DEPENDING ON who you believe, customers of the state-owned utility could see their rates go up by 7 percent or 14 percent to pay for the abandoned nuclear reactors at the V.C. Summer site near Winnsboro.
The Palmetto Promise Institute, an ideological advocacy group that is pushing for the sale of Santee Cooper, projects that rates would go up $16.20 a month for the average residential customer in order to pay off Santee Cooper’s $4 billion nuclear debt.
Santee Cooper officials, who, like officials at most places, do not want to be replaced by new officials, say a 7 percent increase should cover all of their costs, thank you very much. That would be about $8 more a month.
Either increase would be on top of the $5 per month (4.5 percent of the monthly bill) that the average residential customer is currently paying for the project.
Which most likely prompts a lot of my fellow SCE&G customers to respond: That’s it? Five dollars a month now? Possibly — possibly — as much as $21 a month? When we’re paying $27 a month? What are you complaining about?
That $27 a month is 18 percent of SCE&G residential customers’ bills — a figure that will go down if SCE&G suitor Dominion Energy consummates its deal. If not — well, it’ll still go down, because the only reason the deal would fall apart is if the Legislature or the courts say Dominion can’t charge even the new reduced rate.
We should have seen Santee Cooper’s rate projections long before now. But the utilities have been stingy with numbers other than the ones they want us to see since Santee Cooper and SCANA decided in June to abandon their joint construction project in Fairfield County. And since Santee Cooper temporarily suspended further rate hikes and Dominion offered to purchase SCE&G, attention has shifted so far away from Santee Cooper that no one has been pressing it for numbers. It only provided that 7 percent figure in response to the Palmetto Promise projection.
But what matters is that we finally have some book-end numbers, which means we can have a smarter conversation about both Santee Cooper and SCE&G.
The most obvious lens through which to view the projections is the question of whether to sell Santee Cooper.
If you start from the perspective that of course the state should sell, that’s probably the position you’ll cling to. If you start from a more open perspective — that is, we should do what is in the long-term best interests of customers — the answer is less clear. Although Palmetto Promise Institute goes through some complicated analyses that I don’t always follow, it does that in order to prove that ratepayers will have to pay higher rates.
The upside of selling is that, if the deal is structured correctly, the $4 billion nuclear debt would be assumed by the buyer.
The downside is that a for-profit business would still have to pay off that debt. And it would have to pay income taxes that Santee Cooper doesn’t have to pay — a cost that it could and frankly should pass on to ratepayers. It also would have to pay a higher cost for borrowing additional money — a cost that it could and should pass on to ratepayers. And it would have to pay dividends to shareholders — which it could and, under normal circumstances, should take from ratepayers.
So for a deal to be good for ratepayers over the next 20 years, we’d have to know that the taxes and profit would cost average customers less than they would have paid to the state-owned Santee Cooper for the nuclear debt. Depending on whether you believe Santee Cooper’s projections or the Palmetto Promise Institute’s, that’s either $12 a month or $19 a month.
If we wanted a good deal for more than 20 years — and I still think it need to be — then the cost of taxes and profits would need to be even lower. That’s because two decades from now, Santee Cooper would have paid off the nuclear debt, which means the additional charge would have gone away. But with the private company, customers will still be paying for taxes and dividends.
Could a for-profit company bring enough efficiency to Santee Cooper to make those numbers work? I don’t know, but at least now I know the goal. And it certainly seems like a daunting mountain to climb.
The Santee Cooper projections also add valuable perspective to how much SCANA’s shareholders are costing SCE&G’s ratepayers.
SCE&G customers are currently paying more than three times as much as Santee Cooper customers for the failed reactor project. Some of that is because Santee Cooper was able to borrow money cheaper than SCANA. Some is because Santee Cooper doesn’t pay income taxes. But a lot of it is because SCE&G customers have to provide the company’s profits. Which of course Santee Cooper customers would have to do if they bought electricity from a for-profit company.
Last month, The State’s Avery Wilks dug through a new batch of SCANA/Dominion documents and found that $120 million of last year’s $444 million nuclear surcharge went directly to shareholders in the form of profits. Since the start of the project, SCANA says that $529 million of the more than $2 billion collected went directly to shareholders in the form of profits. And bless him for doing that work.
I’m sure plenty of accountants can explain why the calculations behind that statement are 100 percent in compliance with standard accounting practices. And I’m sure the ones who work for SCANA will figure out ways to argue with my next statement, at least as it applies to this situation: Money is fungible.
To wit: SCE&G customers paid a $444 million nuclear surcharge last year. SCE&G parent SCANA paid its shareholders $350 million in dividends last year. Therefore, since money is fungible, all of SCE&G’s profits came from the nuclear surcharge.
Maybe zero isn’t the constitutionally acceptable amount that stockholders should be profiting from this failure. But it’s a lot closer than $350 million a year.
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.