Cindi Ross Scoppe

Here’s what could happen if the Legislature doesn’t end the nuclear surcharge

LEGISLATORS have been waiting to get past Tuesday’s runoff election to agree on how much to slash SCE&G’s nuclear surcharge, at least partially in hopes that once the votes were counted, Gov. Henry McMaster would find a way to back off his unrealistic demand that they eliminate it entirely. But as they return to Columbia Wednesday in hopes of approving that yet-to-be-reached agreement, there’s no guarantee that they’ll succeed.

Failure might be bad for ratepayers, but it also might not be. It’s possible that how much SCE&G customers end up paying for the nuclear reactors that the utility abandoned mid-construction would be the same whether the Legislature acts or not. Or possibly, though far less likely, less.

To understand why, we need to remember that the best way forward has always been unclear, because of three wild cards: SCANA’s claim that reducing the surcharge would drive it into bankruptcy, Dominion’s Energy’s offer to buy SCANA and reduce but not eliminate that surcharge, and the courts, which already are hearing arguments from the state and other entities challenging the law that lets the utility collect the nuclear surcharge and which will have to referee a SCANA lawsuit if the Legislature acts.

It seems less and less likely that eliminating the surcharge would actually bankrupt SCANA: It turns out that SCANA has been using most of that surcharge to pay stockholder dividends; and the third and so far most extensive analysis just rejected the possibility of bankruptcy under nearly all circumstances. But the chance is not zero.

A bigger wild card is Dominion, which proposes to purchase SCANA and give immediate rebates worth $1,000 to the average SCE&G customer — more for bigger users, less for smaller users — and reduce our total payments for the reactors. We’d still be paying for energy we’ll never receive, but we’d be paying far less than SCANA wanted to charge us, and we wouldn’t have to worry about SCANA going bankrupt.

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Cindi Ross Scoppe


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Dominion implies — though it has carefully avoided saying this directly — that it will walk away if the Legislature changes the 2007 Base Load Review Act so it can’t charge us for the abandoned reactors. And Dominion CEO Tom Farrell ominously warned legislators that even if an independent SCANA didn’t go bankrupt, it would be severely weakened, and we could end up paying more than if the Dominion deal closed.

Back in January, I asked Mr. Farrell what would happen if he convinced the Legislature not to change the law and the Public Service Commission to approve the buyout — but the courts hadn’t ruled on the constitutionality of the surcharge. “The question needs to be settled,” he said.

I took that to mean the deal would not close until the courts rule — which makes sense, because it seems more likely than not that the courts would reject Dominion’s proposal.

Turns out, my assumption was wrong. When the question came up during another meeting last month, Dominion vice president Chet Wade said the company would close the deal as soon as it gets all the regulatory approvals it needs. Even if there are pending lawsuits. “We take on that risk,” he told me in a follow-up email.

That means it’s possible that a better-case scenario is available to ratepayers, which plays out like this: The Legislature doesn’t reduce the surcharge. The Public Service Commission approves the Dominion purchase on Dominion’s terms — as legislators fear will happen if they don’t pass a law that makes it clear they expect the agency to do otherwise. Dominion purchases SCE&G, issues our refund checks and reduces our monthly power bills. And then the courts order Dominion to lower our bills more. Perhaps more than they would have ordered a financially weaker SCE&G to reduce our bills if the Legislature had driven Dominion away.

Some see the courts as our ace in the hole — and I’m close to that camp, but with a caveat that turns the courts into the third wild card. Which is: The courts are a wild card. We can never be certain how they will rule, particularly with such complex competing constitutional issues at play.

The Base Load Review Act almost certainly violates the rights of ratepayers, who are forced to pay for a service we will never receive. But repealing that law after SCE&G spent billions of dollars relying on it would almost certainly violate the company’s rights. Somewhere there’s a perfect if unsatisfying balance between the rights of ratepayers and the rights of the utility, and whether the Legislature acts or not, it’s the courts that are going to delineate that constitutional sweet spot.

I doubt they’ll reduce the surcharge to zero. I also doubt they would approve Dominion’s proposal, which still counts on making a profit off of the abandoned project for the next 20 years. But who knows where they’ll land between those two points.

Although the constitutional issues would be the same whether the Legislature reduces the surcharge or not, the precise facts would be different — and that could change the court’s decision. Maybe to the benefit of ratepayers. Maybe not.

Don’t get me wrong: The Legislature created the state’s worst financial catastrophe since the Civil War by passing the Base Load Review Act, and it absolutely has a moral obligation to fix this mess. But it’s not a given that we’ll be worse off if it doesn’t act — or better off if it does.

More information

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

SC nuclear debacle, by the numbers

SC nuclear debacle: a timeline

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

The SC Senate hasn’t even touched our worst VC Summer problems

Why Santee Cooper’s customers pay a way lower nuclear surcharge than SCE&G’s

Santee Cooper is out of control. But that’s not a reason to sell it

Did South Carolina’s own ‘don’t ask, don’t tell’ law make the nuclear fiasco worse?

Why legislators shouldn’t be allowed to accept donations, jobs from utilities

What else we learned from that SCE&G bankruptcy report

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

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

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.

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

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 or (803) 771-8571 or follow her on Twitter or like her on Facebook @CindiScoppe.