House Energy Bills: Perception vs. Reality (Updated)

The General Assembly is currently debating six bills to ostensibly “reform” the system and the laws that created the V.C. Summer nuclear construction debacle. These bills were developed in the special House energy committee and passed by the judiciary committee last fall. Three of the bills (including H.4375, which retroactively amends the Base Load Review Act) have passed the House and will now be considered by the Senate.

However, none of the legislation proposed by the House would substantively change the system, protect ratepayers or provide any long-term relief from the massive debt for which they are obligated. In fact, all six of the bills would set constitutionally dangerous precedents that would further consolidate legislative power and erode the rule of law.

Below is a breakdown of each bill and its current status in the legislative process.

H. 4377: Changes to the Public Service Commission (House calendar):

Lawmakers say the bill would:

• Dismiss and replace the regulators who oversaw the V.C. Summer project.
• Require higher standards for sitting Public Service Commission (PSC) members.
• Add greater oversight over the utility industry.

What the bill would actually do:

• Implement a one-time purge of the PSC, allowing the General Assembly to start over with a brand-new one. Essentially, the law would allow lawmakers – especially the Public Utilities Regulatory Committee (PURC) – to avoid accountability for the actions of current PSC members, in the past or in the future, by wiping the slate clean.
• Preserve the system as it exists now, leaving control in the hands of the same lawmakers who currently control the regulatory process – and who drove the VC Summer project from the beginning.
• Give PURC a direct line of communication to the PSC by exempting PURC from “ex parte communication” rules, a provision that prevents a third party from influencing PSC decision-making.

Why the bill is more dangerous than the status quo:

• Lawmakers would be firing the entire membership of a non-legislative body and circumventing the statutory process for their removal. This move would set a dangerous precedent that could allow the legislature to take control of any board for any reason through state law.
• It allows PURC, its staff, and any investigating legislative committees to circumvent the legal processes for discussing cases with utility regulators – which, in effect, would give lawmakers special access to, and additional influence over, utility regulators.

H.4379 – Consumer Advocate under Attorney General (Passed the House, referred to Senate Judiciary Committee)

Lawmakers say the bill would:

• Create a robust, independent consumer advocate to protect the interests of ratepayers. This consumer advocate would answer to the attorney general.
• Strengthen the Office of Regulatory Staff (ORS) by increasing its ability to examine utilities.
• Eliminate conflicts of interest by prohibiting utilities from giving gifts or campaign contributions to the consumer advocate, attorney general or his staff.

What the bill would actually do:

• Expand the size of government. The new consumer advocate would share overlapping responsibilities with the ORS and depend on the agency’s cooperation to be effective.
• Leave the PURC – and thereby lawmakers – in charge of the consumer advocate function. The bill keeps the consumer advocate dependent on the ORS for information, since only the ORS would have audit and investigative powers as well as industry knowledge.
• Appear to introduce independence and reform without changing who controls the system. Since the ORS executive director would be handpicked and overseen by the PURC, the real power would remain with the same lawmakers who currently control the regulatory system and have done so throughout the duration of the failed V.C. Summer project.

Why the bill is more dangerous than the status quo:

• It places a regulatory duty under the state’s chief prosecutor, diverting the attorney general from his constitutional mission.
• It makes the attorney general responsible for an agency he is unequipped to hold accountable. The consumer advocate must rely on ORS in order to do his job, but the attorney general will be the one technically accountable for the consumer advocate function to the taxpayers and ratepayers. Essentially, this sets the attorney general up for failure by making him responsible for a function his office is neither designed nor empowered to carry out.
• It increases the power of the ORS by allowing it to issue subpoenas – a dangerous and unnecessary power as the ORS already has the ability to force informational disclosure and has full audit rights.

H.4378 – Renaming, tweaking the PURC (Passed the House, referred to Senate Judiciary Committee)

Lawmakers say the bill would:

• Overhaul and reform the utility oversight system.
• Give citizens a “seat at the table” and additional influence over energy regulators.
• Give the governor influence over energy regulators.

What the bill would actually do:

• Change the Public Utility Review Committee’s name to the Utility Oversight Committee (UOC).
• Expand the power of the committee. For instance, the UOC would now be able to remove the ORS director for “loss of confidence” – essentially at their discretion. (To put this in perspective, the governor can only fire the director for cause under current state law.) Upon removal, the UOC appoints an interim director to fill the vacancy.
• Add two additional members to PURC and increase the number of legislative leaders who appoint its members. PURC appointing authorities would now include the Senate president pro tem, among others.
• Allow lawmakers to appoint two-thirds of the PURC and thereby retain control of PURC.

Why the bill is more dangerous than the status quo:

• It increases the power of the committee and erodes the governor’s authority to hold the ORS accountable.
• It’s an attempt by lawmakers to rebrand their way out of accountability. This bill simply shuffles the deck chairs without reforming the system, preserving control of the utility system with a handful of legislative leaders.

H.4376 – Revises Santee Cooper’s Board of Directors (House calendar)

Lawmakers say the bill would:

• Reform Santee Cooper and replace its board members.
• Tighten the qualifications for board members and ensure member competency.
• Add an additional layer of oversight to the virtually unchecked agency by requiring the PSC to approve Santee Cooper’s rate hikes.
• Prohibit Santee Cooper from including “abandonment costs” for the V.C. Summer project in their rates.

