SC House Speaker says “rate payers should be immune” from SCE&G surcharges
THE LINCHPEN of the Base Load Review Act is the word “prudent.” As in: Once state regulators decided that it was “prudent” for SCE&G and Santee Cooper to build two nuclear reactors, it became almost impossible to turn down any of SCE&G’s rate hikes. Opponents would have to prove that SCE&G had made “imprudent” decisions, and imprudent decisions by the utility’s contractors wouldn’t count against it.
So what, precisely, does “prudent” mean? Or “imprudent”?
Amazingly, the law that begins by defining 22 terms — including “person” — does not define prudent. Or imprudent. Or prudency. Or imprudency.
And before I criticize legislators too much for this oversight, I have to admit that when I finally clawed my way through that law this summer, I did not notice the omission.
But it is a serious omission, and just one more piece of evidence — as if we needed any more — of how badly lawmakers failed to understand what they were doing when they passed that law. And another cautionary tale about lawmakers’ efforts to rewrite the law.
Which brings me to the House’s effort to rewrite the law, which it approved last week by a 114-1 vote after a 20-minute explanation and no debate.
House leaders rewrote H.4375 as a result of their growing understanding of the constitutional complexities of this issue: The Base Load Review Act almost certainly violates the constitutional rights of customers, who shouldn’t have to pay for two abandoned nuclear reactors that won’t provide any power. But a law that prohibits SCE&G from charging customers any more for the reactors almost certainly would violate the rights of the utility, which spent $4.7 billion on a project that the state deemed necessary.
The House found a solution that appears to be mostly and perhaps even entirely constitutional.
So in passing the bill, the House found a solution that appears to be mostly and perhaps even entirely constitutional. That’s a very good thing.
Whether it’s smart policy is another question, which we’ll come back to in a moment.
The headline of course is that the bill eliminates the 18 percent nuclear surcharge that SCE&G customers are paying, saving us a combined $37 million a month. The fine print is that it eliminates the surcharge temporarily.
The amount SCE&G could potentially recoup for the construction costs would eclipse the $37 million we would temporarily save each month.
The surcharge only covers interest charges on that $4.7 billion. Even if this bill becomes law, the Public Service Commission still has to rule on the utility’s request to charge ratepayers for some of the $4.7 billion itself. Now, nothing is certain. But it seems quite likely that regulators and, later, judges would allow SCE&G to charge for at least some of the construction costs. It’s possible, though less likely, that they would let SCE&G resume charging for the interest.
Since the amount of money SCE&G could potentially recoup for the construction costs would eclipse the $37 million we would temporarily save each month, the other provisions of the bill are potentially more significant.
The only reason I discovered that the original law didn’t define prudent and imprudent is that the House bill does. It says imprudency includes withholding important information from regulators — which House members believe SCE&G did. It also includes “inappropriate or poor management or oversight decisions in the construction of the project including, but not limited to, failure to keep knowledgeable utility management or supervisory personnel on the project site to ensure proper supervision” — which is what the company SCE&G hired to evaluate the project said happened. The definitions also change the substance of the law by expanding “imprudence” to cover imprudent actions of contractors.
The House is deferring to the Public Service Commission to determine the much more significant matter of how much we pay over the long term.
If not for that last change, it would be hard to argue with House Speaker Jay Lucas, who told the House that “If a utility who’s gone under the base load review act has been forthright in its dealings with our state’s citizens, with the ORS, with the PSC, it should have nothing to fear from these definitions.”
Another significant change: Under current law, if the PSC or a court rules that SCE&G has to lower its rates, SCE&G can keep charging those rates while it appeals the decision. The bill passed last week says that the lower rate would apply during the appeals. Since SCE&G is expected to appeal any rate reductions through the federal courts, which could drag on for many years, this provision could cost the company hundreds of millions of dollars. At least.
Essentially, although it is temporarily lowering our rates, what the House is doing with this bill is deferring to the Public Service Commission to determine the much more significant matter of how much we pay over the long term. And it’s giving the PSC additional tools to do the job.
Anyone who claims to know the answer to that question is either ignorant or deceptive.
It’s a well-designed approach, but it raises this important policy question: If lawmakers are that confident that the PSC is going to reject most of SCE&G’s request, why not just let that happen without interposing a law? Since, you know, any law you pass increases the chance of messing things up even more.
The bigger questions are 1) whether Dominion Energy really will walk away from its offer to purchase SCE&G parent SCANA if the Legislature makes “any change in law that has a significant financial impact” on the agreement — as this would, at least temporarily — and 2) whether South Carolina really would be worse off if that deal falls through.
I don’t know the answer to either question, and anyone who claims to know for sure is either ignorant or deceptive. Which means the most important question is: How much are we willing to gamble?
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 email@example.com or (803) 771-8571 or follow her on Twitter or like her on Facebook @CindiScoppe.