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Dominion seeks to raise its SC power rates by 7.7%

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Dominion Energy, the owner of South Carolina Electric & Gas, is asking South Carolina's utility regulators to increase its customers power bills by 7.7 percent in order to cover 8 years of spending. File/Grace Beahm Alford/Staff

Dominion Energy is asking to increase its South Caorlina power rates by 7.7 percent to recoup billions of dollars that the company and its predecessor have invested over the past eight years.

The utility's request, which was submitted to the S.C. Public Service Commission on Friday, would raise the monthly bill for a residential customer by $9.68 to about $132.

The proposed increase will allow Dominion to collect roughly $178 million more each year from all of its residential, commercial and industrial electric customers. 

This marks the first time Dominion has asked to raise rates since it acquired the South Carolina Electric & Gas franchise in early 2019. The Virginia-based utility has roughly 734,000 power customers in Palmetto State 

The request is still likely to cause an uproar among ratepayers. Many former SCE&G customers, who are largely concentrated around Beaufort, Charleston, Orangeburg and Columbia, are still upset that they are paying for the failed expansion of the V.C. Summer nuclear plant in Fairfield County.  

Dominion had nothing to do with that project, which SCE&G abandoned in July 2017.

But Dominion did play a role in convincing regulators and S.C. House Speaker Jay Lucas, R-Darlington, that it should be allowed to charge customers another $2.3 billion to pay off debts tied to the unfinished reactors over the next two decades. At the time, Dominion's attorneys argued that was the only way to seal the acquisition of SCE&G, which was on the verge of bankruptcy. 

Rodney Blevins, CEO for Dominion Energy South Carolina, said he and his staff have done everything they can over the past 18 months to reduce operating costs at the utility in order to hold down ratepayer bills. 

Since taking over SCE&G's service territory, Dominion has reportedly found $45 million in cost savings. It accomplished that largely by shedding redundant, white-collar jobs and coordinating purchases with Dominion's other subsidiaries. That's money that won't be charged customers. 

“The team has worked extremely hard from the close of the merger to minimize the effects of this increase,” Blevins told The Post and Courier.  

Still, Dominion says the proposed increase is necessary to pay for significant infrastructure improvements that it and its predecessor made over the past eight years. 

SCE&G's former management did increase electric bills several times over that period, but all of that extra money went toward financing the failed nuclear project. It didn't cover the normal operating costs and system upgrades that utilities traditionally cite when seeking to raise rates. 

If Dominion's request is approved, it would cover around $2.1 billion that was spent on the expansion and improvement of its power lines. That includes the transformers, switch yards and other equipment needed to hook up new customers.

The rate hike would also reimburse the company for $878 million in improvements to its power plants, including measures meant to protect the environment, and $198 million in technology and equipment upgrades required to safeguard the electric grid from cyber attacks. 

Dominion is also asking to recoup millions of dollars it spent in response to hurricanes and other storms that have smacked South Carolina in recent years. That includes at least $79 million in deferred costs from flooding and wind damage in 2018 and 2019. 

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The proposed rate hike would bake in a 10.25 percent return on equity, which goes toward paying down debt and providing a profit to Dominion shareholders. The company reported it only earned a 5.9 percent return last year based on the same financial calculation. 

Dominion said the additional money is necessary to maintain the reliability of its electric service. Outside of major storms, the average Dominion customer in South Carolina was without power for less than 78 minutes in 2019, the company said. 

The current rates, it added, do not reflect the full costs of delivering power to homes and businesses. 

Dominion will need to justify the increase at hearings early next year. The earliest the higher rates could go into effect is March 2021. 

In the meantime, the request will be put under a microscope by the Office of Regulatory Staff, the state's utility watchdog agency, as well as a number of other parties that are likely to challenge Dominion's filing. 

“The ORS is in receipt of the application and will be commencing its internal review and analysis," spokesman Ron Aiken said. 

That rate-setting process has become more difficult for South Carolina utilities following the collapse of the V.C. Summer project. Most of the regulators who were on the Public Service Commission during the nuclear fiasco have either stepped down or been replaced by state lawmakers. 

The turnover has made the relationship between the PSC and investor-owned utilities more confrontational of late. Last year, the commission rejected a large portion of two rate hike requests from Duke Energy, which serves other parts of the state. Charlotte-based Duke has since appealed those decisions to the S.C. Supreme Court. 

Blevins, the top Dominion executive in the state, is aware that regulators have become more wary about allowing utilities, which operate as monopolies, to raise rates. That’s how the process should work, he said. 

But Dominion, can back up every expense it is asking to recoup from ratepayers, he added.

“We believe our case, when the evidence is presented, will be compelling,” Blevins said. “I still have confidence in the process. And we’ve done our homework. We’ve worked really hard to put together a strong case that is reasonable.” 

Many of the expenses that Dominion is asking to recover may be difficult for regulators to reject. In most cases, utilities are legally entitled to be paid for investments in their systems if they are in use and benefit customers. 

Dominion will be going through the steps as families and businesses in its service territory continue to struggle through a major recession. 

Dominion has made changes to lessen the burden on its customers during the ongoing coronavirus pandemic. It voluntarily suspended shutoffs for its electric customers who were not able to make their payments. It also waived late fees, reconnection fees and interest payments on unpaid bills. 

But those policies are set to expire Sept. 14, unless the company extends them. 

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