Santee Cooper dropped plans to raise electricity rates for at least the next two years to help pay the utility’s share of a now-abandoned reactor project at V.C. Summer Nuclear Station.
The board voted unanimously today to authorize Santee Cooper management to withdraw two proposed rate increases that would have taken effect in 2018 and 2019. The action follows the board’s suspension last week of the construction of two 1,117-megawatt reactor units at the Jenkinsville facility.
In a separate development, the state Office of Regulatory Staff is challenging plans by S.C. Electric & Gas, Santee Cooper’s partner in the failed project, to raise rates to cover SCE&G’s share of construction costs under the state Base Load Review Act.
State-owned Santee Cooper, formerly known as the S.C. Pubic Service Authority, owns 45% of the Summer project and SCE&G owns the remaining 55%. More than $9 billion has been spent on the project.
In June, Santee Cooper proposed hiking electricity rates 3.7% across all customer classes in April 2018 and April 2019 to meet the utility’s additional expenses related to the V.C. Summer project. Overall, Santee Cooper projected it would have had to raise rates 41% if it had continued participating in the reactor project.
Today’s vote by the Santee Cooper board cancels all steps in the rate process, according to a news release. That includes rate comment meetings scheduled for next week in the utility’s retail customer service territory and an October public hearing by the board on the rate proposal, as well as a scheduled December board vote on the increases.
Leighton Lord, chairman of the Santee Cooper board, said acceptance of a negotiated agreement totaling about $1 billion from Toshiba Corp., parent of project contractor Westinghouse Electric, allows Santee Cooper to cancel the rate process.
The Toshiba agreement helps offset Santee Cooper’s costs in the nuclear project, but the company will still need “to cover costs related to our load, other system improvements and environmental compliance,” said Lonnie Carter, Santee Cooper president and CEO.
“We will tighten our belts and continue to look for ways we can be more efficient to make up the balance. It is important that we hold the line on costs, and Santee Cooper’s talented and dedicated workforce will rise to the occasion,” Carter said.
Meanwhile, the Office of Regulatory Staff has petitioned the S.C. Public Service Commission to dismiss SCE&G’s request to raise rates to recover its costs in the failed project under the state Base Load Review Act.
The measure has been used by SCE&G to win nine electricity rate hikes totaling 18% to cover the cost of borrowing billions for the project, which the commission greenlighted in 2009.
The Office of Regulatory Staff brief argues that since the projects have been abandoned, it may not be appropriate to revise rates under the act, which was designed to cover costs of a project in progress. Also, it would make it difficult for customers to challenge any rate hike to pay for construction costs if approved under the Base Load Review Act.
SCE&G has said it will amortize its share of the abandoned project, which totals about $4.9 billion, over 60 years. However, in filings with the commission, SCE&G said it plans to use its share of proceeds from the Toshiba settlement — about $1.1 billion — to offset any need for a rate increase in the next year.
Public interest groups and dozens of state legislators have questioned SCE&G’s right to require its 700,000 electricity customers to pay for a project that will never produce a kilowatt of energy.
SCE&G announced abandonment of the project on July 31 after Santee Cooper said it was suspending participation. Originally budgeted to cost more than $11 billion, the project was estimated most recently to cost more than $20 billion.
The shutdown resulted in the layoffs of 5,600 workers.
Santee Cooper and SCE&G are partners in the operation of one reactor unit at V.C. Summer, which went into operation in 1984.