Columbia Regional Business Report
Staff Report firstname.lastname@example.org
Published Aug. 13, 2015
The S.C. Small Business Chamber of Commerce and the state’s AARP chapter want an independent evaluation of the state law that has allowed South Carolina Gas & Electric Co. to seek annual rate increases to cover the cost of borrowing money for new nuclear construction.
The Base Load Review Act has permitted the utility to increase electricity rates by more than 17% in seven years if the current rate hike request – which averages about 2.8% – is granted, the groups said.
“The Public Service Commission deserves an independent economic assessment to answer the question of whether SCE&G has been ‘prudent’ in incurring all costs associated with the construction,” said Frank Knapp Jr., President and CEO of the Small Business Chamber. “The consumers definitely need an answer to this question.”
The two reactor units being built by SCE&G and its state-owned partner Santee Cooper at V.C. Summer Nuclear Station in Fairfield County are behind schedule and approximately $1.3 billion over the original estimate of $9.8 billion.
“Wouldn’t it be more prudent for increased costs due to schedule delays and overruns be the responsibility of the SCE&G shareholders that can demand accountability from the company? Is it really prudent to reward SCE&G with more profits as a result of higher costs from the delays and overruns on a project it controls?” Knapp asked.
Higher electricity rates due to the state law have harmed local economies and small businesses, Knapp said.
“So SCE&G small business customers are losing twice,” Knapp said. “Their electricity bills are higher than expected and their customers have fewer dollars to spend with them.”
The Base Load Review Act was passed before SCE&G won approval in 2008 from the commission to build two 1,117-megawatt reactor units at the Jenkinsville power plant, located about 28 miles northwest of Columbia.
Added to the regular cost of operational rate increases, SCE&G will have raised its electricity rates by more than 31% in the past seven years, the organizations charged.
The Base Load Review Act is designed to reduce the cost of building nuclear power plants by allowing regulated utilities like SCE&G to adjust rates annually during the life of the construction project to recover related financing costs.
Paying financing costs while construction is ongoing, as opposed to waiting until the project has been completed, lowers the cost of building the new units by about $1 billion, SCE&G said. That, in turn, reduces the amount customers will pay through rates for related costs such as the cost of capital, depreciation, property taxes and insurance associated with the project, SCE&G said. Over the life of the units, customers will save approximately $4 billion in electric rates, the utility added.
Knapp contended that the General Assembly should explore changes to the law and possibly develop “some legislative fix to give the SCE&G customers some needed relief.”