Dominion buys out SCANA: How we got here
Power bills will fall for some 727,000-plus S.C. electric customers starting this month after a federal judge allowed a temporary rate cut to take effect Tuesday, scoring a major victory for S.C. lawmakers and ratepayers.
U.S. District Court Judge Michelle Childs on Monday denied SCE&G’s motion for a preliminary injunction to block a new state law, forcing the utility to cut its customers’ rates, from going into effect.
Childs ruled SCE&G was unlikely to win its lawsuit to block the new law and was not entitled to money it has collected since it abandoned construction of two new nuclear reactors in Fairfield County in July 2017.
Childs’ order came after a two-day hearing last week on SCE&G’s lawsuit to block laws passed at the end of June that sought to provide relief to ratepayers left on the hook for the failed nuclear expansion project.
In a statement, SCE&G’s parent company left open the possibility of appealing Childs’ decision.
“We will review the court’s order and decide quickly whether to appeal the decision,” Cayce-based SCANA said in a statement sent to investors. “In the meantime, the company will strive to offset the operational impact of the temporary rate reduction by continuing to cut costs and delaying spending without sacrificing safety and reliability.”
S.C. House Speaker Jay Lucas said the court’s decision “demonstrates the judicial system’s impartiality in prioritizing the interests of honest and hard-working South Carolinians over SCANA’s corporate greed.”
Senate President Pro Tempore Hugh Leatherman, R-Florence, also applauded Childs’ ruling.
“SCANA misled state regulators for years while the executives fattened their wallets at our expense,” Leatherman said in a statement. “I am hopeful that we can now move forward from this point to hold the SCANA executives fully accountable and provide rate relief to the customers who did nothing wrong and will receive no benefit from this debacle.”
Childs’ decision was announced after the stock market closed Monday. However, in after-market trading, SCANA’s stock price plummeted after the ruling, losing 4.9 percent of its value.
Dominion Energy, the Virginia-based utility that has a deal to buy the embattled utility, said it remains convinced that its buyout “proposal is the best opportunity for SCE&G customers to get the most amount of benefit and with the greatest certainty.”
Dominion’s proposed buyout of SCANA includes a refund of $1,000 for each household served by SCE&G, on average and cuts electric rates by $10 a month.
“We are going to continue to work in that direction,” Dominion spokesman Chet Wade said. “We believe what we put on the table is the best option for them (SCE&G customers). We are going to keep moving forward on our own tract.”
The temporary rate cuts begin with the billing cycle that starts Tuesday. The rate cuts will be calculated based on each customer’s electricity usage back to April and will continue until December, when the PSC is set to rule on SCE&G’s permanent rates.
SCE&G residential customers would see a more than $22-a-month reduction in their power bill, on average.
“Finally, the ratepayers will begin to get some recognition of what has been done to them by the management of SCANA and will get some relief until the PSC ... makes a final ruling of the rates going forward and the merger,” said state Sen. Nikki Setzler, D-Lexington. “SCANA has stalled every step of the way throughout this process, and this is justification for the ratepayers and the Legislature and the action they took.”
During last week’s court proceedings, SCE&G’s lawyers called financial experts who testified the temporary rate cut would make it more difficult for SCANA to borrow and maintain a healthy cash flow.
Attorneys representing S.C. lawmakers called their own financial expert, who — pointing to a March 22 analysis by the Bates White economic consulting firm — said SCE&G could afford to cut its rates.
SCE&G argued it has the right to charge its customers for the failed V.C. Summer expansion project under a 2007 law, even after it abandoned efforts to build two new nuclear reactors in Fairfield County a year ago.
SCE&G also claimed S.C. lawmakers unconstitutionally targeted the utility to punish it for the project’s failure by passing a retroactive rate cut. That rate cut, they argued, constitutes an illegal confiscation of private property and denies the utility the due process required under law.
SCE&G ratepayers already have paid more than $2 billion toward the cost of the two unfinished reactors. Customers have been paying $27 a month on average to finance the half-finished reactors, originally expected to cost $9 billion.
Attorneys representing the PSC and state lawmakers argued any predictions of financial harm to SCE&G were speculative and disingenuous. They note SCANA handed out $82 million in dividends to its shareholders after abandoning the nuclear project and set aside another $110 million in severance pay for executives for aiding the utility’s pending buyout by Dominion.
Childs, in her ruling, sided with lawmakers. As the PSC had yet to enact the rate cuts, Childs stated SCE&G cannot show it has been harmed by the new laws.
She also ruled SCE&G is not entitled to the rate increases it has received to bankroll the failed V.C. Summer project. Childs noted 2007’s Baseload Review Act allows utilities to recover their costs for building a nuclear plant through higher rates, but only so long as the plant is constructed or being constructed, according to approved construction schedules and estimates.
“(I)t is not clear that any entitlement exists where a nuclear plant is not constructed or being constructed,” Childs wrote, adding it is up to the utility to prove before the PSC that its decision to abandon the nuclear project was prudent. “SCE&G cannot claim an entitlement ... until it makes this showing to the PSC.”
Furthermore, no section of the Base Load Review Act limits the power of the Legislature to regulate utility rates, Childs ruled.
She also concluded SCE&G failed to show the legislation is punitive.