic energy project, SCE&G spent hours Tuesday explaining why it thinks the rate cut would hurt customers more than it would help.
“There are real limits to what we can do here without causing the company to become insolvent,’’ SCE&G attorney Belton Zeigler said, noting that the power bill reduction could cost the utility $450 million annually and bring it to the brink of bankruptcy.
But the company’s pleas, made during a hearing before state utility regulators, drew almost no sympathy from interest groups and state agencies that said people shouldn’t keep paying for a nuclear expansion project that won’t be built.
The average residential customer pays SCE&G about $27 each month for the failed V.C. Summer reactor project. Big industrial users pay even more. All told, the nuclear charge adds up to about 18 percent of a customer’s bill.
Scott Elliott, a lawyer for a group of large energy users, said SCE&G has “no business keeping this money,’’ which he said is owed the citizens who’ve suffered through multiple rate increases over the past decade. The nuclear project was over budget and behind schedule when SCE&G shut it down July 31.
“These ratepayers out here are not culpable,’’ Elliott said. “All they’ve done is pay their bills. And they’ve paid nine rate increases.’’
Elliott’s arguments before the state Public Service Commission were part of the first major battle over a plan to cut nuclear charges from power bills. The Office of Regulatory Staff is seeking to stop SCE&G from continuing to charge customers for the project. SCE&G wants the PSC to throw out Regulatory Staff’s request.
The PSC would have to decide whether to dismiss the Regulatory Staff request to cut power bills, but deferred action after hearing more than eight hours of arguments.
“We have a difficult task and a difficult decision ahead,’’ PSC Chairman Swain Whitfield said. “The commission is going to take this matter under advisement and we’ll give you our ruling as soon as possible.’’
Tuesday’s hearing was spiced with allegations that SCE&G hid vital information needed by the PSC and the regulatory staff agency, which was monitoring the project. The twin reactor effort ran into trouble not long after construction started about five years ago, but few people outside of SCE&G, partner Santee Cooper and construction companies knew that.
Among those speaking against SCE&G’s effort to toss out the case were lawyers for the S.C. Energy Users Committee, a group represented by Elliott; the AARP of South Carolina; the S.C. Coastal Conservation League; and Attorney General Alan Wilson, as well as others.
Office of Regulatory Staff lawyer Shannon Hudson said SCE&G didn’t provide her agency a copy of the Bechtel report, a study that found major problems with the plant’s progress.
A draft of the report showed the nuclear construction project was years behind schedule, but that was scrubbed from the report’s final version, Hudson told the state Public Service Commission.
The agency now has the reports, written by the nationally known Bechtel Corp. engineering firm, but it received them from other sources, she said.
Had Regulatory Staff or the Public Service Commission received information in the reports it could have helped better oversee the V.C. Summer nuclear project as it began to fail, Hudson said. Hudson said the first of two reactors being built was one to two years behind schedule, based on information from the Bechtel draft.
“This information did not get to you and it did not get into the final Bechtel report,’’ Hudson said.
The Cayce-based utility, a subsidiary of SCANA, now is charging its customers higher rates for the nuclear debacle under a law that has been found constitutionally suspect, Hudson told the PSC.
Zeigler said the utility was upfront with state regulators. He said many problems highlighted in the Bechtel report already had been corrected by the time the information surfaced publicly.
SCE&G fought to keep the final report secret, but it eventually was released by Gov. Henry McMaster’s office in September after he pressured Santee Cooper to release the document to him.
Tuesday’s hearing follows the July 31 decision by SCE&G and Santee Cooper to abandon plans to complete two new nuclear-powered reactors in Fairfield County after spending nearly a decade and $9 billion on the work.
That decision — made after the project’s chief contractor, Westinghouse, filed for bankruptcy — left more than 5,000 people out of work and enraged SCE&G’s customers.
SCE&G has charged its customers about $1.8 billion for the unfinished reactors and has considered charging even more, rather than having its stockholder-investors absorb the losses. State lawmakers have launched investigations into the debacle. Federal and state criminal investigations also are underway.
Zeigler told the PSC that the Westinghouse bankruptcy doomed the project.
SCE&G warns of bankruptcy
During Tuesday’s hearing, held in a packed meeting room at the PSC’s Columbia offices, Zeigler said SCE&G can’t afford to lose the revenue from the $27-a-month in nuclear charges.
Zeigler pleaded with the Public Service Commission not to immediately cut those charges, as proposed by a coalition of state agencies and public interest groups.
“It’s a financial issue that could make the company unviable and injure its ability to serve customers,” he said. “Believe us when we say there’s a limit to what we can do here. If we exceed that limit, it’s going to hurt you more than you can imagine.’’
SCE&G has offered to drop $5 from the average monthly bill as part of a compromise. But cutting all of the $27 charge would hurt the company so much it may not be able to survive, officials said. SCE&G says it faces possible bankruptcy if it loses $450 million a year in nuclear charges.
"No one in this room wants SCE&G to be in bankruptcy,’’ Zeigler said.
Zeigler said the impact of scrapping the nuclear charge immediately has not been been studied enough. Instead, he urged the commission to conduct a full review of the utility’s nuclear rates early next year. The company will seek a rate decrease at that time, although Zeigler did not say how much that would be.
Hudson questioned whether SCE&G would be pushed toward bankruptcy if the nuclear rates are cut. She and Elliott also noted that investors are getting ample returns of about 8 percent. Zeigler disputed that.
‘This was a colossal failure’
The 2007 Base Load Review Act made it easier for SCE&G to use ratepayer money for the nuclear project, and, subsequently, the PSC approved nine rate increases. But S.C. Attorney General Wilson said in a non-binding opinion that the law is legally suspect.
SCE&G filed a flurry of paperwork with the PSC late last week, outlining its concerns about the effort to cut the nuclear charge.
“While certainly the abandonment of the project is disappointing and frustrating to all involved, disappointment and frustration should not be used as a reason to now jeopardize the financial integrity of the company and force its bankruptcy, resulting in great harm to everyone,’’ wrote Ellen Lapson, an SCE&G commissioned expert, in a sworn statement to the PSC.
The V.C. Summer debacle is as bad, if not worse, than the failure by Duke Energy in the 1980s to complete a reactor project in Cherokee County and the federal government’s failing mixed-oxide fuel construction effort at the Savannah River Site, said Tom Clements, a Friends of the Earth adviser and critic of the SCE&G project.
Friends of the Earth will go before the PSC on Wednesday with its own case, seeking to roll back SCE&G’s nuclear-related rates. Friends of the Earth and the Sierra Club also want the utility’s customers to get back money they already have have paid for the nuclear project.
“This was a colossal failure compared to most anything else,’’ Clements said before the meeting.