As the summer heats up, so is the controversy over SCE&G’s request to add $852 million to the cost of constructing two nuclear plants in Fairfield County. According to The State if the Public Service Commission (PSC) approves this request in October, “the project’s new total cost would be $14 billion, about 43 percent higher than the $9.8 billion price tag announced in 2008.”
The South Carolina Small Business Chamber of Commerce has been a vocal critic of the cost overruns, delays and contractual problems SCE&G has had since starting the construction in 2009. We have also been critical of the state statute, the Base Load Review Act, which allows the utility to receive a rate increase every year to pay for the construction financing of the project. In our opinion, the Act as written has turned into a blank check for SCE&G to receive the OK from the PSC for all cost and rate increases which have resulted in the utility’s customers paying an additional $1.05 billion more through December of 2015 than they would have if the nuclear plants were not being built. This approximately 17% increase in rates will grow even higher until the utility finishes construction possibly by 2020.
The current request to the PSC for increasing the construction costs is extremely difficult for the public to follow. Most of the $852 million hike is due to a $505.54 million “fixed price” option implying that SCE&G won’t need any more cost increases for the project. That’s simply not true. The “fixed price” only “represents approximately 7.4% of the forecasted cost schedule for all items needed to complete the units” according to the utility. SCE&G could have proposed a different, less expensive option in their cost increase request, but instead they went with the “fake fixed price” option.
When the Lexington County Chronicle, which has lead the way in covering this story (here and here) asked SCE&G spokesman Eric Boomhower to explain what his company means by “fixed price”, he replied, “(t)he fixed price option provides substantial value to our customers, investors and our company by limiting the risk of future cost increases,”
Yes, there is guaranteed great value of the “fake fixed price option” but only for SCE&G and its investors not the customers. The higher cost “fake fixed price option” guarantees the utility and its investors make 10.5% profit on the higher costs paid by the customers but doesn’t guarantee that there will be no more cost increases. Every time SCE&G is approved by the Public Service Commission to increase the cost of building the nuclear plants, the utility and its investors make more money on the backs of the customers.
The Office of Regulatory Staff is responsible for reviewing utility requests like this with an effort to protect the public’s interest. According to the agency’s executive director, Dukes Scott, “(t)his is not a fixed-price contract. You can put a hamburger patty between two slices of bread and call it a cheeseburger all the way, but it’s not. It’s got some aspects of a cheeseburger – you got a patty and a bun.”
I have petitioned the PSC for permission to intervene in the hearing on this request so as to be a formal party of record to the proceeding, which would give me the right to present testimony and cross examine witnesses.