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S.C. House passes Utility Ratepayer Protection bill as debate heats up

Staff Report //January 23, 2018//

S.C. House passes Utility Ratepayer Protection bill as debate heats up

Staff Report //January 23, 2018//

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The S.C. House of Representatives passed the first bill of the Utility Ratepayer Protection package, a six-bill bundle that takes aim at issues that led to the V.C. Summer nuclear debacle, on Tuesday as continuing debate surrounding the abandoned project heated up.

The bill, H.4379, creates a utilities consumer advocate in the office of the attorney general and grants subpoena power to the advocate and the Office of Regulatory Staff. It also removes the preservation of the financial integrity of the state’s public utilities from ORS’ responsibilities.

The bill passed by a 114-1 vote on Tuesday. Rep. Jonathon Hill, R-Townville, voted against it.

The vote came on the same day SCANA filed a blistering response to an ORS audit that found suspending payments from S.C. Electric & Gas customers related to the project would not drive the utility into bankruptcy and the governor called for an elimination of all such payments.

The six-bill package was prefiled in November amid fallout from the failed nuclear reactor project.

“Today’s bill increases ORS’ oversight capabilities and prevents South Carolina’s ratepayers from experiencing future unfounded and deceitful utility rate hikes,” House Speaker Jay Lucas said in a statement. “The creation of a consumer advocate will help to restore energy customers’ confidence in the ratemaking system. By removing a utility’s financial integrity from its purview, ORS will be required to focus solely on the consumer’s interests.”

On Wednesday, the House passed a second bill that disbands the current Public Utilities Review Committee and creates the Utilities Oversight Committee, which will include House and Senate members as well as legislative and gubernatorial appointments. The bill, H.4378, also introduces ethical requirements designed to prevent utilities regulated by ORS and the S.C. Public Service Commission from exerting outside influence. 

SCANA, parent company of project co-owner SCE&G, sought and received approval for nine rate increases from state regulators during the decades-long construction of twin 1,117-megawatt reactors in Fairfield County. The project was abandoned by SCE&G and project co-owner, state-owned Santee Cooper, in July, soon after contractor Westinghouse filed for bankruptcy.

Allegations of mismanagement and fraud have followed. Ratepayers of both utilities, which poured $9 billion into the reactors, are still footing the bill for the abandoned project. SCE&G customers’ bills have increased 18%, an average of $27 a month, for a total of around $37 million a month in payments.

Virginia-based Dominion Energy has proposed a $14.6 billion acquisition of SCANA, subject to regulatory and shareholder approval. Dominion has said that a repeal of the Base Load Review Act, the 2007 law that allowed SCANA to raise rates while the reactors were being built and lets the company continue to recoup project costs from ratepayers, would negate the offer.

One bill in the Utility Ratepayer Protection package would halt the 18% increase on SCE&G customers’ bills and authorize the Public Service Commission to implement a new interim rate that eliminates V.C. Summer-related fees while requiring SCANA to pay all debt associated with the project.

S.C. Gov. Henry McMaster told a gathering of business leaders on Tuesday that he will veto any legislation that does not protect ratepayers.

"Customers need their money back and (should) not spend another penny towards the project," McMaster said during the S.C. Chamber of Commerce's annual Business Speaks at the Statehouse event.

As part of the proposed stock-for-stock merger, Dominion has presented a plan that would reduce SCE&G customers’ rates by more than $7 a month and would include a refund based on average usage for a six- to seven-month period. The proposal includes a $1.7 billion-plus write-off of existing V.C. Summer capital and regulatory assets that would eliminate all customer costs related to the project over 20 years. 

Firing back

Also Tuesday, SCANA filed a response with the PSC challenging an ORS audit, released Friday, that found a 35% percent chance of bankruptcy for the Cayce-based company if the $37 million a month in payments is halted.

SCANA contends the ORS report, which it notes contains no affidavit or sworn statement, is flawed because of a “fundamental misunderstanding” of accounting principles.

An attached affidavit from Iris N. Griffin, CFO, treasurer and senior vice president of SCANA and SCE&G, says that ORS wrongly concluded that, if the V.C. Summer-related payments are suspended, SCE&G could avoid a writedown of its $4.7 investment in the project.

“Doing so would be mandatory under Generally Accepted Accounting Principles ("GAAP") because there would be no current stream of revenue to support the investment nor (appeal rights aside) any objective basis on which to conclude that the Commission is likely to authorize such a stream of revenue in the future,” the affidavit says. “ … The resulting write down would set in motion a cascade of events that would be extremely detrimental to the financial health of the Company and could lead to bankruptcy.”

In the filing, SCE&G asks the PSC to require ORS to conduct “a full audit to assist the commission in determining whether the company's present schedule of rates is fair and reasonable.”

Griffin’s affidavit calls the ORS findings “demonstrably wrong. Therefore, the opinions stated in the ORS report regarding impairments and write-offs are not entitled to any weight or credibility in this matter.”

McMaster cited the ORS audit in a letter sent to the Legislature Tuesday in which he called project-related payments unnecessary and "just not right."

McMaster wrote: "I believe it would be irresponsible for the General Assembly to allow SCANA — or any prospective purchaser — to continue collecting money from ratepayers for this project."