The SC Energy Crisis: An Update

The energy crisis in South Carolina – triggered by SCE&G’s abandonment of the V.C. Summer nuclear construction project – has been in limbo for nearly a year. Despite months of legislative busywork, relatively little has changed: Regulators have not determined who must pay for the abandoned project, and the energy regulatory system remains unreformed.

Here is an overview of where things stand:

V.C. Summer: When and who will pay?

SCE&G requested permission from state regulators to abandon the nuclear project in August 1, 2017, but withdrew the petition fifteen days later – ostensibly to give lawmakers and regulators time to study the issue.

In January of this year, SCE&G refiled for permission to abandon the project, and at the same time sought permission from state regulators to merge with Dominion Energy.

When the Public Service Commission (PSC) considers the abandonment petition, they will also be deciding how much of the project’s debt can be charged to ratepayers. State law (the Base Load Review Act – BLRA) forces the ratepayers to pay for the costs of an abandoned project, unless:

1. The utility’s decision to abandon the plant was imprudent,
2. The utility failed to anticipate or avoid any imprudent costs, or
3. The utility failed to avoid or minimize any imprudent costs based on the information they had at the time.

This law essentially made power plant construction a no-lose proposition for SCANA (parent company of SCE&G) and a safe bet for creditors. Initially, it is up to the PSC to determine if any of SCANA’s costs meet the narrow criteria listed above and must be absorbed by the utility, but their decision can (and likely will) be appealed in the courts.

The BLRA also requires the PSC to rule on rate hike and schedule modification petitions within six months, which means that the PSC could determine who pays for V.C. Summer by July of this year.

Lawmakers have attempted to extend this deadline to the end of the year, but that bill is currently in conference committee and cannot become law before the special session beginning June 27 – if then. The bill would also temporarily lift at least a portion of the V.C. Summer rate hikes for a period of one to five months, but provides no permanent relief, which is the jurisdiction of the PSC and (if appealed to) the courts.

It should also be noted that three PSC seats were up for reelection this year. After delaying the candidate screening process, lawmakers held the election on the last day of regular session. Two new commissioners were elected (no incumbent sought reelection for either of these seats), but lawmakers rejected the entire slate of candidates for the remaining seat. This leaves the incumbent in his seat until he is replaced by the General Assembly, which may not happen until next year.

Reforming lawmakers’ energy monopoly

This nuclear fiasco also highlighted the fact that lawmakers control every aspect of the energy regulatory system:

• Lawmakers passed the bill forcing ratepayers to back the project even if abandoned
• Lawmakers elect the PSC members – who set statewide utility rates
• Lawmakers select the director of the Office of Regulatory Staff (ORS) – energy consumers’ only advocate
• Lawmakers oversee both the PSC and the ORS director via the legislatively dominated Public Utilities Review Committee (PURC)
• Lawmakers screen the governor’s appointees to the Santee Cooper board of directors, also through the PURC

Clearly, this legislatively dominated system does not work. However, the only bills brought forward to “reform” the system simply tweaked it, preserving lawmakers’ control. The bills listed below reflect the latest legislative action.

The sine die resolution allows any bill related to the V.C. Summer project to be considered in the June session, and lawmakers could even file new legislation on the topic. Moreover, the House speaker and Senate president pro tem can call lawmakers back into session anytime until November 10 to consider (among other things) nuclear-related legislation.

H.4375 – Retroactively amending the Base Load Review Act (conference committee)

This bill would 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 (read more). The bill passed the House, was amended by the Senate, and is now in conference committee.

H.4379 – Amending the utility consumer advocate function (passed, amended by the Senate)

This bill originally placed the utility consumer advocate function under the Attorney General, but was amended in the Senate to place the function under the Department of Consumer Affairs (under current law, the ORS is the consumer advocate). The bill would leave the ORS in place instead of eliminating it, with the requirement to focus on concerns of the using and consuming public, and investment in & maintenance of utility facilities.  The House has not yet voted on the Senate amendment, but could do so in special session.

Senate budget proviso creating Santee Cooper study committee (in conference committee)

The Senate’s version of the budget contains a proviso creating a study committee to evaluate Santee Cooper’s assets and to consider the possibility of selling the utility. Of the committee’s thirteen members, twelve would be legislators or their designees. This is similar to H.4376, which passed the House and stalled in the Senate Judiciary Committee. It should be noted that this proviso’s inclusion in the budget violates the constitutional requirement for each bill to address only one subject, and that the Supreme Court has struck down numerous budget provisos that were challenged on the basis of this constitutional provision. The House and Senate versions of the budget are currently in conference committee.

Several other energy-related bills passed the House, but have not been taken up by the Senate.

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From day one of the nuclear fiasco, lawmakers have guarded their power over the energy regulatory structure, as all of these bills demonstrate. The General Assembly – and legislative leadership in particular – are accountable both for the legislation that led to the V.C. Summer debacle, and for the oversight structure and process at every stage, and we will not see true reform until the legislature relinquishes its hold over the utility system.

SCPC will continue to monitor nuclear-related legislative activity, and keep readers informed as these issues develop.