Dominion buys out SCANA: How we got here
After weeks of haggling, the S.C. House and Senate passed a proposal Wednesday to cut temporarily SCE&G’s electric rates by almost 15 percent, almost wiping out the portion of the utility’s power bills that customers now pay for two abandoned nuclear reactors.
Lawmakers also agreed to delay until December the state Public Service Commission’s decision on who — SCE&G’s shareholders, its customers or both — must foot the bill for the billions of dollars left in unpaid construction debt.
Those proposals were among a handful of nuclear-related bills that the Legislature passed Wednesday to address the largest financial debacle in state history.
Gov. Henry McMaster again threatened to veto the rate-cut bill, saying it doesn't go far enough in protecting S.C. power customers. But legislators say they have the votes to override that veto.
“This is step one," said Senate Majority Leader Shane Massey, R-Edgefield. "We’ve got more to do, but this is a big step one.”
Cayce-based SCE&G is expected to sue in court to block the rate cuts if they become law.
The rate cut also could cause Dominion Energy — the Virginia-based utility offering to buy out SCE&G’s parent company, SCANA — to withdraw its takeover offer and its promised benefits, including $1,000 refund checks to SCE&G customers and a $10-a-month rate cut.
"The South Carolina Legislature is playing a high-stakes game where they are gambling with the money of customers and taxpayers," Dominion Chief Executive Tom Farrell said Wednesday in a statement. "They are promoting continued turmoil for South Carolina's energy and business future. All of this for a ... temporary rate reduction that has good odds of being overturned in court. It is a disappointing and short-sighted action that is counter to the best interests of South Carolina and its people."
SCANA spokesman Eric Boomhower said that utility "is evaluating its options if this legislation becomes law."
SCANA's stock sold off during the day, dropping $1.68 a share to close at $36.79. Meanwhile, Dominion's stock rose 49 cents to $68.03 on the prospect the SCANA deal would be abandoned.
'He will veto'
McMaster, a Republican running for his first full term in the fall, repeatedly has promised to veto any proposal that allows SCE&G to charge its customers anything for the failed project. Meeting McMaster's demands would require an 18-percent rate cut.
“He will veto what was passed today," said spokesman Brian Symmes, adding the governor's office is trying to persuade legislators to insist on an 18-percent cut. “We are actively working this, as we do with most ongoing legislation.”
The Democratic nominee for governor also voted against the rate cut.
State Rep. James Smith, D-Richland, and his running mate, Rep. Mandy Powers Norrell, D-Lancaster, were two of four House members who voted against the proposal, which passed the House 109-4.
Smith said he wants a deal with more benefits for power customers.
“This was not ... everything that we could get for ratepayers, so I couldn’t support it,” he said. “We just extended the ability to solve this until the end of the year. With doing that, (I) saw no compelling reason not to continue to fight for better reforms for the people of our state."
Save consumers $260 million?
The legislative deal comes 11 months after SCE&G and its minority partner, the state-owned Santee Cooper utility, abandoned building two new reactors at the V.C. Summer Nuclear Station in Fairfield County after spending a decade and $9 billion on their construction.
A utility-friendly 2007 state law — which lawmakers also voted to repeal Wednesday — allowed SCE&G to charge its customers for the power plants — while they were being built and even after the project was scuttled last July. SCE&G's 700,000-plus customers have paid out more than $2 billion for the useless reactors in the form of higher power bills. Two million customers served by Santee Cooper and the state's 20 electric co-ops, which buy Santee Cooper's power, have paid more than $530 million.
Those customers could be asked to pay billions more. However, those future payments will be decided either by the PSC or the courts. Until that decision is made, S.C. House and state Senate leaders resolved to cut SCE&G’s rates temporarily with the new law.
The typical SCE&G-served household pays $27 a month for the V.C. Summer project. However, the House-Senate proposal — if enacted and upheld by the courts — would save those customers some $260 million between now and December, when the PSC sets SCE&G's post-V.C. Summer-project electric rates.
'Based on the bad acts'
Until Wednesday, the two chambers had been at a stalemate over how deeply to cut the utility's rates.
The House wanted to remove the full 18-percent nuclear surcharge from customers’ bills, as McMaster has demanded. However, the Senate insisted on cutting 13 percent, an amount its leaders thought the state could defend in court based on when SCE&G’s alleged mismanagement of the project began and how that cut could affect the utility’s financial solvency.
Senators and representatives compromised in the middle Wednesday, agreeing to cut nearly 15 percent.
“The goal here is to provide the quickest relief we can to the ratepayers. Those are the people who have been done wrong," said state Rep. Peter McCoy, the Charleston Republican who led the special House committee that investigated the project's failure last fall.
