By RICK BRUNDRETT
Update: After this story was published this morning, a Senate Judiciary subcommittee voted to amend the joint resolution (S. 954) to drop the “experimental rate” language, which would effectively keep the V.C. Summer portion of South Carolina Electric & Gas electric rates pending a new order by the state Public Service Commission. The subcommittee was in general agreement that under the amended resolution, a decision by the PSC likely wouldn’t occur until February 2019, assuming the Legislature doesn’t officially adjourn until November, which Sen. Shane Massey pointed out is typical in election years.
S.C. Senate leaders want to delay utility regulators from issuing a new rate order tied to the failed V.C. Summer nuclear project – another apparent move by lawmakers to directly control the energy regulatory process.
A joint resolution by Senate President Pro Tempore Hugh Leatherman, R-Florence; Majority Leader Shane Massey, R-Edgefield; and Minority Leader Nikki Setzler, D-Lexington, would prevent the state Public Service Commission from issuing a rate order allowed by the Base Load Review Act until 90 days after the end of this year’s legislative session.
Lawmakers ended last year’s session on June 6. Using that date as an example, the PSC couldn’t issue a new order on South Carolina Electric & Gas’ rates related to the nuclear project until Sept. 6 of this year, under the Senate resolution (S. 954), which was introduced last week and is in the Senate Judiciary Committee.
In the interim, however, the PSC “may issue an experimental rate order to revise the electric rates,” the resolution states. It doesn’t define “experimental rate,” but the House last week approved an amended bill (H. 4375) that would set an “experimental rate,” which it defined as a rate minus the V.C. Summer portion of an electric bill. The temporary rate would remain in effect pending any challenges before the PSC or courts.
The Base Load Review Act (BLRA), quietly passed by legislators in 2007, allowed the PSC to impose nine SCE&G rate hikes over the years for two never-finished reactors at the V.C. Summer plant in Fairfield County. The rate increases now account for $27, or 18 percent, of an average $147 monthly residential bill for 1,000 kilowatt hours; SCE&G customers collectively have paid nearly $1.96 billion toward the abandoned project, according to the state Office of Regulatory Staff.
The House bill claims that the S.C. Constitution gives lawmakers the authority to set “certain utility rates for the purpose of protecting the public interest until a determination can be made by the appropriate regulatory and judicial authorities.”
That section of the constitution, however, doesn’t specifically allow lawmakers to directly establish rates. Rather it says the Legislature “shall provide for appropriate regulation of common carriers, publicly owned utilities, and privately owned utilities serving the public as and to the extent required by the public interest.”
Cayce-based SCANA Corp., the parent company of SCE&G, and Virginia-based Dominion Energy have asked the PSC to approve a $14.6 billion merger involving the companies and allow the recovery of V.C. Summer costs under the BLRA.
Contacted Tuesday by The Nerve, SCANA spokesman Eric Boomhower declined to say whether the company believes that lawmakers have the constitutional authority to directly control utility rates. But in an email statement, he warned, “In the event that the BLRA-related legislation currently being proposed in the House and/or the Senate passes into law in its current form, SCANA will have no choice other than to seek legal recourse.”
The Legislature already exerts tremendous control over the energy regulatory process through the State Regulation of Public Utilities Review Committee (PURC), a six-lawmaker, 10-member committee that nominates and evaluates the seven-member PSC. PURC also controls the hiring and evaluation of the executive director of the Office of Regulatory Staff, which, among its duties, is supposed to represent ratepayers’ interests but signed off on the nine rate hikes for the failed $9 billion nuclear project.
Sen. Massey told The Nerve that under state law, SCE&G customers could continue to be charged for the abandoned reactors if the PSC didn’t act on the rate request by Dominion/SCANA within six months of their application, which he noted would put the deadline into July.
The Senate resolution requiring the PSC to delay issuing an order until 90 days after the end of this year’s legislative session would “give us sufficient time to evaluate the financial impact, the constitutional impact of the proposal, and anything else,” he said Monday.
“Dominion has been asking us to slow down and evaluate everything,” Massey said. “All we’re doing with (resolution) 954 is saying, ‘Ok, we’re gonna do that, but you gotta take the gun away from our head,’ and that gun is, there is a six-month time limit on it.”
Asked if the Senate resolution could increase the possibility of SCANA filing for bankruptcy, Massey replied: “I don’t think there’s been any credible evidence that doing this (repealing the BLRA) on a permanent basis would force them into bankruptcy. I don’t think doing it on a temporary basis would force them into bankruptcy, either.”
The credit-rating firm Moody’s on Monday downgraded both SCANA’s and SCE&G’s investment ratings, noting in a written statement that its review was “originally initiated as a result of escalating political and regulatory contentiousness” after the company’s decision last summer to abandon the V.C. Summer project. SCE&G’s junior partner in the project, state-owned utility Santee Cooper, also dropped out.
“Events over the past few months have led us to conclude the regulatory environment for SCE&G has deteriorated markedly and is now considerably below average,” Moody’s said in its statement.
In a letter Tuesday to the PSC, SCANA said Moody’s opinion concerning “the material negative impact that an immediate reduction in revenue would have upon SCE&G” is “consistent” with the company’s formal statements to the PSC on the issue.
The letter warned that a “write down of assets” related to the V.C. Summer project “could cripple SCE&G’s and SCANA’s balance sheet, lead to debt covenants being violated, result in short term notes becoming immediately due, cause the Company’s credit ratings to fall to junk status, damage SCE&G’s trade credit, and set in motion in a cascading series of events that could be financially detrimental to the Company.”
Hannah Hill, the South Carolina Policy Council’s senior policy analyst, contributed to this story. Brundrett is the news editor of The Nerve. Contact him at 803-254-4411 or rick@thenerve.org. Follow him on Twitter @RickBrundrett. Follow The Nerve on Facebook and Twitter.