GUEST COLUMN: S.C. Electric Co-Op customers to pay for cost increase request

Florence Morning News
Charleston Post and Courier

July 19, 2016

By Frank Knapp Jr. Guest column

I have some bad news for the customers of South Carolina’s electric co-operatives and Santee Cooper’s retail customers.

Some of these fine folks might have felt pretty smug about getting their electricity from co-ops or directly from Santee Cooper, the state’s power company.

Let’s face it. All of the public talk has been about SCE&G now asking for $846 million more to build the nuclear plants in Fairfield County and a 3.06 percent overall increase in rates to pay for construction financing costs of previously approved expenses.

Co-op customers might know that the source of their electricity actually comes from Santee Cooper, which owns 45 percent of the nuclear plants. Santee Cooper retail customers might also know this. But all of the public chatter has been about SCE&G and its customers.

Well, here is the bad news … and it is eye-popping.

As I mentioned, Santee Cooper owns 45 percent of the nuclear plants under construction, and thus it is responsible for 45 percent of the capital costs. So when the S.C. Public Service Commission approves increased construction costs for SCE&G, it is also indirectly approving increased costs for the customers who buy electricity directly from Santee Cooper and the 1.5 million South Carolinians who are electric co-op customers.

Most of the $846 million SCE&G wants in increased construction costs is due to its decision to take a $505.5 million “fixed-price” option offered by its vendor, Westinghouse, to allegedly save the customers money and finish the project by 2020.

But this is a fake “fixed-price” option.  It won’t guarantee that there will be no more cost increases that fall outside the contract, it doesn’t guarantee that Westinghouse won’t come back to renegotiate the deal for more money (as it is doing right now), nor can it guarantee that the project will be finished when promised (every month delay costs the SCE&G customers $10 million).

The executive director of the S.C. Office of Regulatory staff has derided the term “fixed-price,” saying that “you can put a hamburger patty between two slices of bread and call it a cheeseburger all the way, but it’s not.”

So here is the eye-popping bad news for co-op and Santee Cooper retail customers that hasn’t been publicly discussed and isn’t included in the SCE&G filings with the Public Service Commission. The entire cost of the fake “fixed-price” option is around $919 million.

Almost a BILLION dollar more to complete the construction!!!! That would put the project 43 percent over SCE&G’s original budget in 2008.

SCE&G customers would be on the hook for $505.5 million, and Santee Cooper would hold $413.5 million of that additional cost.

The electric co-op customers in the state will be looking at picking up 70 percent of Santee Cooper’s share to the tune of $289.4 million.

And for Santee Cooper electric retail customers, your share of the fake “fixed-price” option SCE&G wants will be $124.1 million.

Fortunately, the Public Service Commission can say “no” to SCE&G’s fake “fixed-price” option and reduce the utilities request for additional costs this year to $341.1 million.

That’s still a lot of money. But making the SCE&G, electric co-op and Santee Cooper direct retail customers commit to paying costs that might never happen and tie it to a Westinghouse contract that will, based on SCE&G’s history, be re-negotiated if the vendor goes into the red is a poor management decision that is not in the best interest of the customers.

The utility has made many imprudent decisions and has been wrong about projected costs since the very beginning of this nuclear project. The result is a project three years behind schedule and billions of dollars over budget.

This fake “fixed-price” option is one more bad decision.

Enough of this blank check for SCE&G.

It’s now time for co-op and Santee Cooper retail customers to join the fight to tell the Public Service Commission to crack down on SCE&G to get this project done with as little increased costs as possible.

Frank Knapp Jr. is the president and CEO of the South Carolina Small Business Chamber of Commerce. 

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