Late yesterday, while most Palmetto politicos were following election returns, this news site broke open a big story related to #NukeGate – the botched construction of a pair of next-generation nuclear reactors near Jenkinsville, S.C.
As we exclusively reported, legislative leaders reached a deal on Tuesday that they insist will undo the damage they did over a decade ago when they permitted two utilities (one of them owned by the government) to squander more than $10 billion on these now-abandoned reactors.
Of that sum, $2 billion was collected directly from ratepayers – part of a command economic “socialization” of investment risk related to the doomed project.
We’re referring, of course, to the notorious Base Load Review Act (BLRA) – legislation advanced by liberal state lawmakers and allowed to become law in 2007 by former governor Mark Sanford. Under the terms of this glorified handout, crony capitalist utility SCANA and government-owned utility Santee Cooper were allowed to impose an eighteen percent “nuclear surcharge” on ratepayers – a charge they are still paying.
The reactors were supposed to have been operational in 2016 and 2017, respectively, at a cost of $9.8 billion.
That obviously didn’t happen …
(Click to view)
(Via:High Flyer)
The money was spent, the reactors simply weren’t completed … and the utilities couldn’t afford the $10-16 billion price tag necessary to finish them. Eleven months ago, Santee Cooper pulled the plug on the project – killing an estimated 5,600 jobs and throwing the Palmetto State’s energy and economic future into chaos.
Of interest? Santee Cooper scrapped the project just eight days after it proposed another rate hike on customers. Months later, it gave its disgraced former CEO a taxpayer-funded golden parachute totaling $16 million.
Now the government-run utility is asking the S.C. Supreme Court to intervene and uphold its right to raise rates – even though it is on the verge of a spectacular implosion. And even thought it is at the center of a massive federal investigation over the lies it told while running up that massive debt.
Gotta love government intervention in the energy economy, huh?
Speaking of, lawmakers’ latest plan is to drop the eighteen percent nuclear “surcharge” to three percent – and backdate it to April of this year. That sounds reasonable on its face – and the proposal would certainly provide a modest amount of ratepayer relief. However, it is a problematic “solution” on a whole host of fronts.
First, it is ultimately the responsibility of the embattled S.C. Public Service Commission (SCPSC) to set rates moving forward – not the S.C. General Assembly. Lawmakers are prohibited from micromanaging that process, but several of them have spoke openly in committee meetings about what the ostensibly independent agency “could do.”
Legislative leaders are clearly signaling specific rate-related decisions to SCPSC members, which is something we suspect will be a focal point of the lawsuits looming on the horizon.
Second, these lawsuits will have real teeth in the event the proposed legislative compromise becomes law. State senators have argued for months that cutting the rate below five percent would invite a constitutional challenge – which is why they refused to go along with the House plan in the first place.
Now they have agreed to do just that …
Of course, all of this is assuming governor Henry McMaster makes good on his promise to veto any proposal that doesn’t take the surcharge all the way down to zero (a.k.a. the gauntlet we laid down for lawmakers).
Will McMaster keep his promise now that he has won the “Republican” gubernatorial nomination?
The biggest concern, though, is the likelihood – or rather the certainty – that the legislative compromise will kill the deal currently on the table from Virginia-based Dominion Energy (and specifically the $1.3 billion in cash rebates the company has offered to ratepayers).
Dominion’s $14.6 billion deal to purchase SCANA would lower the surcharge from 18 to 11 percent over the next seven years and from 11 percent to zero over the next 12 years – but its real selling point is the rebates, which would put roughly $1,000 into the pockets of each and every SCANA customer this year.
If this deal becomes law, those rebates vanish.
“The South Carolina Legislature is playing a high-stakes game where they are gambling with the money of customers and taxpayers,” said Thomas F. Farrell II, Dominion’s president and CEO. “Legislators are risking cash payments to SCE&G’s electric customers of $1.3 billion – equal to $1,000 for the typical residential customer – and a permanent rate reduction of 7 percent.”
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[/timed-content-server]Farrell added that lawmakers were “jeopardizing total customer benefits of more than $12 billion and another $19 billion in economic activity.”
“They are promoting continued turmoil for South Carolina’s energy and business future,” he said. “All of this for a few headlines and a temporary rate reduction that has good odds of being overturned in court. It is a disappointing and short-sighted action that is counter to the best interests of South Carolina and its people.”
Also worth keeping in mind? Reports that SCANA approached lawmakers over the last few days with a proposal that would have added additional ratepayer relief to the deal currently on the table from Dominion.
How much more relief? No one is saying … but we’re told it was “substantial.”
We’re also told lawmakers weren’t hearing it.
“We extended our hand in good faith and it was slapped,” a source close to SCANA told us.
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