After a decade of rubber-stamping rate increases for a nuclear power plant that will never be built (a.k.a. #NukeGate), South Carolina’s embattled Public Service Commission (SCPSC) finally cut rates this week. Although as we have repeatedly warned, at this point its decision could wind up doing more harm than good for beleaguered ratepayers.
Acting in immediate obedience to a deal approved last week by state lawmakers, SCPSC members voted on Tuesday to enact a fifteen percent rate cut in power bills for customers of SCE&G – a subsidiary of Cayce, S.C. based crony capitalist energy provider SCANA.
The cut would take effect in August and last through December – saving the average consumer $22 on their power bill over the next five months. However the panel also approved a one-time credit that would apply the fifteen percent rate reduction for the months of April, May, June and July.
It is not clear whether SCANA will pay the credit – which would average out to around $88 per customer.
Currently the utility is suing the state in federal court, arguing the rate cuts imposed against it by the state constitute “an unlawful taking of private property.”
S.C. Senator Tom Davis – one of the legislative leaders who supported the rate cuts – called SCANA’s claim “pretzel logic.”
According to Davis, the company forfeited its right to continue receiving the proceeds from these rate increases when it concealed “material facts from state regulators.”
Is he correct? Yes. In fact, anyone who doubts this should look no further than the two abandoned nuclear reactors sitting up in Jenkinsville, S.C.
Still, our guess is SCANA still wins in court. How come? For starters, lawmakers approved the socialization of the investment risk for this project. Not only that, they were responsible for the agencies overseeing this investment.
In other words the state has absolutely no one to blame but itself for this spectacular command economic failure …
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[/timed-content-server]How did we get here? As we exclusively reported last week, legislative leaders reached a deal they insist will undo the damage they did over a decade ago when they permitted two utilities (including one owned by the government) to squander more than $10 billion on a pair of now-abandoned reactors in Fairfield County, S.C. Of that sum, $2 billion was collected directly from ratepayers – essentially socializing a significant chunk of the investment risk related to this doomed project.
The two reactors were supposed to have been operational in 2016 and 2017, respectively, at a cost of $9.8 billion.
That obviously didn’t happen …
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.
The socialization of the investment risk came courtesy of the notorious Base Load Review Act (BLRA) – legislation which was advanced by liberal state lawmakers and allowed to become law in 2007 by former governor Mark Sanford. Under the terms of this glorified handout, SCANA and government-owned utility Santee Cooper were allowed to impose an eighteen percent “nuclear surcharge” on ratepayers – a charge they are still paying even after the latest rate cuts.
We called on lawmakers to either eliminate this surcharge completely (on a permanent basis) – or accept a private sector solution for SCANA that enabled ratepayers to see immediate relief.
They chose neither option … instead endorsing a temporary, partial repeal that has set off what we suspect will be a long, bruising legal battle.
This is exactly what we predicted would happen months ago … and exactly what several state senators were leery of when they agreed to a compromise last week with the S.C. House of Representatives. Senators had argued that cutting the surcharge rate below five percent would invite a constitutional challenge – which the state is now facing.
(Click to view)
(Via: High Flyer)
Not only that, the legislative “compromise” appears likely to kill a deal that is still (barely) on the table from Virginia-based Dominion Energy. Under the terms of this proposal, the nuclear surcharge would be lowered from 18 to 11 percent over the next seven years and from 11 percent to zero over the next 12 years. Of course Dominion’s offer includes something lawmakers cannot provide – $1.3 billion in upfront relief to ratepayers.
That’s roughly $1,000 in upfront cash to each SCANA customer …
Additionally, we are told SCANA offered to sweeten the pot further – but lawmakers refused the company’s offer.
How much additional relief was on the table? We still don’t know …
Meanwhile, Santee Cooper – which is drowning in debt and the focus of a major federal investigation – filed a suit with the S.C. Supreme Court last month seeking to affirm its right to “set and collect rates sufficient to cover all of its expenses, including debt obligations.”
Its ratepayers will receive no relief from the legislature’s actions.
Many months ago, this news site explicitly warned that “the uncertainty from a protracted court fight could cost the state billions of dollars in economic activity and tens of thousands of jobs.” Hell, it already is costing jobs.
Accordingly, we pushed from the very beginning of this process for “a reasonable settlement that maximizes ratepayer relief, within the confines of what the courts will accept and the markets will bear.”
Is that where we are headed with all of this? Clearly not …
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