Important recent development on rolling back SCE&G rates

Important recent development on rolling back SCE&G rates

SCE&G electric rates that have risen 18% since 2009 to pay for the construction financing costs of the now abandoned nuclear plants in Fairfield County. Ratepayers have been forced to pay about $2 billion in extra charges on their electric bills because of this failed project.

From the very beginning the position of the South Carolina Small Business Chamber has been that SCE&G electric rates should be reduced by 18% going forward, which would mean that SCANA/SCE&G shareholders would be responsible for paying almost $5 billion in construction debt for the abandoned plants. In addition, we have advocated that all the money consumers have paid since 2009 in higher rates that were approved by the Public Service Commission (PSC) due to the construction of those plants be recovered by the ratepayers.

Our position has been supported by Governor Henry McMaster and many state legislators.

The Office of Regulatory Staff (ORS) has asked the PSC to roll back SCE&G rates by the 18%. ORS maintained that such a rollback would not bankrupt SCE&G.  The utility claimed that it would have to file for bankruptcy.  In response to the dispute, the PSC asked for a “report on the potential financial ramifications” of eight different scenarios it could order on the matter. ORS obtained the services of the accounting firm of Baker Tilly Virchow Krause, LLP, to prepare the report.

This full report was released on June 12th.  But it wasn’t until this past week that Baker Tilly issued a letter of interpretation of their report so that we mere mortals could fully understand it and easily compare the impact of each of eight possible scenarios.

According to the report, SCANA/SCE&G would not have to file for bankruptcy should the PSC order the company to roll back rates by 18%. “The reduction in revenue will still result in positive operating cash flow to SCE&G” said the report.

However, combining an 18% rollback in rates along with crediting “ratepayers $2 billion of previously collected revenues over a four-year term” would result in either the company needing to file for bankruptcy to restructure debt or to seek another rate hike (again).

So, the immediate 18% rollback in rates is doable despite SEC&G’s objections. However, clawing back the $2 billion already paid to SCE&G over a 4-year period would push the company over the edge or, if the PSC didn’t want that, require another rate hike.

No one wants the utility to file for bankruptcy nor does the consumer want another rate hike. So how about we stretch out the recovery period for that $2 billion?

How about 8, 10, 12 or more years? Let’s look at these scenarios.

This certainly would be greatly delayed reimbursement.   However, it would lead to the eventual total claw back of the customer’s money they deserve to have repaid.