Base Load Review Act (BLRA)

Base Load Review Act (BLRA)

Through April 2017 the SCE&G ratepayers have had 9 rate increases under the Base Load Review Act (BLRA) resulting in about $1.4 billion in additional electricity costs to both business and residential consumers.  These rate increases are being used just to pay for the construction financing costs to build the two nuclear plants in Fairfield County at the V.C. Summer Nuclear Station.  The construction project is $2.5 billon (21.6%) over budget and 2-3 years behind schedule largely due to imprudent business decisions by the utility.

In June of 2016, South Carolina Small Business Chamber of Commerce (SCSBCC) President and CEO Frank Knapp intervened in SCE&G’s request for revisions to the nuclear project’s construction costs and schedule under the BLRA.

In July of 2016 the SCSBCC, the South Carolina Chapter of the Sierra Club and the South Carolina League of Women Voters formed the STOP THE BLANK CHECK COALITION and propose four amendments to the Base Load Review Act to better protect the consumer from excessive rate increases.  Also in the coalition are the Carolina Peace Resource Center, Kingdom Living Temple, National Association of Social Workers-SC Chapter, New Alpha Community Development Corporations, Sustainable Midlands and The Whitney M. Slater Foundation.

The goals of the coalition were to stop SCE&G from having its proposed fixed-price contract approved by the PSC because it was seen to have too many loopholes.  The other two goals of the Coalition were to reduce the upcoming BLRA rate hike and amend the BLRA for future nuclear power plants.  Four amendments were proposed:

  1. Utility Accountability – Allow the use of the BLRA to recover construction financing costs only on the original PSC approved budget for construction.  Any construction financing costs for additional construction expenses will be recovered in a general rate proceeding after the plant is used and useful (i.e. online producing energy for consumers).  This will focus the utility on making the most prudent cost projections and construction decisions because the company will have its own finances on the line or cost overruns and delays.
  2. Utility Profit Regulation –  Allow the PSC to decide the utility’s Return on Equity under the BLRA.  This re-empowering of the PSC is essential to truly protect the consumers from a state-approved utility monopoly.
  3. Utility Responsibility – The utility shall demonstrate to the PSC the prudence of transaction costs, or decision by a preponderance of the evidence. Currently the burden to show that a construction decision is prudent is on a challenging party, not the utility.
  4. Utility Transparency – The SC Office of Regulatory Staff shall be an advisory-only party to all contractual negotiations and contract decisions for construction projects being submitted to the PSC for approval.  Such an advisory-only role by the Office of Regulatory Staff does not constitute its approval of any eventual contracts nor is it to be construed that any subsequent contracts are prudent.  The SCE&G experience has shown that ultimately the ratepayer will be the victim of imprudent contracts between the utility and vendors.

On September 1, 2016, Mr. Knapp signed a settlement agreement with SCE&G to have a real fixed-price contract for completing the two reactors being built at the V.C. Summer Nuclear Station.  Joining him in the settlement were the Office of Regulatory Staff, the Electric Cooperatives of SC, Central Electric Cooperative and the SC Energy Users Committee.  The Public Service Commission subsequently approved the settlement which set an acceptable fixed-price contract ($505.5 million) for completing the construction project. Any significant cost over that amount would be the responsibility of the company and/or its vendors.  The settlement also slightly lowered the requested rate hike and also lowered the return on equity on future BLRA rate increases to 10.25 percent, a reduction from 10.5%, and would save the ratepayers $26 million by the time the plants go online.

In February 2017 Representative Kirkman Finlay introduced H.4022 which included three of the Coalition’s proposed BLRA amendments for future nuclear plant construction projects.  Only the amendment on utility transparency was not included.

In March of 2017 Westinghouse Electric Corporation, SCE&G’s primary contractor for the two nuclear plants at the V.C. Summer Station filed for bankruptcy.  The SCSBCC indicated it supported SCE&G to completing the nuclear plants but insisting that the settlement protecting the ratepayer from additional construction cost increase should remain in place since the settlement was with SCE&G not its vendors.

In April 2017 the Office of Regulatory Staff petitioned the PSC to make public all contracts between SCE&G and its vendors saying that the transparency of contractual arrangements would be in the public’s interest.  SCSBCC supported this effort saying that “the South Carolina public and legislature have a right to know how contractual relationships between SCE&G, Westinghouse and other vendors contributed to the current unsettling situation.”