The rate-cut compromise would roll back the rate hikes that SCE&G levied after 2010 to finance the nuclear reactors.
“We think we’re on solid ground," Massey said. "We also thought it was important to be able to justify this rate based on the bad acts that we found. ... We haven’t been able to find any evidence that SCANA knew they were having serious problems before 2010. They told us, 2011, they started returning invoices to (V.C. Summer's lead contractor) Westinghouse because of Westinghouse’s deficient performance.”
State Sen. Brad Hutto, D-Orangeburg, opposed the rate-cut proposal, calling it unconstitutional and saying it would drive away the only good option on the table: the Dominion deal.
"Isn't this a gamble we're taking?" Hutto asked, rhetorically. “You’re asking us to be on record as being the ones that caused them (Dominion) to leave, and I’m not willing to take that risk.”
But the Senate overruled Hutto's objections, voting 37-2 to slash SCE&G's rates.
Doing 'what is politically best for him'
Each of the nuclear proposals passed the House and Senate overwhelmingly, indicating legislators easily could override McMaster's veto.
S.C. House members said they were dumbfounded the governor was sticking to his veto threat.
“Why in the world would anyone want to veto that and insist on getting (the nuclear surcharge) down to zero when, by all accounts, if that veto is sustained, it goes back to 18?" state Rep. Russell Ott, D-Calhoun, asked from the House floor.
"If there's one thing we know about the governor, he will do what is politically best for him, and not necessarily what is best for the people of South Carolina," said state Rep. Micah Caskey, a Lexington Republican and vocal McMaster critic.
McMaster's spokesman said legislators were out of line.
"The conferees compromised on something they had no room to compromise on," said spokesman Symmes. "If this is a priority, as we know it is, they won't go home until they completely eliminate the nuclear surcharge and make sure no South Carolinian pays another dime for nuclear reactors they will never get."
The other nuclear-related proposals passed Wednesday by the House and Senate included:
▪ Creating a state consumer advocate's office to fight for ratepayers against utility rate hikes.
▪ Making the state Office of Regulatory Staff, which polices utilities, a tougher watchdog by giving it subpoena power over utilities and removing part of its previous mission, which required it also to look out for utilities’ financial interests.
▪ Defining the words “prudent” and “imprudent” for the Public Service Commission, which sets utility rates and will decide in December whether SCE&G can continue charging customers for the failed nuclear project. Those definitions are important because, legally, SCE&G can charge its customers only for money it prudently spent on the project. With its proposal, the Legislature effectively is telling the PSC it should look at possible mismanagement.
"Those are the real teeth to the bill that provide long-term relief to the ratepayer," McCoy said. "Those definitions create a much, much higher standard for prudency and imprudency, which is going to do nothing but benefit the ratepayer."
▪ Repealing the Base Load Review Act. The 2007 law, which enabled the nuclear fiasco, was unlikely to be used again by a S.C. utility, but lawmakers wanted to get rid of it for good measure.
How the deal would affect customers
S.C. House and Senate leaders reached a deal Wednesday to slash SCE&G’s rates by 15 percent temporarily. They also passed other nuclear-related bills. A look at how the proposals would affect S.C. power customers if they become law:
1. A temporary rate cut. The roughly 15-percent rate cut would save SCE&G customers about $260 million on their power bills between now and December. The typical SCE&G customer now is paying about $27 a month in higher power bills for the useless reactors. That would be reduced to about $5.
2. An exit by Dominion? No refunds? The proposals could drive Dominion Energy away. The Virginia-based company has offered to buy SCE&G’s parent company, SCANA, and deliver its customers $1,000 refunds and a $10-a-month rate cut. But it has said it will pull out of that deal if lawmakers meddle with SCE&G’s power bills. Dominion wants to charge SCE&G's customers another $3.8 billion for the unfinished V.C. Summer reactors over the next 20 years.
3. Delay in deciding who should pay. The question of who — customers, shareholders or both — must pay for SCE&G's failed V.C. Summer expansion going forward won’t be answered until December. Lawmakers delayed that Public Service Commission ruling, now set for July, to give regulators and other groups more time to investigate SCE&G's role in the debacle.
4. Focus on prudence. The Legislature, which elects members of the PSC, is trying to influence that agency to rule that SCE&G shouldn't be allowed to charge customers for some of the nuclear project's costs — specifically those due to the utility's alleged mismanagement. The proposal defines “prudent and “imprudent” for the PSC, which must decide whether SCE&G’s costs for the project were “prudently” incurred and, thus, can be passed along to customers.
5. A new consumer advocate. S.C. power customers would get a consumer advocate to fight for them in utility rate-hike cases. Most power customers now have no idea when their utility is trying to raise rates until it’s too late. This proposal would give them a watchful defender.