As a federal judge weighs whether to grant an S.C. Electric & Gas request for an injunction staying temporary rate cuts ordered by the S.C. Public Service Commission, the company bidding to acquire the utility’s parent company is, like other interested players, waiting to see what happens.
However, if recent legislation passed by the General Assembly repealing a state law that allowed SCE&G to raise rates to recoup costs of the failed V.C. Summer nuclear project stands, Richmond, Va.-based Dominion Energy said its patience could run out.
“Our goal has always been to avoid getting everything tied up in long litigation,” Chet Wade, Dominion vice president of corporate communications, told the Columbia Regional Business Report on Thursday. “Unfortunately, what is happening today is exactly what we expressed concerns about in January.”
Dominion and Cayce-based SCANA Corp. announced a proposed $14.6 billion merger at the first of the year that has run into speed bumps in the S.C. Legislature. In a special session at the end of June, lawmakers passed bills that temporarily lowered rates charged by SCANA subsidiary SCE&G to its approximately 727,000 electric customers stemming from the abandoned nuclear reactors. The new laws also effectively repeal the Base Load Review Act, the 2007 state law that allowed SCANA to request and receive nine rate increases during the reactors’ construction, as well as delay a final PSC decision on who is to pay for the reactors and how the costs will be recouped until December.
The PSC voted to enact the 15% rate cut passed by the Legislature for SCE&G customers, beginning with August’s first billing cycle, and ordered that the reductions be applied to bills from April through July. SCE&G filed a lawsuit challenging the constitutionality of that order and seeking an injunction against the rate reductions on July 2.
A federal court dismissed that lawsuit on July 26, and SCE&G promptly appealed. On Thursday, the court denied motions by the PSC and lawmakers to dismiss the suit. The court has yet to issue a final ruling on the injunction.
Also Thursday, SCE&G filed joint direct testimony petitioning the PSC for merger approval. The testimony included statements from SCANA CEO Jimmy Addison (.pdf) and other company officials describing events leading to the abandonment of the nuclear reactors and touting the benefits of the proposed merger.
“Without the combination, SCE&G’s ability to serve its customers effectively over the short-term, or the long-term, could be in jeopardy,” Addison said in his statement. “ ... In the immediate context, Dominion Energy has the financial strength to help SCE&G and its customers recover from the disruption that has occurred as a result of the abandonment of the (V.C. Summer) Project. In the long-term, it will provide customers with a stable, dependable and high quality utility service.”
Whateve the outcome of the SCE&G lawsuit, Dominion is looking toward December, when PSC action could undo or uphold the repeal of the BLRA. The company has said it is open to a restructuring of the BLRA but must be allowed to recoup some V.C. Summer costs from SCE&G ratepayers.
Wade stressed that the Dominion deal includes a permanent 7% rate cut, as well as an average refund of $1,000 to residential customers and a three-year rate freeze.
“What we’re being told is they will have a decision by the end of the year, and so that’s what we’re moving toward, is that clock,” Wade said. “We are, in good faith, moving forward.”
If eventual PSC action completely removes rate increases granted under the BLRA, “that’s not a workable solution for us,” Wade said. “Basically what (the Legislature) has done is retroactively reversed the BLRA. … If the PSC somehow wants to rearrange that formula, we’re fine with that. It’s their call. But to go in and do a bunch of other things that just don’t make it tenable for us … we can’t move forward. And I don’t think anybody can.”
Some lawmakers have expressed doubt that the Dominion deal is the best SCANA can get, and others have cautioned against accepting it without diligent consideration.
“If we move on this too quickly and end it, we could be stuck with it,” Senate Majority Leader Shane Massey, R-Edgefield, said in February during an appearance before the Senate by Dominion CEO Tom Farrell.
“If somebody could do better, the door is wide open,” Wade said. “We’ve heard all these rumors: ‘So-and-so is going to come in on Monday and provide a better offer. We’re sure of it. They’ve told us.’ And where is it? If someone else could do a better offer, why wasn’t it presented? I think that’s pretty strong evidence that ours is the best proposal.”
As the court deliberates and the clock ticks toward an ultimate PSC decision, Wade said Dominion will continue trying to convince state leaders and residents that its deal is the best alternative.
“It’s a question of, ‘Do I want to take a sure thing, which gives me a lot back, or do I want to really roll the dice?’ ” Wade said. “It almost comes down to all or nothing. It’s pretty close to that. That’s the gamble that the legislators have put out there with the customers’ money.”