Proposed deal an effort to stop SCE&G ‘blank check’

The Post and Courier
September 5, 2016

By:  David Wren

A proposed settlement that would rein in construction costs at the V.C. Summer Nuclear Station is being called a victory for South Carolina Electric & Gas customers who’ve seen their utility bills increase by nearly 17 percent since 2009 to pay for the project.

The settlement was reached last week between SCE&G, the state Office of Regulatory Staff and individuals and groups who’ve intervened in the utility’s proposal to add $852 million in costs for two new reactors.  The settlement still needs approval of the S.C. Public Service Commission.

Under the proposal, SCE&G would slightly lower the extra costs by almost $20.5 million.  The utility’s return on equity – the fixed amount of profit it is allowed to make from the construction project- also would be shaved to 10.25 percent from 10.5 percent.

The quarter-percent cut in allowed profit is expected to save customers $26 million by the time the reactors go online by the end of this decade.

“Reducing the total cost increase being requested by SCE&G, even if it is minimal, is obviously a good thing for ratepayers who will pay for the financing of these costs in next year’s rate increase and eventually for the construction costs themselves after the plants go online,” said Frank Knapp, CEO of the S.C. Small Business Chamber of Commerce and one of the intervenors in the latest proposed rate hike.

While those are small victories, Knapp said consumers will benefit the most from a fixed-priced deal that sets the cost of the project at no more than $14 billion—up from $10 billion when work started.  SCE&G has vowed if costs exceed that amount, they will be paid by shareholders of parent SCANA Corp. and contractor Westinghouse Electric, not customers.

“Company shareholders should have skin in the game, which should increase pressure on the company and its vendors to complete the project on time and on budget.”  Knapp said

Knapp was among the founders of “Stop the Blank Check,”  a coalition of business leader’s pushing for reform of the state’s Base Load Review Act.  The act lets SCE&G charge customers for construction while it is taking place and years before customers would realize any savings from the power generated at V.C. Summer.  Most utilities—including Santee Cooper, which owns 45 percent of the Midlands plant—finance construction costs by issuing bonds that are repaid after new plants are operating.

While “this settlement essentially stops the blank check for SCE&G on this project,”  Knapp said, changes to the Base Load Review Act still are needed to “stop future blank checks” for utilities building a new power plant in South Carolina.

Among the reforms his group has asked legislators to take up are:  allowing the act to be used only for original budget estimates, no overruns; greater oversight of construction contracts; and allowing the PSC, not the utility to determine how much profit is allowed.

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