Charleston Post & Courier
August 16, 2015
The two new nuclear reactors under construction at the V.C. Summer site in Fairfield County are more than a year behind schedule and nearly $1.2 billion over budget. But profits and shareholder earnings continue to rise at South Carolina Electric and Gas Co.
Indeed, SCE&G earnings were up $12 million in the second quarter of 2015 compared to the same period last year, according to a quarterly earnings report from SCANA, the utility’s parent company. Unfortunately, customers are paying dearly for that windfall.
“Electric margins continue to increase as expected due to financing cost recovery through the Base Load Review Act and customer growth,” said Jimmy Addison, executive vice president of SCANA, in the report.
In other words, customers are paying significantly higher electric bills so that SCE&G can pour billions of dollars into new nuclear reactors and still turn a healthy profit each quarter.
The Base Load Review Act (BLRA) was passed in 2007 to help state utilities finance major capital projects. Under the law, utilities can raise customers’ rates up front to pay for financing and other costs.
Since the law passed, SCE&G customers have weathered seven rate hikes related to the new nuclear reactors. An eighth increase is awaiting approval from state regulators.
SCE&G argues that raising rates now rather than waiting until the reactors go online saves customers billions of dollars in interest and other costs. But it also means that 695,000 South Carolinians pay about 26 percent more on their electric bills than they did when the reactor project received regulatory approval in 2009.
The American Association of Retired People (AARP) thinks consumers have suffered enough. So does the S.C. Small Business Chamber of Commerce, which Tuesday called for an independent review of the Base Load Review Act to make sure that it truly benefits consumers rather than just utilities and their shareholders.
AARP, the nation’s largest advocacy organization for senior citizens, has called for a more stringent review of SCE&G rate hikes, arguing that elderly customers are being disproportionately affected by increased electric rates.
Both the Small Business Chamber and AARP assert that SCE&G has too little at stake in building the new reactors.
State law essentially guarantees utilities a fixed profit margin — usually around 10 percent — and the BLRA allows budget overruns to be passed along to customers. As such, SCE&G assumes only minimal financial risk for a project expected to cost as much as $11 billion.
At the very least, it’s time for a thorough review of the effectiveness and fairness of the Base Load Review Act. SCE&G, along with state regulators charged with protecting consumers, must better demonstrate how the law protects and benefits the public.
Vague promises of future savings are not enough. If the law will truly save customers money in the long run, they deserve to know just how much they can expect their bills to drop — and when.
After all, even billions of dollars in savings are tough to justify when electric bills just keep climbing and climbing and climbing.