Politics & Government

In surprise reversal, PSC rules SCE&G misled regulators about failing nuclear project

In a surprising reversal, the S.C. Public Service Commission ruled Monday that SCE&G intentionally misled the commission about a failing nuclear reactor construction project to win electric rate hikes.

The PSC’s decision won’t affect Virginia-based Dominion Energy’s takeover of SCE&G’s parent company, SCANA, completed earlier this month. Nor will it change the $22-a-month rate cut, on average, that Dominion is enacting for SCE&G’s nearly 730,000 electric customers.

However, the ruling signals the PSC’s tougher attitude toward utilities. In the past, the state agency has been criticized as too friendly to utilities, especially after it allowed SCE&G to raise its electric rates nine times to finance the doomed V.C. Summer Nuclear Station project.

The PSC’s reversal also points to the clout of S.C. House Speaker Jay Lucas.

In November, the Darlington Republican — who has influence over the Legislature’s election of PSC members — urged the PSC to accept the Dominion deal. On Jan. 9, he joined the state’s utility watchdog — the Office of Regulatory Staff — and other groups in asking the PSC to change its mind after the commission declined to denounce SCE&G last month.

In both cases, the PSC did what Lucas wanted.

“It is essential to restore public trust, and this finding will go a long way in acknowledging that the regulatory compact … was broken by SCE&G,” said Tom Ervin, the lone commissioner to fight for a public declaration of SCE&G’s “imprudence” last month.

“It also puts all other regulated utilities on notice that we take this matter very seriously. In any future proceedings, we’re going to hold them accountable, and we’re going to expect transparency in any filings made to the (Office of Regulatory Staff) and the commission.”

The PSC met Monday to take up minor appeals of its decision last month to OK Dominion’s buyout of SCANA and the company’s 15-percent rate cut. It rejected most of those appeals Monday.

In its ruling last month, the PSC decided not to explicitly address a key point of contention in the weeks-long November hearing into the V.C. Summer project’s failure and SCE&G’s electric rates. That claim, by the Regulatory Staff, was SCE&G had hid damaging information about the project from the PSC in order to keep the construction project going and profits flowing.

As part of its argument for deeper rate cuts, Regulatory Staff introduced witnesses, including two former SCANA employees, who testified utility executives filed unrealistically low cost estimates for the nuclear project with the PSC when seeking a rate hike in March 2015.

Regulatory Staff also noted SCE&G and its minority partner in the nuclear project, the state-owned Santee Cooper utility, paid $1 million for the Bechtel Corp. to assess the nuclear project in 2015, only to delete damaging pieces of the report and withhold it regulators.

In his testimony, former SCANA chief executive Jimmy Addison conceded the utility withheld key information from the PSC about the project, adding he wished SCE&G had disclosed more to regulators. Addison was chief financial officer of SCANA before the project collapsed in July 2017.

“The Office of Regulatory Staff is pleased the S.C. Public Service Commission ... agreed with our petition to reconsider and reverse its previous decision by declaring and finding that SCANA executives acted imprudently from March 12, 2015, forward by deliberately misleading the PSC, ORS the public and investors about the true financial condition of the project,” Regulatory Staff executive director Nanette Edwards said in a statement Monday.

“We believe it is of vital importance that a legal finding of imprudence on the part of the utility be issued not just to satisfy the law but to send a message to all utilities regulated by the PSC that statutory compliance, transparency and accountability are requirements that cannot be violated without penalty.”

In December, the PSC balked at ruling that SCE&G was “imprudent” — a legal finding in rate-setting cases that usually means a utility cannot charge its customers for certain costs.

Commissioner Elliott Elam argued an “imprudent” ruling was unnecessary since Dominion already had agreed it wouldn’t charge customers for any nuclear construction costs incurred after March 2015.

However, Ervin argued a finding of “imprudence” would send a message the PSC won’t tolerate a lack of transparency in the future.

Over the next 10 days, several groups appealed the PSC’s decision not to find imprudence. House Speaker Lucas joined them with a filing to the PSC on Jan. 9.

And, by Monday, the PSC was singing a different tune.

Elam made the motion for a finding of imprudence and, one by one, his fellow commissioners endorsed the importance of making that finding.

“Under any definition of the term prudence, the company was imprudent in its actions in this case,” Elam said.

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Avery G. Wilks is The State’s senior S.C. State House and politics reporter. He was named the 2018 S.C. Journalist of the Year by the South Carolina Press Association. He grew up in Chester, S.C., and graduated from the University of South Carolina’s top-ranked Honors College in 2015.