Opinion Extra

SCE&G regulatory trial: Who will pay for the failed nuclear project?

SCE&G and its minority partner, the state-owned Santee Cooper utility, abandoned the V.C. Summer nuclear construction project in July 2017 after years of cost overruns and construction delays and $9 billion spent.
SCE&G and its minority partner, the state-owned Santee Cooper utility, abandoned the V.C. Summer nuclear construction project in July 2017 after years of cost overruns and construction delays and $9 billion spent. High Flyer

On Nov. 1, the S.C. Public Service Commission (PSC) will start a hearing that will impact the electric rates of SCE&G customers for decades.

The primary issue to be decided is how much if anything SCE&G customers will be forced to pay for the incurred construction costs of its abandoned nuclear project in Fairfield County.

Essentially, this is a regulatory trial.

SCE&G is being accused of intentionally withholding critical information from the S.C. Office of Regulatory Staff (ORS) and the PSC.

ORS is the state agency that was responsible for analyzing data received from SCE&G for the approval of construction cost increases, construction schedule delays and rate hike requests to pay for construction cost financing. ORS then made recommendations to the PSC for decisions on these matters.

After reviewing more than a million pages of SCE&G-produced documents, ORS concluded that by March 2015, the company knew that it would take several years longer to complete the nuclear project and the cost would be billions higher than it was telling the regulators.

By not providing this information to ORS and the PSC, critics contend that SCE&G enabled itself to obtain undeserved electric rate increases to fund the doomed project.

The principle SCE&G challengers — ORS, Sierra Club and Friends of the Earth — maintain that had ORS and the PSC known what SCE&G knew in March 2015, the regulators might have pulled the plug on the project then, saving the ratepayers billions.

SCE&G will have the opportunity to refute the allegations of intentional deception and defend its handling of the failed construction project. The utility has offered a plan to the PSC for addressing the situation.

Enter Dominion Energy which has offered to acquire SCE&G’s parent company, SCANA, to obtain the utility’s extensive utility grid and 700,000 customers. But Dominion has said that it will walk away from their offer if the PSC does not agree that SCE&G should be allowed to charge customers for much of the approximately $5 billion of incurred construction costs for the abandoned project.

This regulatory trial will basically boil down to this:

If the PSC decides that SCE&G has been falsely accused, then it will probably find Dominion’s purchase offer is in the best interest of consumers.

Under this scenario, electric rates that have recently been reduced 15 percent, thanks to the S.C. Legislature, will go back up by 7 percent. Also, customers would receive a cash rebate based on past electricity use. Dominion claims that this could average $1,000 for the average household. Critics have warned that most ratepayers would see less than this figure and that this cashback scheme is really a loan to consumers that will be paid back over 20 years through higher rates.

On the other hand, the PSC could agree with the charge that SCE&G intentionally deceived regulators and accept the ORS recommendations.

Under this scenario, ratepayers will see their current rates go down an additional 5 percent. This decrease on top of the 15 percent reduction already in place would eliminate all the rate hikes since 2009 for the nuclear project plus an additional 2 percent. The extra 2 percent would result in about the same amount of money returned to the ratepayers as the Dominion instant cashback offer with two major differences. The savings would come over 20 years, but it would be a true refund that customers would not have to repay.

Let the regulatory trial begin.

Mr. Knapp is the president and CEO of the South Carolina Small Business Chamber of Commerce and a pro se intervenor in the upcoming PSC hearing.

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