Nuclear Power Station (copy) (copy)

A federal judge issued an opinion Monday that questioned whether S.C. Electric & Gas should be allowed to charge anything for its failed nuclear project since it abandoned the reactors last year. Grace Beahm/Staff

COLUMBIA — South Carolina Electric & Gas customers could be entitled to even deeper cuts in power rates than they won in court this week, according to a federal judge.

U.S. District Judge Michelle Childs ruled Monday that the state Legislature was allowed to cut most of SCE&G's nuclear-related charges while utility regulators deliberate over who should pay for the failed $9 billion expansion of the V.C. Summer nuclear power plant. 

What's more, she suggested SCE&G might not have the right to charge anything for the abandoned reactors north of Columbia until those regulators weigh in later this year.

That's a very troublesome opinion for SCE&G, which until Tuesday was allowed to collect $445 million a year for the nuclear project whether work was taking place or not. Childs' opinion provides a new angle for attorneys who want to cut the reactors out of SCE&G's electricity rates altogether.

The Office of Regulatory Staff — the state's utility watchdog agency — has said it could use Childs' opinion in a push for more rate cuts.

On Tuesday, SCE&G announced it plans to appeal the temporary rate cut that took effect Tuesday and disagreed with the Childs' ruling. 

"We will believe the court’s ruling was erroneous, and are hopeful the Court of Appeals will agree," said Eric Boomhower, a spokesman for SCE&G's parent company SCANA Corp.  

The V.C. Summer project accounted for 18 percent of SCE&G's rates — about $27 a month for the typical home. The Legislature-ordered reduction, 15 percent of total charges, will save the average residential customer $22 a month.

The rate cut reaches back to April — SCE&G will have to give credits for the last few months — and it will last until regulators make a final decision at the end of the year. By then, the reduction will have cost SCE&G about $270 million.

But Childs' opinion suggests that the rate reduction could go all the way back to July 2017, when SCE&G called off construction at V.C. Summer. And it could cut even deeper, taking all of the nuclear project costs out of electricity rates.

If that happened, it would cost SCE&G roughly $629 million, more than doubling the cost of the Legislature's rate cut.

Childs' opinion alone won't make that happen. She only weighed in on whether the smaller rate reduction could go forward.

But her order provides an interpretation to the 2007 state law that allowed SCE&G to charge customers for the reactors before they were completed. The law says the power company can only collect on a new power plant if it's either "constructed or being constructed" because regulators haven't formally blessed its decision to send construction workers home.

That was a point raised by attorneys representing the Legislature in federal court. And it's a point that could be used when utility regulators deliberate over who should pay for the V.C. Summer debacle.

"They rolled the dice and they got way worse than they expected," said Bob Guild, an attorney for Friends of Earth and the Sierra Club who has challenged the nuclear project repeatedly over the past decade.

The Office of Regulatory Staff asked those regulators in September to eliminate all of SCE&G's nuclear charges. That case is still pending, meaning the issue could be raised in the coming months.

"From their perspective, this has to be a worst-case scenario for SCE&G at this stage in the proceedings," said Rep. Micah Caskey, a Republican from West Columbia who helped investigate the nuclear cancellation. 

SCE&G didn't respond to a request for comment on Childs' interpretation of the law.

The prospect of lower rates — and the legislative debate that led to them — has spooked Wall Street, and it has already forced SCE&G's parent company, Cayce-based SCANA Corp., to cut its payouts to shareholders. The nuclear project bankrolled more than half a billion dollars in dividends over the past decade, including an estimated $80 million this year.

Childs' refusal to block the lower rates cemented the financial scare, sending SCANA's stock tumbling 5 percent Tuesday. Shares fell to $40, valuing the company at about $5.7 billion.

If rates fell even further, the damage could worsen, according to Shahriar Pourreza, a utility analyst at Guggenheim Securities in New York. If SCE&G is blocked from charging altogether, SCANA's stock price could fall to $26 a share, he said.

Many investors are now eagerly watching the state's utility regulators on the Public Service Commission who will hold hearings in November. 

"There are still several unknowns remaining including as to how the PSC will rule," Pourreza wrote in a research note this week. "This likely isn’t the last we hear from SCE&G on its legal battles."

Thad Moore contributed to this report.

Reach Andrew Brown at 843-708-1830 or follow him on Twitter @andy_ed_brown.