Cutting SCE&G’s electric rates permanently would offer temporary relief but could hurt the Cayce-based utility’s nearly 730,000 electric customers in the long run, according to a New York economist.
Robert Glenn Hubbard, dean of the Graduate School of Business at Columbia University, testified Monday before the S.C. Public Service Commission as part of hearings into SCE&G’s failed, $9 billion effort to build two nuclear reactors in Fairfield County.
The commission also is considering SCE&G’s future electric rates and a proposal by Dominion Energy to buy the utility’s parent company, SCANA Corp.
Making permanent the $21-a-month temporary rate cut enacted by S.C. lawmakers this summer would make SCANA less attractive to investors, raise SCE&G’s operating costs and lead to significant revenue losses, Hubbard testified. SCE&G raised the electric rates for its typical residential customer by about $27 a month to pay for the project before it abandoned the project in July 2017.
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“This higher cost of capital could cause customers’ rates to be higher in the longer term ... even though customers’ rates may be lower in the short run,” he said. “In addition, SCE&G likely would have to reduce its capital investments or invest in less efficient infrastructure, leading to reduced quality of service.”
Other witnesses testifying for SCE&G or Dominion have said that slashing SCE&G’s rates could lead the utility into bankruptcy.
But there is room for debate.
A witness for the state’s utility watchdog told the PSC earlier this month he did not think bankruptcy was a realistic outcome. Other analysts have said the utility has options to avoid bankruptcy, including selling its North Carolina natural gas subsidiary, PSNC Energy.
SCANA also, could reduce or eliminate dividends that it pays shareholders and cut operating costs to get out of its nuclear hole, financial analyst Kevin O’Donnell told the Public Service Commission last week.
Attorneys for the state’s utility watchdog, the S.C. Office of Regulatory Staff, argue SCE&G’s financial woes are of its own making, anyway.
Regulatory Staff attorneys have grilled SCANA employees about decisions the utility made, after abandoning the nuclear project, to pay out executive bonuses and multimillion-dollar dividends to shareholders, and set aside another $110 million in severance pay for top managers for aiding the utility’s sale to Dominion.
Regulatory Staff is pressing the PSC to slash SCE&G’s rates permanently, arguing the utility withheld key information from regulators in March 2015 when requesting a rate hike to help finance the nuclear project.
The PSC heard Monday from nuclear industry consultant Kenneth Petrunik, who testified on behalf of SCE&G. Petrunik argued Regulatory Staff was aware of the status and potential challenges of the project.
Petrunik downplayed a damaging February 2016 about the project’s failures that SCE&G hid from regulators, saying it contained no significant information that wasn’t previously known to SCE&G and disclosed to Regulatory Staff.
An SCE&G attorney, however, had secretly deleted from the final report an estimate that the project wasn’t going to be finished in time to collect $2 billion in federal tax credits. Regulatory Staff has said SCE&G’s withholding of the Bechtel report constitutes fraud.
The hearing continues Tuesday with testimony from former utility executive Carlette Walker and retired SCE&G engineer Ken Browne, star witnesses for Regulator Staff.