Nuclear Power Station (copy) (copy) (copy)

SCANA Corp. halted work on two new reactors it was adding to the V.C. Summer plant last July. File/Grace Beahm/Staff

A long-awaited report about the financial ramifications of rate cuts for South Carolina Electric & Gas ducks a key question that regulators have been asking: Would the lost revenue force the embattled utility to file for bankruptcy protection?

The answer isn't clear cut, according to a new analysis by the accounting firm Baker Tilly. Bankruptcy is a legal process driven by business decisions, so SCE&G's finances alone don't dictate its future, the firm said in a report filed Tuesday with state regulators.

If the utility isn't allowed to collect $37 million a month for its failed nuclear project, Baker Tilley says it can't predict what would happen because bankruptcy isn't "always the result of recording accounting entries."

That takeaway mirrors a previous analysis commissioned by the Office of Regulatory Staff, the state's utility watchdog agency. That study, written by one of South Carolina's top bankruptcy lawyers, predicted a one-in-three chance of SCE&G filing for bankruptcy protection.

SCE&G has testified that bankruptcy is a real option because it took on billions in debt to finance the construction of two reactors at the V.C. Summer Nuclear Station north of Columbia. And it has argued that one-in-three odds represent a big gamble for one of the state's biggest utilities.

The Baker Tilly report shed some light on the financial trouble that could follow a forced rate cut. If SCE&G was forced to stop charging ratepayers for the reactors and refund the money they've already paid, the company would be worth less than the debt it owes.

And in any scenario where ratepayers stop paying for the project altogether, SCE&G's financial metrics would fall so low that it could receive a bottom-of-the-barrel credit rating, according to Baker Tilly's analysis. That could ultimately make it more expensive for the utility to borrow money, a cost that would be passed on to electricity users.

The ramifications would be less severe if it only faced a partial rate reduction. About 18 percent of SCE&G's electricity rates goes toward the failed V.C. Summer project.

That's significant because the Legislature has all but dropped the possibility of a full reduction of the nuclear rates. Both the House and the Senate want to temporarily cut them but have not come to an agreement.

The Senate has favored the idea of a partial, 13 percent reduction because SCE&G and its parent company, SCANA Corp., could cover the losses by slashing its dividend payments to investors.

SCE&G declined to comment on the report Wednesday, saying it was awaiting an opinion letter about the bankruptcy question from Baker Tilly. That document was requested by the Office of Regulatory Staff and is expected to be submitted next week.

Contact John McDermott at 843-937-5572 or follow him on Twitter at @byjohnmcdermott