COLUMBIA — Several South Carolina lawmakers aren’t sold on Dominion Energy’s proposal to takeover Cayce-based SCANA in a $14.6 billion deal.
A special committee in the S.C. Senate held a hearing Tuesday to learn more about how the proposed acquisition would impact SCANA’s customers, who continue to pay $37 million a month for two abandoned nuclear reactors at V.C. Summer station.
Dominion CEO Thomas Farrell told the senators the offer from the Virginia-based utility company was the only option South Carolina had outside of SCANA filing for bankruptcy — or at best hanging on as a financially "crippled" power company.
But a bipartisan group of lawmakers pushed back on that notion and questioned whether SCANA and Dominion’s leaders were trying to coerce lawmakers into accepting a deal that would require more than 700,000 South Carolina Electric & Gas customers to continue paying for the failed reactors over the next 20 years.
In an awkward moment, Sen. Mike Fanning, D-Great Falls, asked every utility official in the room to stand so the lawmakers could recognize them. After some reluctance, dozens of lobbyists, lawyers and utility staffers stood.
"This is what the people of South Carolina, the ratepayers, are up against right here,” Fanning said. “It’s only going to get bigger and worse as it goes on.”
Dominion’s proposal, Fanning said, didn’t feel like an open negotiation, but an ultimatum.
“You walk in here this morning, and now I feel like I’ve got a gun to my head,” Fanning said.
"There is no gun here,” Farrell responded. “Unfortunately, this is just the circumstances we find ourselves in.”
Dominion’s offer would reduce the amount of money the average SCE&G customer pays for the nuclear reactors from $27 a month, to $20. But electric ratepayers would be required to pay that amount for the next 20 years.
For two weeks now, Dominion has promoted and advertised their offer to lawmakers, utility regulators and the public by emphasizing a $1,000 rebate that an average customer would get if the deal is finished.
Senate Majority Leader Shane Massey, R-Edgefield, and other lawmakers have begun to compare that incentive to a payday loan, where customers get a benefit up front but end up paying more in the long run. Under Dominion's proposal, the typical SCE&G electric customer would pay roughly $4,000 over the next two decades.
Farrell, who made $13.3 million in 2016 as Dominion’s CEO, told the state lawmakers there is no perfect solution to the financial crisis caused by the V.C. Summer cancellation. Like SCANA’s executives have in the past, Farrell painted a dire picture and told lawmakers that only Dominion could save SCANA from bankruptcy.
"This is like a political election. You have to vote for somebody,” Farrell said. “You may not really like either candidate, but when you go in the booth, there are only two alternatives.”
Not all of the state lawmakers, however, believe that bankruptcy is guaranteed. And even if it is, they are not sure that would be the worst option for electric customers in South Carolina.
“At some point, the cries of bankruptcy have to be looked at,” said Massey, who has led the special Senate committee that investigated the V.C. Summer project. “I think it's a bluff.”
Massey pointed to the dividend payments SCANA has continued to pay its investors. Even as its stock price plunged, the troubled utility company paid investors a total of $350 million last year.
The Office of Regulatory Staff — the state’s utility watchdog agency — is currently auditing SCANA to determine if it has enough money to operate if lawmakers ban the company from charging customers for the abandoned nuclear project near Jenkinsville, about 30 miles north of Columbia.
Either way, Farrell said SCANA would be “crippled financially” if lawmakers cut off the $445 million a year the utility collects from customers for the unfinished reactors. The company's stock would plunge, making it harder to raise money from investors. And lenders would demand higher interest rates — a cost that would be passed on to ratepayers.
"Their cost of capital will explode,” Farrell said. “They will become the weakest utility in the United States. I believe that quite firmly, sir."
Dominion’s deal continues to hinge on whether lawmakers in the House and Senate repeal a 2007 law, known as the Base Load Review Act, that allowed SCANA to charge customers for the nuclear project before it was finished.
Many of the state’s leaders have vowed to repeal that utility-friendly law since the reactors were cancelled last July. If that is done, Farrell told the senators it would be “impossible” for Dominion to finalize its takeover of SCANA.
"Unfortunately, there is just no silver bullet that is going to make this problem go away,” Farrell said. “I’m sure everyone here wishes the clock could be rolled back. I know this is deeply frustrating, but I’m afraid there is just no completely satisfying answer to this problem.”