What the bill would actually do:

• Implement a one-time purge of the Santee Cooper board, allowing the General Assembly to start over with a new board of directors. Essentially, the law would allow Santee Cooper to avoid accountability for their failure to oversee the nuclear construction project and protect the interests of their ratepayers and the taxpayers in general, in the past or in the future, by wiping the slate clean.
• Violate the governor’s proper jurisdiction by firing the board through one-time legislative action.
• Give PURC direct influence over Santee Cooper operations through PURC’s control of the PSC.
• Prevent Santee Cooper from using increased rates to pay for V.C. Summer abandonment costs.

Why the bill is more dangerous than the status quo:

• The General Assembly would be able to circumvent the statutory process for appointing the Santee Cooper board and set a precedent by which lawmakers could take control of any board for any reason through state law.
• It makes Santee Cooper subject to the same lawmakers who currently control the regulatory system and have throughout the duration of the failed V.C. Summer project.
• It shifts the power over Santee Cooper further away from the governor and to the legislative branch – distorting the proper balance of power.
• It lays the groundwork for Santee Cooper’s abandonment costs to be paid for by taxpayers. In this bill, lawmakers carefully distinguish between Santee Cooper’s “abandonment costs” and their “debt service”. Current law requires that Santee Cooper must be able charge whatever amount is necessary to repay their debt service – currently estimated at $7 billion – and this bill cannot prevent that. However, this bill does prevent Santee Cooper from increasing its rates to pay for abandonment costs. It states that these costs must be paid for “in other ways” based on actions taken by the General Assembly. Put simply, if these costs cannot be absorbed by Santee Cooper, the only “other way” they can be paid for is by taxpayers at large.

H.4380 – Mandatory refund for ratepayers (House calendar)

Lawmakers say the bill would:

• Force SCANA to refund ratepayers for V.C. Summer costs by ordering the PSC to refund any costs that meet certain criteria.

What the bill would actually do:

• Micromanage an executive agency into a specific action by legislative act.
• Force the PSC to make a constitutional determination – the role of the judicial branch, not a regulatory body
• Attempt to retroactively change the state law that guaranteed SCANA’s debt by withdrawing the guarantee.

Why the bill is more dangerous than the status quo:

• Ordering an executive agency to special, specific action sets a dangerous precedent. If legislative branch can do this, what would stop lawmakers from micromanaging any executive agency they choose?
• It withdraws a guarantee made by state law to a company that technically complied with that law – a flagrant breach of faith and an unconstitutional retroactive change to state law. It is unlikely this would hold up under a court challenge.
• Determining the constitutionality of state laws is the role of the judiciary, not a regulatory agency. This is a violation of balance of power and proper constitutional roles, and would set a dangerous precedent.
• It legislatively targets a specific company – another dangerous precedent which violates the constitutional prohibition on special laws like this.

H.4375 – Retroactively amending the Base Load Review Act (Passed the House, referred to Senate Judiciary Committee)

Lawmakers say the bill would:

• Bring immediate relief to ratepayers
• Limit/prevent further cost recovery from the V.C. Summer project.
• Repeal the Base Load Review Act (BLRA) – the law that forced ratepayers to back V.C. Summer project costs before the plant was ever completed.
• Direct the PSC to set interim rates (that don’t include V.C. Summer costs) to apply during any court challenges.

What the bill would actually do:

• Attempt to retroactively change the state law that guaranteed SCANA’s debt by altering the terms of the guarantee – an unconstitutional provision and unlikely to hold up under a court challenge.
• Repeal the BLRA completely (except that the provisions still apply for the V.C. Summer project).
• Order the PSC to set a new interim rate for SCE&G that does not include V.C. Summer rate hikes.
• Suspend part of the standard appeals law for SCANA as regards to the V.C. Summer situation.

Why the bill is more dangerous than the status quo:

• It attempts to shield lawmakers from accountability for the consequences of the law they passed.
• It withdraws a guarantee made by state law to a company that technically complied with that law – a flagrant breach of faith and an unconstitutional retroactive change to state law. It is unlikely this would hold up under a court challenge.
• It suspends the protections of state law for one specific company and one specific situation by legislative act – a violation of the rule of law and an extremely dangerous precedent.
• It legislatively targets a specific company – yet another dangerous precedent which violates the constitutional prohibition on special laws like this.
• It micromanages an executive agency into a specific action by legislative act.

These pieces of legislation would neither reform the system nor protect ratepayers. They would, however, shelter lawmakers from accountability for passing the legislation that enabled the V.C. Summer disaster and overseeing the entire project at every step of the way. In addition, some would violate Article I, Section IX of the US Constitution in the process, which states, “No Bill of Attainder or ex post facto Law shall be passed.”

The legislative stranglehold over the energy industry led to the nuclear fiasco that has obligated ratepayers for billions of dollars. Further consolidating their own power – and eroding the rule of law in the process – will do nothing to repair the current situation, bring long-term relief to ratepayers, or prevent a similar situation in the future.

We will continue to monitor these bills as the House and Senate consider them, and will keep the public informed as to their status and contents, if amended.