Utility rate increase unfair, untimely

Utility rate increase unfair, untimely

By Tim Wilkes, Lexington County Chronicle and Dispatch News

SCE&G has filed for a rate increase with the S.C. Public Service Commission, the state agency that approves all utility rates. The rate increases requested are: for small businesses, almost 14 percent; for medium commercial, almost 12 percent; for residential, 7 percent; and for large commercial, about 5 percent.

The S.C. Small Business Chamber of Commerce will be appearing at the Nov. 18 rate hearing on behalf of all the small businesses, which would be hurt financially by the higher utility costs.

The Small Business Chamber opposes the proposed electric rate increase for several reasons:

First, this rate increase is unjustified. Seventy percent of the rate increase will go toward increasing the power-generating capacity to serve future needs and thus produce more income for SCE&G. Revenue for business investment should come from selling more stock (which SCE&G plans to do), borrowing money through loans or bonds (which SCE&G does not plan to do), using existing profits or reserves (SCANA does not plan on tapping its $404 million in cash and cash equivalents in reserve or reducing dividends) and trimming other expenses. The customer should not be asked to provide investment money while receiving neither improved service nor a piece of the future profits.

The latter is especially true given that SCE&G is a state-sanctioned monopoly with a guaranteed profit margin. None of its customers will be able to escape this rate increase, if approved by the commission. Companies with this kind of protection from competition and guaranteed profitability have a responsibility to be fiscally responsible with the public’s money and to operate based on sound business principles.

Second, this rate increase is unfair. Small business is being asked to pay a rate hike 2½ times higher than the rate increase for big business. SCE&G argues that it costs more to build and maintain transmission lines to small businesses compared to large commercial users, thus the rate hike difference. The reality is that transmission line construction costs have already been paid, and these costs, plus maintenance costs, are already calculated into the current rate structure, which allows big businesses to pay a lower per kilowatt-hour usage rate than small businesses. If any rate increase were to be approved, it should be the same across the board for all consumers.

Third, the cost of this rate increase will be largely unrecoverable, at least in the short run. Small businesses will probably not pass their increased costs on to their customers for two reasons. Small businesses often have long-term contracts that cannot be changed. They will also be reluctant to pass on the costs because they will fear losing customers to competitors that may be in another region where there is no increase or who (if in the region) may choose not to pass on the increased electricity costs. Furthermore, if all competing businesses raise their prices accordingly, the consumer faced with limited choices in today’s economy may simply stop buying.

Fourth, the timing for a rate increase could not be worse. Small businesses are struggling to survive in today’s economy. Loss of jobs, corporate scandals, a depressed stock market and low consumer confidence have resulted in reduced spending by the public. At the same time, state and local governments are looking for more revenue through fees and more stringent regulatory measures. Any additional financial burden at this time may be the straw that breaks the camel’s back for many small businesses.

SCE&G’s rate increase is unjustified, unfair, unrecoverable and untimely.