South Carolina Electric & Gas is asking state regulators to approve the largest single rate increase yet under a state law that lets the utility charge customers for construction of two new reactors at the V.C. Summer nuclear plant in Jenkinsville years before they are completed.
The proposed increase, which needs approval from the state’s Public Service Commission, would boost residential customers’ rates by 3.1 percent, or an average of $4.44 per bill for those using 1,000 kilowatt hours of electricity per month. Commercial customers would see their rates increase by between 3 percent and 3.3 percent, depending on the size of the business, if the new rate structure is approved.
Until now, the biggest annual increase was 2.87 percent in 2013.
SCE&G said in a news release that the rate increase would be offset by lower fuel costs that were passed along to consumers earlier this year.
“By passing lower fuel costs from our efforts to ensure a balanced and diversified fuel mix to our customers, residential customers will see lower bills at the end of the year than they were receiving at the beginning of 2016,” Steve Byrne, SCE&G’s chief operating officer, said in a statement.
If the increase is approved, nearly 19 percent of residential customers’ monthly bills will be going solely toward construction of the new reactors, according to Dukes Scott, executive director of the state’s Office of Regulatory Staff, which represents consumers’ interests in utility matters.
To date, SCE&G has charged its customers more than $1 billion for construction of the units, Scott said. The proposed rate increase would raise another $74.2 million and would take effect at the end of November if approved.
SCE&G is allowed by state law to take up to 10.5 percent of the costs as profit. Regulators are not allowed to lower that profit margin to save consumers money because the law only lets SCE&G voluntarily cut its rate of return.
The proposed rate increase is part of the Base Load Review Act, passed in 2008 by the General Assembly. The law allows the utility to charge its 700,000 customers for construction as the nuclear project proceeds. Historically, utilities have financed construction through bond sales that are repaid after the project is completed.
The Base Load Review Act amounts to a “blank check” for SCE&G, according to Frank Knapp, president and CEO of the S.C. Small Business Chamber of Commerce and an opponent of the rate increases.
“The law was written by the industry, the General Assembly didn’t understand it and there has been no good evaluation of it since it was passed,” Knapp said. “Consequently, here we are.”
Knapp said he is working with consultants on proposed amendments to the law to better protect consumers.
The V.C. Summer project has been plagued by cost overruns and delays. SCE&G asked state regulators last month to approve an additional $852 million in construction costs for the project, which has ballooned from $10 billion to $14 billion. SCE&G owns 55 percent of the nuclear plant while Moncks Corner-based electric utility Santee Cooper owns the rest.
In addition to eight rate increases already approved under the Base Load Review Act, SCE&G has adjusted its electric rates another 13 times since 2009 resulting in an additional $6.30 net increase to residential customers’ monthly bills, according to the state’s Office of Regulatory Staff.
All told, the average monthly residential electric bill will have increased from $114.20 at the start of 2009 to $148.11 if the new rate increase is approved — a 30 percent increase, the state agency reported.
SCE&G says the pay-as-you-go method will save consumers billions of dollars in future utility rates during the life of the nuclear units. Critics say the law is unfair to customers who might never see those benefits if they leave SCE&G’s service area and it puts a burden on elderly and low-income consumers.
The nuclear reactors initially were supposed to go online in 2016 and 2018, but are now about two years behind schedule. Further construction delays could lead to more rate increases. SCE&G plans to receive $2.2 billion in federal Production Tax Credits, but those credits — part of the Energy and Policy Act of 2005 — expire if the units aren’t up and running by Dec. 31, 2020.
SCE&G, a division of Cayce-based SCANA Corp., provides electricity and natural gas to Charleston and Dorchester counties and parts of Berkeley County.
Reach David Wren at 843-937-5550 or on Twitter at @David_Wren_