The Charleston Post and Courier
August 11, 2015
By David Wren
State regulators should review the pay-as-you-go method being used to build a nuclear power plant near Jenkinsville to see if it really is saving money or simply letting South Carolina Electric & Gas pass costs it should absorb on to its customers, the head of the S.C. Small Business Chamber said Tuesday.
A spokesman for the utility, however, said the state already reviews the project’s finances and proposed utility rate increases, all of which are available for public review.
Frank Knapp Jr., the chamber’s CEO, said he’s not convinced the current financing method — under a state law called the Base Load Review Act — is fair to consumers, including the business owners his group represents.
“At what point would it be in today’s customers’ interest to cease the funding of ongoing construction financing costs and approval of cost overruns and instead require SCE&G to complete the construction on its own dime and then ask the state’s Public Service Commission for the appropriate rate increase,” Knapp said.
Knapp and Teresa Arnold, state director of the AARP, said SCE&G rate hikes associated with the nuclear plant are having an excessively negative impact on the small businesses and fixed-income residents they represent, many of whom will never use power from the nuclear plant they are paying to build.
“When you’re on a fixed income, there’s a different ratio that happens to your budget when something goes up by a dollar as opposed to someone who has the ability to make more money,” said Ruth Rambo, an SCE&G customer in Charleston. “The more dollars we spend, the greater percentage of our budget it is because it doesn’t move.”
SCE&G has proposed a 2.8 percent rate increase that is being considered by the commission. The increase, part of a decade-long series of rate hikes, would be used to help pay for construction of two new reactors at the V.C. Summer Nuclear Station — a $10 billion project scheduled for completion in June 2020.
If approved, the rate hike would mean SCE&G has increased customers’ bills by more than 31 percent since 2008.
More than half of those increases have taken place under the Base Load Review Act, a state law that lets any investor-owned utility avoid the financial risk and high cost of building a nuclear power plant. It does so by making ratepayers foot the bill of construction financing through annual rate increases as the plant is built, years before customers get any benefit from the electricity that plant will produce.
The rest of SCE&G’s increases have been due to general rate hikes. All told, the increases amount to nearly $36 extra for each 1,000 kilowatt hours of power used.
Arnold said the commission has been rubber-stamping annual increases without considering whether “this current process for financing power plants remains the most economic path toward an affordable energy future for South Carolina.”
There is no incentive for SCE&G to rein in costs, Arnold said, because the utility has built an 11 percent corporate profit into the price tag.
SCE&G also “has absolutely no financial leverage over its supplier to stay on schedule,” Knapp said, because the utility has charged the contractor the $86 million maximum allowed by contract by cost overruns and delays.
“There is and has been only one loser for the past and future delays and added costs — the ratepayers,” he said.
Eric Boomhower, a spokesman for SCE&G, said the state already looks out for consumers through reviews conducted by the Office of Regulatory Staff, which represents the public in utility matters. That office is not opposing SCE&G’s latest proposed rate increase, which could be approved as early as next month.
The ORS “already audits the project costs on an ongoing basis, and issues quarterly reports updating the status of the capital cost and construction schedule of the project,” Boomhower said. “The ORS also audits the rate-related filings we submit annually under provisions of the Base Load Review Act.”
Fran Gossett, an SCE&G customer in North Charleston, said she supports an independent audit of the nuclear plant construction costs and whether its financing method benefits consumers.
“Their pockets are getting deeper while ours are getting thin,” Gossett said., adding that she is not sure the rate increases can be justified.
A study in Georgia showed a nuclear plant being built there by the same financing method is becoming difficult to justify economically and Duke Energy in 2013 stopped construction of a Florida plant using pay-as-you-go financing after customers had already been billed for $1.5 billion in construction costs.
Boomhower said the pay-as-you-go financing method will lower the cost of building the new units by $1 billion and ultimately will save consumers about $4 billion in electric rates over the life of the units.
Santee Cooper, which owns 45 percent of the nuclear plant, is using traditional financing for its part of the construction bill through the sale of $3.6 billion in bonds. The state-owned utility is now considering rate increases to help pay financing costs for those bonds. More bonds could be sold before construction is finished.
Delays at the Fairfield County nuclear plant have pushed its completion back by two years. Those delays, along with other unexpected expenses, have cost an extra $539 million, according to SCE&G owner SCANA Corp.
SCE&G provides electricity and natural gas to Charleston and Dorchester counties and parts of Berkeley County. It has 692,000 electric customers and 342,000 natural gas customers statewide.