Cindi Ross Scoppe

How awful would it really be if SCE&G went bankrupt?

I’VE HEARD the “b” word more times in the two weeks since Dominion Energy announced plans to purchase SCANA than in the six months before that. As in: What’s the big deal if SCANA goes bankrupt?

SCANA said last month it would be forced into bankruptcy if it had to stop charging customers $37 million a month for its now-abandoned nuclear reactors, and Dominion says the deal’s off it can’t keep collecting part of that nuclear surcharge.

A lot of people — who might or might not know what they’re talking about — insist that SCANA is much healthier than it’s letting on and could survive without the surcharge. The Public Service Commission is uncertain enough that it ordered the Office of Regulatory Staff to determine what ending the surcharge would do to SCANA. Regulatory Staff Deputy Director Nanette Edwards told me the report, due Friday, will examine eliminating the entire 18 percent surcharge and eliminating different portions of it.

I suspect the “let them go bankrupt” talk has picked up because before Dominion, our choices were to keep paying for SCE&G’s abandoned nuclear reactors or else stop paying, let SCANA go bankrupt and lose a Fortune 500 company that has been a good community leader. The Dominion deal means we’ve already lost the Fortune 500 company.

So for many, the question has become simply who should pay for the nuclear reactors that will never produce any energy: customers or SCANA stockholders? Which has led to all the “I don’t care if SCANA goes bankrupt” talk.

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Cindi Ross Scoppe

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Which made me wonder: What exactly would happen if SCANA had to end the nuclear surcharge and file for bankruptcy protection in federal court? So I asked Columbia attorney Rick Mendoza, one of the state’s foremost experts on bankruptcy law, to explain what we could expect.

My takeaway: It probably wouldn’t be as awful as I assumed. But the key word is “probably.” There’s a lot that will be very bad no matter what, and enough more that could be very bad that I still think the Dominion deal is better than bankruptcy.

Stockholders, many of them retirees here in South Carolina, many of them low-level SCANA employees, likely would lose everything in a bankruptcy. Local businesses that are owed money for work they’ve done and continue to do for SCANA would lose nothing in the Dominion deal but might not get all the money they’re owed in a bankruptcy.

Ms. Edwards says out-of-state utilities might be unwilling to help a bankrupt SCE&G during emergencies without payment in advance. SCANA could find it impossible to borrow money for what might be years before it’s sold. And Dominion did promise not to fire anyone for two years and to provide, for five years, $1 million more a year in charitable donations than SCANA does.

Another downside, which I don’t fully understand, involves potential efforts by ratepayers to stop paying for electricity in order to essentially give themselves a refund for their already-paid surcharge, which Mr. Mendoza said “in theory that could undermine what SCE&G was trying to do with the bankruptcy.”

In a case that involves a regulated utility that files for bankruptcy because of a retroactive change in state law — which he says “strikes me as unprecedented” — “It becomes very complicated, although there are a lot of things that could occur that you hope would be worked out.”

Note the word “hope.”

The bankruptcy court would sell the company or its assets and use the proceeds to pay off SCANA’s debts. That would be “much like what Dominion has already proposed, (although) it would be through a process where they solicit potential buyers, a structured sale.” That could generate a higher sale price, which could mean more creditors would get more of what they’re owed.

But the legal fees likely would be in the tens of millions of dollars, and the case would drag on for years. Mr. Mendoza said the court might sell off the assets early in the process, but by “early” he means, “maybe after a year or two of litigation.” He said the chance of a regulated utility being sold to a corporate raider with no expertise was remote.

And here’s the kicker: There’s no guarantee that ratepayers would get refunds, or even be off the hook for additional payments. Unless it was a state Supreme Court decision to eliminate the monthly surcharge that drove SCANA to bankruptcy, there would be lawsuits charging that it was unconstitutional to eliminate the surcharge (a topic for another column). Of course, there already are lawsuits challenging the constitutionality of the surcharge itself.

So bankruptcy probably would leave customers paying less than the Dominion proposal. But it could take years to sort everything out, which could stall economic development in areas served by SCE&G. Local companies that do business with SCANA could suffer. The shareholders, and likely management, would be wiped out. And there are countless other complications that might develop.

The Dominion sale would mean less money spent on attorney fees, full payment for local businesses that SCANA owes money, and no further losses for shareholders. Ratepayers would pay much less than SCANA wants to charge us — although still probably much more than we would pay after a bankruptcy. But it would be quicker and cleaner, and we would have a whole lot fewer “probablies” to worry about.

There’s nothing fair about customers having to pay another penny for the abandoned plants. But the smart question isn’t what’s fair. It’s what’s best for all of us, and I still can’t see how “bankruptcy” is part of that answer.

More information

Here are some other pieces I’ve written about this that you might find helpful:

These are the people who brought us the SCE&G/Santee Cooper nuclear debacle

Here’s who voted to give SCE&G a blank check

How ‘waste not, want not’ became ‘spend more, profit more’

SCE&G nuclear fiasco: It’s complicated. Here are some explanations.

Santee Cooper still has a chance to cut the cost of failed nuclear project

Still want to run government like a business? That’s insane

Buying the benefit of the doubt: How donations secured SCE&G the means to squander billions.

Kapow! SCE&G punches back at Santee Cooper criticisms

How much worse was the original Bechtel nuclear report?

Where to hide nuclear secrets? Behind a lawyer, of course

Santee Cooper’s role in SC nuclear debacle looks worse by the day

Does anyone at Santee Cooper remember who Santee Cooper works for?

Carter’s departure doesn’t fix the problems at Santee Cooper. These 2 changes could.

SCE&G law could cost you more than you imagine

Ms. Scoppe writes editorials and columns for The State. Reach her at cscoppe@thestate.com or (803) 771-8571 or follow her on Twitter or like her on Facebook @CindiScoppe.

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