Dominion buys out SCANA: How we got here
SCE&G ignored numerous warning signs before walking away from a failed $9 billion nuclear expansion project, an industry consultant told the S.C. Public Service Commission on Monday.
“Let me be blunt: You have a utility that bet the farm and lost,” Scott Rubin, an independent utility consultant and attorney from Pennsylvania, testified Monday on behalf of AARP South Carolina. “By the end of this year, customers will have paid $2.2 billion for absolutely nothing — not a single watt of electricity.”
Rubin’s testimony came on the eighth day of PSC hearings into the failed effort by SCE&G, a SCANA subsidiary, to build two nuclear reactors in Fairfield County. The commission also is considering SCE&G’s future electric rates and a proposal by Richmond-based Dominion Energy to buy its parent, Cayce-based SCANA.
At stake is who will pay for that failed project — SCE&G’s customers, SCANA’s shareholders or both — and how big the future power bills will be for SCE&G’s roughly 730,000 electric customers.
Rubin argued there were numerous signs in 2013 and early 2014 that the project should have been canceled. Among those signs was a 14-page summary of problems with work by the project’s contractors, written by SCE&G’s then-chief executive officer in May 2014.
SCE&G’s minority partner in the project, the state-owned Santee Cooper utility, also tried unsuccessfully in 2012 and 2013 to find another utility to buy a portion of the project, Rubin testified.
“They tried for months and could not find anyone who wanted even a 5 percent share of the project,” Rubin said. “Other utilities thought the cost was too high, the benefits were too small, and the risks were too great. ... But SCE&G’s management ran through these stop signs.”
Because of that, Rubin argued, SCE&G customers “should not pay a penny more” for the abandoned project.
SCE&G increased the electric rates for its typical residential customer by about $27 a month to pay for the project before it pulled the plug on the unfinished reactors in July 2017. Subsequently, the PSC cut SCE&G’s nuclear-related rates temporarily.
The S.C. Office of 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.
Attorneys for SCE&G say Regulatory Staff was well aware of the project’s flaws and are using the utility as a scapegoat.
Commissioners Monday also heard from SCANA Chief Financial Officer Iris Griffin, who said Regulatory Staff’s proposed rate cut would make it harder for SCANA to borrow and maintain a healthy cash flow.
Additionally, Dominion has said it would walk away from its proposed SCANA buyout, and rate cuts could lead to further downgrades of SCANA’s credit, Griffin said. That, she said, would hamper the utility’s ability to invest the approximately $500 million a year it needs to spend to “maintain safe and reliable service,” including replacing obsolete equipment, extending service to new customers, and expanding generation and transmission capacity.
“A proposal that would further impair SCE&G’s financial integrity unnecessarily puts the cost of quality future service to customers at risk,” Griffin said.
Matthew Richardson, an attorney for Regulatory Staff, argued SCE&G’s financial woes are of its own making.
Richardson grilled Griffin about decisions SCANA 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 their utility’s sale.
Griffin said she would make about $1 million this year if her bonuses pay out, and another roughly $3 million if the Dominion merger is approved and she loses her job.
The chief financial officer said she, too, never has read a report by the San Francisco-based Bechtel Corp., completed in February 2016, that found the nuclear project was suffering from a host of problems.
Griffin’s predecessor as CFO, Jimmy Addison, now chief executive officer of SCANA, testified last week he never had read the damning Bechtel report and never intends to, calling it “history.” But, he added, he wished it had been disclosed to the Public Service Commission and the public in 2015.
Addison was named CEO after SCANA’s then-CEO, Kevin Marsh, and its chief nuclear officer, Stephen Byrne, stepped down amid the fallout from the failed project. Griffin then was promoted to fill the CFO position vacated by Addison.
“Do you think that’s coincidental?” Richardson asked Griffin, referring to SCE&G’s two main witnesses declining to read the Bechtel report.
“I don’t know that it is coincidental, and I think the company plans to put forward witnesses that were involved more directly in some of the information you’ve asked about,” Griffin responded. “I’m just not that witness.”