RATEPAYERS are in a tar-and-feathering mood. They’re demanding refunds for more than $2 billion they’ve already paid for two abandoned nuclear reactors, insisting that SCANA and Santee Cooper swallow the other $9 billion they spent on the failed project and calling for clawbacks of executive bonuses and pensions. They want to see SCANA and Santee Cooper executives behind bars.
And this past week, it felt like we were moving in that direction, as SLED added a state criminal investigation to the already-commenced federal probe, an attorney general’s opinion laid out a strong case that the law that green-lighted this whole debacle violates the state constitution and the Office of Regulatory Staff asked the Public Service Commission to eliminate the 18 percent construction surcharge on SCE&G electricity bills. (No one has the power to force the unregulated Santee Cooper to eliminate its surcharge.)
Unfortunately, there is no happy ending for our nuclear nightmare.
Whether or not anyone goes to jail, whether bonuses or pensions are returned, there’s no way that ratepayers are going to escape picking up part of the cost of this colossal failure. The courts might not allow that even in the unlikely event that the Legislature mandated it. And from a purely pragmatic perspective, even going a little too far in punishing SCANA and Santee Cooper could end up costing us more than we gain.
Of course the only fair outcome would include SCANA and Santee Cooper refunding our payments and absorbing all the money they spent before acknowledging that it wasn’t feasible to complete the badly designed and badly managed construction of the now-unneeded nuclear reactors.
There is no scenario under which it is fair for ratepayers to continue paying for construction that is not continuing. And although the project started out on a sound basis, it becomes much more difficult to justify even the $1.7 billion SCANA customers already have paid to help finance it when you consider how long construction continued after utility executives knew it was doomed. And when you consider that SCANA shareholders have been rewarded with $1.4 billion in dividends in just the past four years.
But fairness can work in mysterious ways in utility regulation, as S.C. Solicitor General Bob Cook explained in the devastating attorney general’s opinion that lays out the constitutional flaws in the 2007 Base Load Review Act.
The whole idea of utility regulation, he wrote, is “achieving the proper balance between protecting the interest of the utility’s shareholders and the interest of the customers.” In the words of our state Supreme Court, rates cannot be “so low as to be confiscatory to the utility or so high as to be burdensome to the utility’s customers.”
What makes the 2007 law almost certainly unconstitutional is that it allows SCANA to charge us for all the money it spent on the abandoned reactors — and potentially even a 10 percent profit on that money. That, Mr. Cook concluded, amounts to an unconstitutional taking of private property for private use — i.e., to enrich stockholders. But making the utility pay the full cost for a project that the state deemed necessary could be seen as a taking of the utility’s property — that is, the money it invested.
As a result, the outcome “must balance consumer and investor interests and must be careful not to effect a taking on either side of the equation.”
Beyond the constitutional demands, there’s this problem: Forcing SCANA to absorb too much of its $4.9 billion tab — let alone return what customers paid for interest costs — could cripple the company. Stock prices would continue to tumble as shareholders realized their prized dividends were about to dry up, and at some point one of the most important corporate citizens in our community would disappear — sold to an out-of-state utility or, worse, corporate raiders. Maybe Duke Energy or some other utility would reduce our rates, but the loss of a corporate headquarters, and the philanthropy and leadership that come with that, would not be insignificant.
Since Santee Cooper doesn’t have stockholders, there aren’t a lot of repayment options: What money the company can’t make up in cost-saving moves, the ratepayers will pick up. The state could sell the utility — if it could find a buyer — but that too would result in higher rates.
What Santee Cooper could do is reduce some executives’ salaries. They’re nowhere near as high as SCANA salaries, but they’re still astronomical by state government standards. It also could sell off some of its vast property holdings, beginning, though certainly not ending, with its plush Wampee Conference Center on Lake Moultrie. Neither would reduce the $4.1 billion debt by much, but it would at least be an act of good faith.
Come to think of it, it wouldn’t hurt for SCANA to show a little good faith as well — selling some of its own land holdings and reducing the pay of the executives who oversaw this disaster. And it’d be nice to see SCANA executives return at least some of the bonuses they were awarded as their nuclear project was disintegrating. If the rest of us have to pay for this blunder — and we will — the people who caused it certainly should feel a little pain.
Here are some other pieces I’ve written about this that you might find helpful:
Ms. Scoppe writes editorials and columns for The State. Reach her at firstname.lastname@example.org or (803) 771-8571 or follow her on Twitter or like her on Facebook @CindiScoppe.