The STOP THE BLANK CHECK Coalition was formed in July of 2016. The coalition of organizations represents a wide array of businesses and residential energy consumers as well as the faith, low-income and other vulnerable communities. The Coalition advocates for utility regulatory reform in an effort to protect electrical utility customers from rate-payer abuse by the utility companies and a regulatory structure that favors the utility companies. Those efforts have focused the attention of the legislature, media and public on the need for reform. In 2017 House Bill 4022 was introduced in the South Carolina House of Representatives by Rep. Kirkman Finlay and was based largely on recommendations from the Coalition. In September of 2017 the Coalition proposed additional reforms to the state’s utility regulatory system and addressed the construction costs of the abandoned plants at the V.C. Summer Nuclear Station.
Carolina Peace Resource Center
Kingdom Living Temple
National Association of Social Workers- SC Chapter
New Alpha Community Development Corporation
South Carolina League of Women Voters
South Carolina Small Business Chamber of Commerce
The Whitney M. Slater Foundation
Base Load Review Act
In 2007 the S.C. Legislature passed the Base Load Review Act (BLRA) to guarantee that a utility building a new power plant can hike electrical rates for its customers every year to pay for the construction financing costs of the project. As written, once the South Carolina Public Service Commission approves the project the utility can request an increase in allowable costs annually and be virtually guaranteed approval by the PSC. Additional costs result in higher annual rate increases and eventually must be paid for by the ratepayers.
In 2009, Public Service Commission approved a budget for SCE&G to build two nuclear plants in Fairfield County with its partner, Santee Cooper. SCE&G would own 55% of the capital project and Santee Cooper, the state-owned power company, would own 45%.
Since 2009 SCE&G has been approved under the BLRA to increase the costs to build two nuclear plants far above the original budget. The utility has also raised rates under the BLRA 9 times since 2009 for a total of a nearly 20% increase. By the summer of 2017 SCE&G customers had paid an additional $1.4 billion under the BLRA according to the Office of Regulatory Staff. This is in addition to the 17% increase in rates approved since 2009 for SCE&G’s current electricity generation.
Santee Cooper customers have seen 5 rate hikes since 2009 but because the utility is a state agency it is not required to provide details as to how much of these rate increases was due to the nuclear plants construction.
The construction at the two nuclear plants at the V.C. Summer Nuclear Plant has now been abandoned.
The BLRA turned into a blank check for the utility all paid for by the SCE&G, Santee Cooper and Electric Co-Operative customers. The Act provides that all construction costs and rate hikes under BLRA include a very generous Return on Equity (profit) to the utility thus creating an incentive to a private utility to go over budget in order to make more money.
Proposed Utility Regulation Form
2017 saw a disastrous situation at the V.C. Summer Plant (the Westinghouse bankruptcy and the abandonment of the nuclear plants construction by SCE&G and Santee Cooper). It is clear that other reform efforts are needed beyond addressing the BLRA. On September 13th, 2017, the Coalition proposed additional, necessary reforms essential to protect the public in future utility regulatory matters. The Coalition also advocated for a desired outcome in the V.C. Summer Plant crisis.
Below are the recommendations for the Stop the Blank Check Coalition:
1.) We have supported the amendments to the Base Load Review Act (BLRA) provided by H.4022 in an effort to keep future nuclear plant construction projects on budget and on schedule while protecting ratepayers. However, given Duke Energy’s decision not to build a nuclear plant in South Carolina, repeal of the BLRA is a sensible measure.
2.) Santee Cooper’s public status shields it from the needed regulatory oversight given to private utilities and it also lacks proper oversight by elected leaders. The state agency must be made more accountable through the following:
- Governor’s ability to remove directors at will
- Regulation under the same bodies, laws, and rules as privately owned utilities
3.) We support reform of the regulatory process for all utilities to insure protection of ratepayers and the general public interest. The following are our initial recommendations for reform, in addition to inclusion of Santee Cooper under the regulatory umbrella:
- No person should serve on any body associated with either shaping or carrying out the regulatory process if they, their family or a business with which they are associated has a business relationship with or receives any form of income or compensation from a state-regulated utility, an affiliate of such a utility, or an association representing such utilities.
- We support gubernatorial appointment of Public Service Commission (PSC) members. We would consider support of public election of PSC members only if public financing were provided, with a prohibition on any private funding from any source.
- We do not support shifting responsibility for representing the interests of utility ratepayers to a consumer bureau. Utility law is complex and specialized, and ORS is far better prepared to address the concerns of the public than a general consumer-interest agency would be. A consumer advocate within ORS would be useful, but only if the agency as a whole does not have other mission elements that conflict directly with the interests of ratepayers (see below).
- The Office of Regulatory Staff (ORS) should not be responsible for representing the financial “integrity” of utilities as an explicit element in its mission. The ORS mission should be to represent the interests of ratepayers and the general public interest. The financial health of utilities will remain a consideration to the extent that it is an issue in addressing the general public interest, but the protection of utility shareholders, per se, is the responsibility of the utilities themselves, not the government.
- The ORS Executive Director is responsible for making decisions that must be grounded in an objective and unbiased assessment of complex data. Those decisions may be politically sensitive, but the ORS should not be subject to political pressures. We therefore draw attention to the requirement of Act 175 of 2004, §1-3-240(C)(12), which provides that removal of the Executive Director should be only for cause, not at will.
- The Public Utility Review Committee (PURC) raises concerns that should be addressed. There is inadequate protection against conflicts of interest within the existing body. However, we more broadly question whether PURC is appropriate or needed. It represents an unfortunate blurring of lines between legislative and executive functions. The Governor, as head of the executive branch of government, should conduct personnel evaluations associated with both PSC and ORS. The legitimate interest of the General Assembly in whether PSC and ORS function as intended should be addressed through the same committee oversight process that the Senate and House use to review other executive agencies. PURC itself should be disbanded.
