While charging its customers $37 million a month for a failed multibillion-dollar nuclear project, top executives at a South Carolina utility set aside $110 million in an irrevocable trust to pay themselves bonuses for aiding their utility’s sale.
The revelation came Monday during a hearing a on SCE&G’s motion to block a 15-percent temporary rate cut enacted by state lawmakers.
Attorney Matthew Richardson, who is representing Senate President Pro Tempore Hugh Leatherman, pointed to SEC filings disclosing the trust, which he argued was “meant to protect SCANA execs with golden parachutes.”
Asked about the trust, SCANA Chief Financial Officer Iris Griffin said the money was meant to provide merger-related compensation to unnamed utility leaders who would lose their jobs after Virginia-based Dominion Energy buys SCE&G parent company, Cayce-based SCANA.
SCANA’s shareholders are set to meet Tuesday in Columbia to vote on whether to approve that buyout.
SCANA also paid out roughly $82 million to its shareholders during each of three quarters after it abandoned trying to construct two nuclear reactors in Fairfield County, Richardson reminded the court. “It’s been great to be a SCANA shareholder while the nuclear plant was being constructed.”
In June, however, the utility cut its quarterly dividend by 80 percent amid continuing fallout from the V.C. Summer nuclear debacle and action by the S.C. Legislature ordering the state Public Service Commission to cut SCE&G’s electric rates by 15 percent.
U.S. District Court Judge Michelle Childs began hearing testimony Monday from financial experts called as witnesses by SCE&G as part of an effort to block that rate cut. The hearing before Childs will continue Tuesday morning.
Almost a year to the day after SCE&G announced it was abandoning two new nuclear reactors in Fairfield County, the utility argued it had the right to make its customers keep paying for the failed project.
Attorneys for SCE&G argued state lawmakers unconstitutionally targeted the utility to punish it for the project’s failure with their retroactive rate cut.
“The General Assembly ... changed the rules of the game after the game had been played,” said attorney David Balser, who is representing SCE&G.
In late June, lawmakers passed a new law calling for a temporary 15-percent cut in the bills of SCE&G’s electric customers, nearly wiping out the roughly $27 a month that SCE&G now charges its average customers for the failed nuclear expansion project.
SCE&G is suing the Public Service Commission, seeking to stop enactment of the rate-cut law.
Under a 2007 state law, SCE&G’s 700,000-plus customers now pay $27 a month to finance the half-finished reactors, originally expected to cost $9 billion. While the project has been dead for a year, SCE&G has kept the additional charge on its customers’ monthly bills — bringing in an extra $37 million a month.
SCE&G and state-owned utility Santee Cooper, its junior partner in the nuclear project, abandoned the V.C. Summer Nuclear Station expansion last year following the bankruptcy of contractor Westinghouse.
SCE&G ratepayers already have paid more than $2 billion toward the cost of the two unfinished reactors.
The utility also claims the rate reduction and other aspects of the new law constitute an illegal confiscation of private property and deny the utility the due process required under law.
SCE&G said it needs the money to pay for continuing costs, including billions in debt for the failed nuclear project. Losing that revenue could scuttle Dominion’s proposed acquisition of SCANA, a buyout that includes a $1,000 refund for the average residential electric customer.
Griffin and equity analyst Ellen Lapson testified the temporary rate cut would slash investors’ return on equity, making it harder for SCANA to attract and keep investors and more difficult for it to borrow and maintain a healthy cash flow.
Both also testified the rate cut could lead to further credit rating downgrades —SCANA’s debt was downgraded to junk status in February. They warned the loss in revenue would lead to spending cuts that would hamper the utility’s ability to prepare for and recover from storms.
“Customers are harmed when the utility is financially weak,” Lapson said.
Attorneys representing state lawmakers and the Public Service Commission argued preventing blocking the new law’s rate cut “would have an adverse consequence for ... the public interest in addressing the costly problems that have arisen” from the failed nuclear project.
They also argued SCE&G knew of the potential for financial problems well before state lawmakers’ passed the temporary cut to help ratepayers. The rate cut only would be in effect until November, when the Public Service Commission will consider whether to permanently reduce SCE&G’s rates.
Attorney Bobby Stepp, who is representing House Speaker Jay Lucas, also noted the amount SCE&G would lose under the temporary reduction — around $270 million — is a mere fraction of the company’s 2017 operating revenues of more than $4.4 billion.
The V.C. Summer debacle is expected to be an issue in this November’s election for S.C. governor.
State Rep. James Smith of Columbia, the Democratic nominee for governor, reacted to news of the $110 million bonus pool Monday by saying, “All of the executives getting this golden parachute should resign immediately.”
“Enriching themselves further while demanding that South Carolina ratepayers pay billions for their mistakes is outrageous,” Smith said. “This money should instead be going into a fund that provides relief to the ratepayers. They’re the ones who deserve it.”
Testimony in the case resumes Tuesday morning at 9 a.m. at the federal courthouse in Columbia.