SCANA says it’s prepared to fight to protect its interests in light of the passage of a bill that would halt payments by customers of subsidiary S.C. Electric & Gas of costs related to the failed V.C. Summer project and repeal the state law that allows the company to continue to recoup those costs through ratepayers.
“There is a regulatory process in place for adjudicating the recovery of costs associated with the nuclear project,” Eric Boomhower, SCANA’s director of public affairs and corporate communications, said in an email to the Columbia Regional Business Report on Thursday. “SCANA and Dominion have filed a petition with the Public Service Commission that explains how a combination of the companies would result in significant benefits being provided to customers.
“In the event legislation is passed that interferes with the regulatory process and changes the legal standards for recovery of those costs in a way that would inflict severe damage on the company, the company would have no choice but to seek legal recourse at that time.”
On Wednesday, the S.C. House passed a bill repealing the Base Load Review Act and dropping the 18% charge on SCE&G bills, or $37 million a month the company collects, for costs related to the twin 1,117-megawatt nuclear reactors in Fairfield County. The bill also guarantees that no future utility projects can recover those costs, a measure that would likely deal a blow to Virginia-based Dominion Energy’s proposal to acquire SCANA.
Dominion has said that its $14.6 billion proposal hinges on being able to recover the V.C. Summer costs from ratepayers, albeit for less time than SCE&G’s current payment schedule and with a plan to provide refunds to ratepayers.
SCANA sought and received nine rate increases during the reactors’ decades-long construction under the BLRA, a law passed in 2007 that allowed the utility to raise rates to pay for the reactors before they were finished.
SCANA may still be able to recoup those costs, but the bill would require the utility to prove to regulators that actions taken during the reactors' construction were prudent. The legislation would keep ratepayers from forking over more money while the S.C. Public Service Commission considers motions related to rate relief.
SCANA has predicted dire financial consequences if the BLRA is repealed and hotly disputed an audit by the Office of Regulatory Staff that found only a 35% chance of bankruptcy for the utility in that event. The company challenged the ORS audit, noting it contained no affidavit or sworn statement, and said it represented a “fundamental misunderstanding” of accounting principles.
On Wednesday, the PSC directed the ORS to perform a “thorough audit, inspection and examination” of SCANA’s financial records.
The proposed Dominion merger would reduce the average SCE&G customer’s rates by 5%, or more than $7, a month. A $1.7 billion-plus write-off of existing V.C. Summer capital and regulatory assets would eliminate customer costs related to the project over 20 years, faster than the 50- to 60-year period proposed in a November offer from SCE&G, which would have reduced annual rates by 3.5%.
Dominion has also promised a $1.3 billion cash payment to refund SCE&G ratepayers within 90 days of the merger’s completion. The utility would work with state regulators to determine refund amounts based on usage.
“The House action, assuming it becomes law and survives legal challenges, could offer temporary relief for SCE&G customers, but unfortunately could threaten the permanent solution offered by Dominion,” the company said Wednesday in a statement. “Regarding our combining with SCANA, as we have said from the beginning, any change in law that has a significant financial impact on our proposed transaction would create a path for Dominion Energy to walk away from our proposal and eliminate the immediate positive benefits for South Carolina.”
SCANA’s board voted in favor of the merger last month.
SCE&G and state-owned utility Santee Cooper, co-owner of the V.C. Summer project, poured $9 billion into the reactors before multiple delays and rising costs led contractor Westinghouse to file for bankruptcy last April. SCE&G and Santee Cooper abandoned the project in July.
S.C. Gov. Henry McMaster has said he would sign legislation that refunded customers’ money and prevented any future V.C. Summer-related charges but veto any that “continues to place the financial burden of this corporate failure on South Carolina ratepayers,” he said in last week's State of the State address.