How SC lawmakers passed a 2007 law that failed SC power customers

How SC lawmakers passed a 2007 law that failed SC power customers

The State
August 6, 2017

By Avery G. Wilks and Cassie Cope

“An act to protect South Carolina ratepayers.”

The first words of the 2007 law that put S.C. power customers on the hook for financing nuclear reactors now drip with dramatic irony, days after a multi-billion-dollar nuclear expansion in Fairfield County was abandoned.

“It basically allowed the utilities a blank check at the ratepayers’ expense,” said state Rep. Kirkman Finlay, R-Richland. “There was no incentive to move quickly, efficiently and to control costs. Zero.”

After the state-owned Santee Cooper and Cayce-based SCE&G utilities Monday said they would halt construction of two partially built nuclear reactors near Jenkinsville, there are few defenders of the law that paved the way for the bungled project.

Drafted with input from an attorney for SCE&G, the law reads like a wish list for power companies, critics now say. At the time, then-Gov. Mark Sanford refused to sign the bill, citing reservations about its costs to South Carolinians. But by the time the proposal reached the Republican’s desk, there was no stopping it.

Other than Sanford, hardly anyone blinked an eye when the bill passed the Legislature a decade ago, becoming law just months after it first was introduced.

S.C. state and federal lawmakers saw an ever-growing demand for energy and envisioned a nuclear renaissance with the Palmetto State leading the way.

They were told paying for the nuclear plants during their construction – instead of afterward, when they started producing power, as was standard – would save customers money in the long run.

At the time, the issue was overshadowed by Transportation Department reform and tritium leaks at the Barnwell nuclear waste dump. Some of its likely opponents, including environmental advocates, say they were blindsided, only learning of the proposal after it passed.

“I don’t think too many people understood what was in it,” said Frank Knapp, president of the S.C. Small Business Chamber of Commerce. “It was a big piece of legislation, and everybody seemed to be on board. I don’t know how many people read it. They obviously did not understand the ramifications of what they were reading.”

Good intentions

Before it cleared the way for a project that would cost S.C. electric customers billions of dollars, the Base Load Review Act seemed like a good idea, according to some lawmakers who were there.

Lawmakers already feared a shortage of energy would cause power rates to skyrocket, and they embraced nuclear power as a clean source of energy.

“We’ve had such good track records with nuclear energy,” said state Sen. Thomas Alexander, R-Oconee, adding that his home county has a three-reactor facility that has helped keep energy costs low.

To foster nuclear expansion, legislators got behind the Base Load Review Act, drafted to enable utilities to charge customers up front while the reactors were being built.

SCE&G has said the pay-as-you-go model would save $1 billion in construction costs and produce $4 billion in savings for customers.

“Under no circumstances was a utility, or two utilities in this case, going to be able to construct a nuclear power plant and bring it online and absorb all of the cost and only roll out those costs after it came online,” said former state Sen. Larry Martin, R-Pickens. “That wasn’t going to happen. Ever.”

The logic was sound, Senate President Pro Tempore Hugh Leatherman said.

“We would have saved a ton of money” and avoided interest costs, the Florence Republican said.

‘It has not served South Carolina’

According to his law firm’s website Friday, Columbia attorney Belton Zeigler – general counsel for SCE&G until 2002 and, now, on retainer to represent the utility in matters related to the nuclear project – “worked with the South Carolina General Assembly to draft the Base Load Review Act. …”

Asked Friday if he helped write the Base Load Review Act, Zeigler referred The State newspaper to a spokesman for the utility, citing attorney-client privilege.

Efforts to reach the utility for comment Friday were unsuccessful.

Ultimately, the bill resembled a utility wish list, critics say.

▪ It shifted the risk of the coming nuclear expansion to S.C. power customers from the utilities themselves.

▪ It made it more difficult to challenge and defeat rate increases, related to the nuclear project, that the utilities requested from the Public Service Commission.

▪ And it gave utilities the power to charge customers – instead of stockholders, in SCE&G’s case – to cover the costs of the project’s failure.

“It has not served South Carolina in any way, shape, matter or form,” said state Rep. James Smith, a Richland Democrat who has formed a bipartisan “Energy Caucus” of lawmakers to determine what went wrong with the V.C. Summer project and recommend solutions.

