Editorial: Nuclear plants’ bottom line still murky

Editorial: Nuclear plants’ bottom line still murky

Charleston Post and Courier
October 1, 2016

It’s unlikely that anything SCE&G has to say about rate hikes will be well received by customers who have to pay more. But the company’s latest pitch was definitely off the plate.

It came from Kevin Marsh, chairman and CEO of SCE&G’s parent SCANA Corp., as he tried to put a positive spin on the cost of building two reactors at the V.C. Sumner Nuclear Power Station in Jenkinsvile. Mr. Marsh said customers should be happy because lower financing costs and a heftier tax credit payout mitigate their costs.

That sounds like a feint. Indeed, that’s exactly what it is, according to Frank Knapp, president and CEO of the S.C. Small Business Chamber of Commerce.

“The lower interest rates were a function of the economy, and the tax credits are a function of the federal government trying to promote nuclear energy. Those things were going to happen anyway,” Mr. Knapp told reporter David Wren.

“Think how much better off the ratepayer would be if SCE&G had stayed on budget.”

The state Public Service Commission isn’t helping customers feel any better. It is getting ready to rule on SCE&G’s latest rate hike request. Customers are not happy at the $64.4 million in financing costs added to the $1.054 billion already approved.

They have requested the PSC hold a public hearing in the Charleston area, something it has done in the past — but not this time. The PSC intends to hold only one hearing, and it will be at its Columbia office on Oct. 4.

That’s unfortunate. The PSC should be eager to hear from customers.

And customers have plenty to talk about: If approved, the total project cost will exceed $13.9 billion — about 22 percent more than the $11.4 billion that was predicted when the project began in 2009.

The increase is related to financing the project and an $831 million increase in construction costs due to major project delays. It was supposed to be up and running in April of this year. Now SCE&G is planning to open one in August of 2019 and the second by the end of 2020.

There is no guarantee that those completion dates will be met.

Last year, Westinghouse Electric Co. hired Fluor Corp. to oversee the rest of the project. The new contract was presented to the public as a fixed-price agreement.

Dukes Scott, executive director of the Office of Regulatory Staff, initially had some reservations: People didn’t realize that not all costs would be fixed — some increases could occur with unexpected legal, safety or regulatory costs to the owner. He also wasn’t convinced that Westinghouse would live up to its plan or that SCE&G would enforce the contract.

But since then, Westinghouse has pledged not to ask for another budget increase. And SCE&G has agreed to a moratorium preventing it from asking for any update due to costs incurred by the company until 2019 or later.

Further, SCE&G reduced its return on investment from 11 percent to 10.5 percent and now to 10.25 percent. It’s still a healthy return, but it will save money on the project.

Still, customers aren’t off the hook completely. If owner costs do increase, customers will ultimately be asked to pay. Instead, the PSC should prevail upon SCE&G to cut its return on investments more, as needed. Customers have felt more than their share of pain.

Leaving the plants incomplete is not an option. It would mean all the money customers have paid would be wasted. Besides, nuclear energy is clean. Reducing the use of fossil fuels is a worthy goal.

Maybe it would be better for SCE&G to focus on that than to take credit for cost changes that they weren’t responsible for.