December 14, 2018

Lot’s of Bad News

Today the Public Service Commission announced its decision to adopt Dominion Energy’s last “best and final” proposal and accept all Dominion’s merger conditions regarding SCE&G and the failed nuclear project in Fairfield County.  You can read my statement that I issued below.

What this ruling means for SCE&G’s (soon to be owned by Dominion) ratepayers is that electric rates will not be cut by an additional 5% as proposed by the Office of Regulatory Staff (ORS).

Today’s rates were already temporarily reduced by 15% per the instruction of the legislature.  Now this 15% rollback will be permanent, at least until the next rate case.  Rates have increased by 18% since 2009 to pay the financing costs of the construction of the now abandoned nuclear project.  SCE&G spent $5 billion on this construction and will recover much of that money from ratepayers.

This is the outcome promoted by the Speaker of the House who made the unusual and controversial move to formerly intervene in this hearing ostensibly to represent the House of Representatives.

The general sentiment of those close to this process was that the Speaker’s political influence would result in the PSC complying with his request.  I wrote an op.ed about the problem with a powerful legislator intervening in a quasi-judicial regulatory process

The Speaker got what he wanted.

My press statement below addresses the facts about this hearing and what should be done to avoid the political influence that many feel resulted in today’s PSC ruling.

There were a few other negative aspects of today’s ruling.

The PSC refused to include securitizing the construction-cost debt that SCE&G will now be able to recover from ratepayers.  Securitization is a bonding instrument used in 17 other states to secure bonds at cheaper interest rates because the government guarantees the debt will be paid.  Ratepayers save money.  But the PSC rejected recommendations for its order to include securitization should the legislature pass a bill allowing its use in South Carolina.

The PSC approved a 9.9% Return on Equity, essentially profit for the utility, on SCE&G’s construction costs it is allowed to recover.  The ORS had proposed a 9.1% ROE.

The difference on the average monthly residential bill for the 9.9% versus 9.1% ROE will be an additional 32 cents.  While that is not much, that is $3.84 more per year for the average ratepayer for the next 20 years, or $76.80.  Again, not much.  But multiply $76.80 times 720,000 ratepayers and you get over $55 million extra revenue for the utility.

Some Good News

The ORS and most of the other intervenors, including me, fought like hell to get a better deal for the SCE&G ratepayers.  The hard-working staff at ORS deserves the ratepayer’s deepest appreciation.

Because ORS and the other parties opposed to Dominion’s proposals dug in their heels and refused to settle with the utility, the rate cut grew from the initial 7% offered by SCE&G/Dominion to 15%.  Not bad but not what the rate cut should have been.

Also, ORS has estimated that SCE&G will save another 3% from the 2017 federal tax bill which gave a 40% tax cut to corporations.  SCE&G/Dominion claim that they will pass on the tax cut benefits to the ratepayers when they receive it.

However, it will be imperative that ORS stay on the new SCE&G/Dominion utility constantly to make sure the federal tax cut is passed on to ratepayers.  If ORS succeeds, that 15% rate cut could be turned into a 16%, 17% or even 18% eventual rate cut.

The End

With this PSC ruling (the final written order will be ready on December 21st), the nuclear debacle brought to us by the mismanagement and deceit of SCE&G executives comes to a close at least for the utility.  Dominion will buy SCANA and the state will have a new and more powerful big-dog utility to have its way with the legislature, the PSC and ratepayers.

Now the legislature will focus on what to do about the $4 billion of abandoned nuclear construction costs owned by Santee-Cooper, the state’s power company that provides 80% of the energy for local co-ops.  Will Santee-Cooper be sold in whole or in parts?  Or will the state find a way of keeping it as a state agency?  This issue will consume much of the legislature’s attention next year.

Frank Knapp


Press Statement
December 14, 2018

Statement by Frank Knapp Jr, president and CEO of the South Carolina Small Business Chamber of Commerce.  Mr. Knapp was a pro se intervenor in this Public Service Commission docket

Here are the facts:

– With this ruling SCE&G ratepayers will not receive an additional 5% rollback in electric rates.

– With this ruling SCE&G ratepayers will pay hundreds of millions more over the next 20 years for the failed nuclear project compared to the plan proposed by the Office of Regulatory Staff.

– The Speaker of the House, representing a legislative branch of government, took the highly unusual and controversial step of officially intervening in this regulatory process held by the Public Service Commission, a quasi-judicial body.

– The Speaker can almost unilaterally control the re-election fate of the Public Service Commissioners in the General Assembly.

– The Speaker’s Office was in negotiations with Dominion Energy even before the hearing started.

– The Speaker, through his chief of staff, was supporting a Dominion Energy proposal before the hearing started.The Speaker’s position contradicted the level of consumer rate relief (18%) first overwhelmingly supported by the House of Representatives.

– The Speaker was the only intervening party telling the Commissioners during the hearing that he wanted them to accept the Dominion Energy proposal.

– The Office of Regulatory Staff, charged with representing the consumers in regulatory matters, did not support the Dominion Energy proposal.

– The Commissioners ruled in favor of the position supported by the Speaker and Dominion Energy.

“We cannot blame the ratepayers if they think that the Public Service Commission ruling was based largely on political pressure and not on what was in the best interest of the consumer.
The Speaker’s inappropriate effort to influence this hearing smacks of a backroom, political deal with a giant Virginia-based utility that spent millions to influence legislators and the public
and is willing to spend millions more.  We will never know how much influence the Speaker had in this ruling, but we do know that this should never happen again.  The General Assembly should pass legislation to prohibit any legislator on behalf of a legislative body or a legislative body itself from intervening in a Public Service Commission regulatory hearing.”

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