Next month SCANA shareholders will vote on a proposed merger with Dominion Energy, one year to the day after SCANA and its partner Santee Cooper pulled the plug on the V.C. Summer nuclear expansion project in Fairfield County. These utilities spent $9.4 billion and staked our state’s energy future on this now-abandoned project. If shareholders approve the merger, the state’s Public Service Commission will decide whether to accept or reject it.
Dominion has spent millions of dollars on advertising aimed at persuading the public as well as members of the PSC that a merger would be in ratepayers’ best interests. While I do not begrudge Dominion the opportunity to make its case, SCANA ratepayers have a substantial financial interest in the merger and deserve a better analysis of it than they’ve been given.
Dominion argues that ratepayers should be left on the hook for the billions of dollars borrowed by SCANA to fund construction of the V.C. Summer project. They warn that if ratepayers are given relief, SCANA might file bankruptcy — creating doubt as to who would serve its customers.
A bankruptcy, however, does not mean ratepayers will not be provided with electricity. In a bankruptcy, the failed management of a company is replaced by a trustee under the authority of the bankruptcy court. The trustee is empowered to discharge the obligations of the company, which continues to operate, only under new management — just as it would under a merger.
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I do not want SCANA to file bankruptcy. But assuming that a bankruptcy is something that must be avoided at all costs is incorrect and clouds our view of what Dominion is proposing.
The Dominion deal provides for SCANA shareholders to receive 22 percent more than the current market value of their stock. Ratepayers, who have already paid $2 billion of the utility’s debt, get a one-time rebate of $1,000 per customer, but are obligated to pay an 11 percent debt surcharge for the next 20 years, or an additional $4,040 in debt payments per customer.
A bankruptcy is not desirable, but it is preferable to enslaving ratepayers to decades of debt incurred on their behalf but without their knowledge or permission.
In other words, shareholders, who chose to invest in SCANA and assumed risk, receive a 22 percent premium for their stock; ratepayers, who had no choice about their energy provider and never agreed to cover debt for its risky venture, fund that premium by making debt payments for a facility that’s been abandoned.
This is unfair on its face. A bankruptcy is not desirable, but it is preferable to enslaving ratepayers to decades of debt incurred on their behalf but without their knowledge or permission.
In a bankruptcy, shareholders would not get anything until after creditors’ claims were paid. And ratepayers would have the chance to prove they’re the largest class of creditors — which in fact they would be if it were determined that SCANA sought rate increases while concealing material facts.
Dominion’s proposed $1,000 rebates are not the ‘windfalls’ that the company’s ads portray them to be; ratepayers have a right to reimbursements for inappropriate debt assessments.
I think that’s likely. On average, SCE&G power bills are inflated by 18 percent to pay for the nuclear debt. But testimony received by a Senate committee, which showed the utility received rate increases after failing to disclose material facts, suggests only 6 percent is justified.
Dominion’s proposed $1,000 rebates are not the “windfalls” that the company’s ads portray them to be; ratepayers have a right to reimbursements for inappropriate debt assessments.
And they have a right to more substantial rate reductions than Dominion proposes. At most, they should pay a debt surcharge of 6 percent over time, or $2,200 per customer — not the 11 percent and $4,040 proposed by Dominion.
Even in a bankruptcy, ratepayers would have rights and remedies. And the members of the PSC must keep that in mind.
Moreover, those rights would not be without a remedy; there is an ongoing relationship between ratepayers and SCANA, and if it is determined that the company owes its customers money, it could be forced by the PSC and/or the bankruptcy court to reduce ratepayers’ future bills.
The point is that, even in a bankruptcy, ratepayers would have rights and remedies. And the members of the PSC must keep that in mind.
For their part, ratepayers should contact their state representatives and senators to insist that they advocate on their behalf to the PSC for a fairer deal — one that’s more in line with the findings of the Senate committee. And to let them know that SCANA’s bankruptcy threats are empty ones.
Sen. Davis is Beaufort attorney; contact him at TomDavis@scsenate.gov.