4.) Regulated utilities should be prohibited from making campaign contributions to individual candidates, parties, PACs or caucuses.
5.) We support efforts to hold SCE&G and SCANA shareholders responsible for the incurred construction costs of the now abandoned nuclear plants at the V.C. Summer Nuclear Station instead of ratepayers—some of whom are elderly, disabled or live in poverty. SCE&G should not be allowed to seek to recover construction costs under 58-33-280K of the BLRA. State regulators must consider evidence of imprudence and disallow passing costs on to ratepayers that were incurred through imprudent management. At present we question in particular SCANA’s failure to demand from contractors sufficient information to independently evaluate project progress and challenges and make appropriate decisions on an on-going basis. However, we await further information that bears on the failed management of V. C. Summer.
6.) We support development of an energy plan for South Carolina that reflects protection of the public interest in a time of rapidly changing technology through a strategy that gives South Carolina diversity of energy sources and flexibility to move forward toward an affordable sustainable future.
Santee Cooper and ELECTRIC CO-OPS
The state’s utility company, Santee Cooper, owns 45% of the now abandoned nuclear plant construction project and thus it is responsible for 45% of the capital costs already incurred. So when the Public Service Commission approved increased construction costs for SCE&G, it is also approved increased costs for Santee Cooper and its customers. Thirty percent of those additional construction costs for Santee Cooper are passed on to the 1.5 million ratepayers who receive their electricity directly from the utility. Thus 70% of the additional Santee Cooper costs are passed on to the electric co-operatives that buy electricity from the utility.
In 2016 the STOP THE BLANK CHECK Coalition advocated for amending the Base Load Review Act so that for future power plant projects the public is better protected by requiring that additional construction financing costs beyond initial project estimates will be paid by utility shareholders until plants are finished, utility contracts will be transparent to the public, the PSC will be empowered to adjust Return on Equity and place the burden on the utility to show that business decisions made during the course of the project are “prudent”.
1.) Utility Accountability– Allow the use of the BLRA to recover construction financing costs only on the original PSC approved budget for construction. Any construction financing costs for additional construction expenses will be recovered in a general rate proceeding after the plant is used and useful (i.e. online producing energy for consumers). This will focus the utility on making the most prudent cost projections and construction decisions because the company will have its own finances on the line or cost overruns and delays.
2.) Utility Transparency– The SC Office of Regulatory Staff shall be an advisory-only party to all contractual negotiations and contract decisions for construction projects being submitted to the PSC for approval. Such an advisory-only role by the Office of Regulatory Staff does not constitute its approval of any eventual contracts nor is it to be construed that any subsequent contracts are prudent. The SCE&G experience has shown that ultimately the ratepayer will be the victim of imprudent contracts between the utility and vendors.
3.) Utility Profit Regulation– Allow the PSC to decide the utility’s Return on Equity under the BLRA. This re-empowering of the PSC is essential to truly protect the consumers from a state-approved utility monopoly.
4.) Utility Responsibility– The utility shall demonstrate to the PSC the prudence of transaction costs, or decision by a preponderance of the evidence. Currently the burden to show that a construction decision is prudent is on a challenging party, not the utility.
House Bill 4022, introduced by Representative Kirkman Finlay in the spring of 2017, addressed three of the four Coalition amendments. Only the amendment regarding transparency and the Office of Regulatory Staff was not contained in the original version of the bill.
The Coalition will release new recommendations on September 8, 2017.
Opinion: Nuclear plant crisis calls for utility reform September 28, 2017
Rate hike foes say critical report would have helped their fight September 21, 2017
Lexington County Chronicle: How Much Power Did SCANA Buy? September 21, 2017
How Much Power Did SCANA Buy? September 21, 2017
Quorum: Santee Cooper Ignored Warnings To Reduce Risk September 19, 2017
Santee Cooper Ignored Warnings To Reduce Risk September 17, 2017
SC law from ’07 puts ratepayers on hook for failed nuke projects September 15, 2017
The State: Consumer groups demand lawmakers watch utilities closer September 13, 2017
Miami Herald: Consumer groups demand lawmakers watch utilities closerSeptember 13, 2017
How Regulators Can Deny SCANA’s Latest Ploy September 7, 2017
STOP THE BLANK CHECK Coalition Members Featured on SCETV Program September 1,2017
Lexington County Chronicle: Group: SCANA should pay for $9B gaff August 24, 2017
Speaker says agency chief should be fired; governor says no August 23, 2017 https://scsbc.org/speaker-says-agency-chief-fired-governor-says-no/
Officials’ Hands Tied Vs. SCE&G? August 9, 2017
Activist groups question future of nuclear facility August 9,2017
House panel advances bill tightening utility rate rules April 26,2017
Will S.C.’s new reactor melt down like roads, pensions? April 21, 2017
SCE&G Nuke Plant Cost Hits $13.8B March 9,2017
Will SCE&G Patrons Be Clipped Again? February 16, 2017
Associated Press: “New group wants SC to stop passing on Nuclear Plant Costs”
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Additional Press on STOP THE BLANK CHECK COALITION:
The Dispatch News (Lexington): SCE&G rate foes rally Jul 21, 2016
WLTX (Columbia): Group Wants To Stop SCE&G Rate Hikes July 18, 2016
Additional Press on SCE&G:
Lexington County Chronicle (Lexington, SC): Critic: SCE&G is lying June 2, 2016