Cindi Ross Scoppe

What else we learned from that SCE&G bankruptcy report

The long-awaited state report about whether SCE&G would file for bankruptcy if it couldn’t charge us any more for its abandoned nuclear reactors doesn’t actually tell us whether SCE&G is likely to file for bankruptcy if it has to stop charging us. But it does offer some useful insight into the question.

Maybe the most important thing it does is put the company’s $37-million-a-month/$444-million-a-year nuclear surcharge in context.

As Columbia bankruptcy attorney Rick Mendoza explained in a supporting memo, once you factor in federal tax adjustments, the annual surcharge is almost identical to the amount of money SCANA paid in dividends last year. Or, put another way, SCANA could have absorbed most if not all of the nuclear surcharge by simply not paying dividends.

That’s the main reason Mr. Mendoza concluded for the state Office of Regulatory Staff that there was only a 35 percent chance that SCANA would file for bankruptcy if it has to stop collecting the nuclear surcharge. (He told me he did not use a mathematical formula to arrive at 35 percent: He simply was looking for a way to convey the idea that “it can’t be eliminated as a real possibility” but “it was not really likely.”)

I’ve been hearing a similar argument from readers and some lawmakers for weeks, and the numbers raise valid questions about whether SCANA should have continued to pay those dividends since it abandoned the project. But they don’t actually address the question of whether SCANA can afford to pay off the construction debt without our help.

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Cindi Ross Scoppe

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Don’t be so sure SCE&G can pay for nuclear debacle without going bankrupt

Three ways the Dominion-SCE&G deal could fall apart

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

4 changes the Legislature needs to make after the $9 billion nuclear debacle

Is this the best deal SCE&G customers can get? Why finding out could cost us

SC nuclear debacle, by the numbers

SC nuclear debacle: an updated timeline

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As I explained in my last column, that $37-million-a-month charge only covers the interest payments on the $4.7 billion that SCE&G plowed into the abandoned reactors. The company still has to pay back much of that $4.7 billion.

Some legislators have started suggesting that SCE&G could pay down the construction debt through securitization, which allows utilities to essentially turn debt into very long-term, very low-interest bonds, in some cases guaranteed by the government. As I understand it, customers would still be charged for this, but the total charge would be much lower than the current proposal from either SCANA or Dominion, because this would strip out the 10 percent profit the companies want to add to the construction costs. Depending on how the Legislature changes the law or how the courts rule on the law, this could be something lawmakers need to allow in South Carolina. But I don’t understand it well enough to say any more about it right now.

Equally interesting was Mr. Mendoza’s narrative about what might cause SCANA or SCE&G to file for bankruptcy protection. I had assumed this could happen if either the court or the Legislature forced SCE&G to stop recouping some or all of its costs, or pay back the money it’s already collected from us.

But Mr. Mendoza focuses on the combination of that threat with “numerous claims by contractors, vendors, rate payers, regulators, consumer advocates, and shareholders.” He writes that “the many claims and threatened actions against them, and the … substantial costs to respond, address and defend them, imperil the viability of the two companies.”

You can read the Office of Regulatory Staff’s report, including Mr. Mendoza’s memorandums, dated 1/19/2018, on the Public Service Commission website.

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

There are 3 ways to cut Santee Cooper customers’ bills; 2 of them are worth exploring

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

Santee Cooper’s next decision could cut cost of SC nuclear debacle — or not

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

Does it matter who’s in charge of SCANA?

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

If SCE&G customers get refunds, it’ll be thanks to these 8 words

Kapow! SCE&G punches back at Santee Cooper criticisms

Is Santee Cooper gearing up for the fight of its life?

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?

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

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

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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