S.C. senators Wednesday OK'd temporarily slashing by 13 percent SCE&G’s highest-in-the-region power bills, a move that sets up a fight with the S.C. House and governor over how much the utility’s customers should continue to pay for a failed nuclear project.
The proposal could lead Virginia-based Dominion Energy to withdraw its offer to buy SCE&G’s troubled parent company, SCANA, and offer its S.C. electric customers a permanent 7-percent rate cut and refunds worth about $1,000 a household.
It also could prompt a lawsuit by SCE&G challenging the Legislature's authority to intervene in the utility rate-making process.
The Senate's action, which won’t immediately affect power bills, followed several days of debate about how much the Legislature could — or should — cut from SCE&G's rates. SCE&G's power bills rose by about $27 a month for the typical residential customer as the utility sought to bankroll its now-abandoned effort to build two nuclear reactors in Fairfield County.
Sign Up and Save
Get six months of free digital access to The State
Senate Minority Leader Nikki Setzler, whose district includes SCANA's Cayce headquarters, said the utility left lawmakers no choice but to act after it continued to pay dividends to its shareholders and failed to lower its own rates voluntarily.
“I want to see SCANA cut their dividends. I want to see them reduce their rates if they don’t want this passed,” the Lexington Democrat said. “But they won’t do it.”
However, state Sen. Brad Hutto, D-Orangeburg, warned legislators that they should stay out of the business of setting utility rates — a task usually left to the S.C. Public Service Commission. Hutto said the Senate proposal only would drive away Dominion and prompt a lawsuit by SCE&G that the state can't win.
“It’s like Frankenstein’s experiment,” Hutto said. “We’re experimenting without even knowing what we’re doing.”
A tight spot
S.C. lawmakers find themselves in this position because, after nearly a decade of construction and $9 billion in costs, SCE&G and the state-owned Santee Cooper utility last July abandoned the V.C. Summer nuclear construction project.
During that decade, investor-owned SCE&G raised its power bills nine times to pay for the nuclear project. Now, about 18 percent of the utility’s monthly power bills go toward the useless reactors. So far, SCE&G customers have paid about $2 billion for the project in the form of higher power bills.
Those customers are on the hook to keep paying for the project until at least December, when the Public Service Commission decides who — SCE&G customers, shareholders or both — should pay off the nuclear construction debt.
The PSC also will decide then whether Dominion can buy SCANA. If it does, Dominion proposes to charge SCE&G's electric customers another $3.8 billion for the failed Summer expansion.
For months after the project’s collapse, S.C. lawmakers said they would pass a law blocking SCE&G from continuing to charges its customers for the reactors and forcing the utility to refund what it already has charged those customers.
However, faced with concerns about the constitutionality of that proposal, lawmakers punted that decision to the PSC and the courts.
Until the PSC can decide, legislators now propose temporarily cutting what SCE&G can charge its customers for the nuclear project. Lawmakers say those customers deserve a break. They also complain SCE&G still is funneling hundreds of millions of dollars of customers' money to its shareholders in the form of dividends that the utility could use to lower its rates.
A fight (or two) to come
Dominion has threatened to walk away from its deal to buy SCANA — including rate cuts and refunds for SCE&G customers — if lawmakers meddle in the utility's power bills.
A Dominion spokesman warned Wednesday that the Senate's "temporary reduction ... could be overturned by the courts."
"If the Senate bill becomes law, we stand by the previous statement of our chairman that this would be a material event," causing Dominion to withdraw its SCANA buyout offer, spokesman Chet Wade said.
To justify a 13-percent rate cut, senators cited a financial study that concluded that amount could be safely cut from SCE&G's revenues without forcing it into bankruptcy.
But the Senate proposal won't become law without the approval of the House — which is likely to object.
The House has said it won't settle for anything less than a full 18-percent rate cut. Also, Republican Gov. Henry McMaster has threatened to veto any proposal that doesn't remove the full, 18-percent nuclear surcharge.
McMaster and all House members are up for election this year.
"The House isn't going to accept our version, and the House version is unconstitutional," Hutto said. "If we adopt the Senate's version, it's not going anywhere."
Senate Majority Leader Shane Massey, who authored the 13-percent rate-cut proposal, acknowledged Wednesday it faces a difficult path to becoming law. After speaking with attorneys and financial experts, Massey said he thinks the state could defend a legal challenge to a 13-percent cut, not necessarily an 18-percent one.
"I am concerned about our ability to deliver an 18-percent reduction," the Edgefield Republican said. "I don't want to go for the whole $27 and lose everything."
SCANA spokesman Eric Boomhower called the proposal's passage "disappointing," adding the Dominion deal is the best option for SCE&G customers and the state.
"In the event S. 954 becomes law, SCANA would consider its options at that time, including challenging the law in court," Boomhower said.