Observers – including Knapp and conservationists – recall that the bill was backed heavily in the Legislature by SCANA, SCE&G’s parent company. The utility has considerable pull under the State House dome, spending $1.5 million to lobby legislators since 2009, the earliest year for which records are available online.

Cruising to passage

The bill was filed in February and became law by early May.

It breezed through the Legislature with little debate, members recall. Only six legislators in the 170-member General Assembly are on record as voting against it.

Twenty-five of 46 state senators co-sponsored the Senate’s version of the bill, which ultimately became law. There is no record of the Senate vote on the bill because that chamber did not require on-the-record voting in 2007.

The proposal passed the House by a 104-6 vote at the urging of state Rep. Bill Sandifer, who chairs the House’s Labor, Commerce and Industry Committee.

Reached by phone Friday, the Oconee Republican told The State newspaper he had no interest in commenting.

“You don’t have any subscribers in my area,” Sandifer said. “If you did, I would consider it.”

The bill – one of 177 laws the Legislature passed in 2007 – received little media attention.

The day after it passed the House, for example, The State’s front page made no mention of it. Instead, the newspaper’s front page had articles about an HPV vaccine bill failing in the S.C. House, a profile of the Virginia Tech shooter, a Supreme Court ruling on partial-birth abortions and an article about an S.C. National Guard soldier’s brief homecoming before deploying to Afghanistan.

‘Stealth project’

Conservationists said they would have opposed the bill vehemently had they known about it.

“It was a stealth project from the beginning,” said Bob Guild, an environmental lawyer who chaired the S.C. Sierra Club in 2007. “I knew nothing about it, and I’ve been involved in utility regulation since the late ’70s and early ’80s. It was completely under the radar as far as I was concerned.”

Guild said he first learned of the proposal only after it passed, during a sit-down meeting with then-Gov. Sanford.

The Republican governor showed Guild the bill –which was waiting for his signature to become law – and told the Columbia attorney he wanted badly to veto it.

But, Guild recalls Sanford saying, “The Legislature would override my veto in 30 seconds as compared to the usual 10 minutes.”

Sanford confirmed Guild’s account Friday.

Sanford let the bill become law without his signature. He wrote to then-Senate leader Glenn McConnell that while he supported nuclear energy, he had concerns about the risks the bill posed to power customers.

“However, what I struggled with is whether the costs of the bill to both consumers and our state outweighed the benefits,” Sanford wrote. “In the end, I determined that doing nothing would likely slow down getting cleaner power production online and strain our energy capacity, all at the expense of the people of our state.”

By then, it was too late, Guild said.

“After it was enacted, my colleagues in the conservationist community said, ‘What the hell was that?’ ” Guild said. “We all knew it was a bad deal.”

‘This just doesn’t work’

Today, S.C. legislators are picking up the pieces, and SCE&G power customers are paying about 18 percent of their monthly bills for nuclear reactors that have been abandoned.

Senate leaders called Friday for a special session of the General Assembly to try to block further rate hikes on S.C. power customers. Legislators want investigations into the project’s failure and are considering whether to change or scrap the Base Load Review Act.

S.C. Attorney General Alan Wilson’s office also is looking into the matter.

“Right now, we’ve set up a system where the ratepayers suffer,” Finlay said, “and this just doesn’t work.”

The fallout

$11 billion: Original projected cost of the two reactors; that estimate was revised upward to at least $20 billion because of delays and cost overruns

$4.9 billion: SCE&G’s estimate of the cost now to shut down the project

$9 billion: What SCE&G and Santee Cooper have spent already on the project

9: Rate hikes, thus far, that SCE&G has passed on to its customers to pay for the now-abandoned reactors

$1.4 billion: What SCE&G customers have paid in rate increases to bankroll the two new reactors

2: U.S. states with higher monthly power bills per household than South Carolina

5,000: Nuclear construction workers who lost their jobs Monday

The Base Load Review Act

Drafted with input from a utility attorney, the bill won supporters in high places in the State House and cruised through the legislative process. The 2007 law:

▪  Shifted the risk of the coming nuclear expansion to S.C. power customers, not the utilities themselves

▪  Made it more difficult to challenge and defeat rate increases that the utilities request from the Public Service Commission to finance nuclear reactors

▪  Gave utilities the power to charge customers – not stockholders, in the case of SCE&G – to cover the costs of a nuclear project’s failure

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