As many investors have feared, lawmakers in South Carolina are moving forward with efforts to eliminate cost recovery for the failed V.C. Summer nuclear plant expansion while authorizing refunds to ratepayers.
Legislation was advanced by committees in the House of Representatives and state Senate after a proposed plan by SCANA Corp. to compensate ratepayers for the abandoned project appeared to fall short with Wall Street and lawmakers.
SCANA utility South Carolina Electric & Gas Co. and project partner Santee Cooper, known legally as South Carolina Public Service Authority, decided on July 31 to halt construction of the two new 1,117-MW reactors in Fairfield County, riling state leaders.
In an effort to quell concerns, SCANA on Nov. 16 unveiled a plan to immediately reduce electric rates by about $90 million annually, or 3.5%, while requiring shareholders to absorb approximately $2.9 billion in net nuclear construction amortization costs through lower earnings over 50 years. Shareholders also would fund the purchase of a 540-MW combined-cycle natural gas plant.
The proposal was met with a lukewarm response by many lawmakers, but some reacted more angrily, with House Speaker Jay Lucas calling it "further proof that SCANA has consistently prioritized the company's profits over protecting its consumers."
With little acknowledgement of the settlement attempt, the House Judiciary Committee on Nov. 21 passed several bills designed to protect ratepayers from billions in sunk costs tied to the scrapped reactors and to reform state regulatory oversight. The bills could be voted on by the full South Carolina House of Representatives in early 2018.
H.B. 4375 would enact a new ratemaking statute that applies the "used and useful test" to projects initiated under the state's Base Load Review Act, or BLRA.
This legislation would give the Public Service Commission of South Carolina the authority to "remove all rate increases" tied to the construction of the scrapped V.C. Summer reactors, "prevent ratepayers from paying for any additional costs of the failed and abandoned project; and implement interim electric rates which would remove all costs associated with this project from ratepayer bills and would be effective until pending proceedings before the commission are resolved."
The provision is designed to prevent SCE&G from collecting $37 million per month in revised rates tied to the project, representing an 18% reduction in customers' electric bills. This would add up to about $445 million a year in lost revenue for SCANA.
Another piece of legislation, H.B. 4380, gives the PSC the authority to order refunds to ratepayers for revenue collected under the BLRA if it finds these costs were "not actually used and useful," violate the state constitution or were the result of imprudence, misrepresentation or "poor management or oversight by the utility."
The BLRA, drafted to support construction of the V.C. Summer project, allows investor-owned electric utilities to annually request revised rates to recover financing costs for baseload plant construction. Abandonment provisions under the BLRA also allow the utility to recover capital costs and allowance for funds used during construction if "the decision to abandon construction of the plant was prudent."
SCE&G submitted a petition seeking approval under the BLRA to recover $4.9 billion, later reduced to $2.2 billion, in capital costs spent on the V.C. Summer units.
Outside of cost recovery, lawmakers advanced legislation that would reform regulatory oversight through changing the election process and terms for PSC commissioners beginning in 2018 and creating a consumer advocate in the attorney general's office. In addition, state-owned utility Santee Cooper's rates would be subject to approval by the PSC instead of the board of directors.
Santee Cooper, which is not regulated by the PSC, revealed to lawmakers that it has implemented five rate increases since the project's approval in 2009, with 4.3% of the 15.7% overall rate hike tied to the nuclear plant.
H.B. 4376 would end the terms of all Santee Cooper board members on the effective date of the legislation while requiring "new or revised electric rates" be submitted to the PSC for approval with "no new rates or revised charges" imposed or approved tied to the abandonment costs of V.C. Summer.
In the Senate, the V.C. Summer Nuclear Project Review Committee recommended legislation to subcommittees that would reduce the PSC to five at-large commissioners, from seven commissioners, while increasing their salary and reducing board terms to five years from seven years. The committee failed to reach consensus on requiring Santee Cooper's rates to be approved by the PSC, but unanimously approved a motion that any public-private utility partnership's rate increase or cost recovery be approved by the commission.
This special committee also recommended repealing the BLRA for future projects, thus preserving protection for projects previously approved under the law.