COLUMBIA — South Carolina's nuclear boondoggle could become a boon for natural gas, providing an opportunity for some of the country's largest energy corporations to charge utility customers throughout the Palmetto State with costs to build multi-billion dollar pipelines.
That could pull more money from power customers of S.C. Electric & Gas and Santee Cooper, who have already paid billions of dollars for a pair of abandoned nuclear reactors.
The failure by SCE&G parent, SCANA Corp. and Santee Cooper to expand the V.C. Summer Nuclear Station has created a gold rush of sorts for energy giants that are constructing large pipelines out of West Virginia and seeking to corner the market for natural gas in the Carolinas.
A pair of large utilities, weighing whether to expand their presence in South Carolina, plan to charge customers in other states for natural gas pipeline construction.
Dominion Energy, the Virginia-based co-owner of the Atlantic Coast Pipeline, already has its foot in the door with an offer to take over SCANA, which serves more than 700,000 customers in the Midlands and Lowcountry. Dominion's partner in that pipeline is Duke Energy, the state's largest electric utility that provides power to 760,000 customers in the Pee Dee and the Upstate.
Meanwhile, NextEra Energy, which holds an ownership stake in the competing Mountain Valley Pipeline, offered to buy SCANA's natural gas utility in North Carolina late last year and could be a suitor for the entire company if South Carolina utility regulators reject Dominion's $14.6 billion takeover. The Florida-based corporation also is widely seen as a possible buyer for state-run Santee Cooper.
Neither interstate pipeline project currently has plans to extend into South Carolina. But both are heading south as the competing energy companies attempt to lock down customers and power plants in the Palmetto State.
Any proposal to extend the pipelines into South Carolina could put hundreds of thousands of ratepayers on the hook for the projects' growing costs and the built-in profit margins for the developers. This is how Dominion plans to recover costs to build its pipeline in Virginia.
Currently, South Carolina law does not require state's utility regulators to review the need for a pipeline project before it's actually constructed. They only get to weigh in after the gas starts flowing and the utilities seek to recover the cost of that fuel from ratepayers.
As a result, attorneys representing the Southern Alliance for Clean Energy and Coastal Conservation League pushed utility regulators this month to increase protections for customers. They want the utility commission to study upfront the need for new pipelines and whether they are the cheapest option for ratepayers, instead of leaving that up to the federal government.
"In the wake of the V.C. Summer fiasco, this commission should be particularly wary of increasingly common utility practices that allow them to exploit captive customers," said Greg Lander, an expert witness who testified for the Southern Alliance for Clean Energy.
A decade ago, nuclear power was seen as the best option to replace polluting coal electric plants since natural gas prices were spiking.
But projects, such as the one at V.C. Summer in Fairfield County, struggled because no new nuclear plants have been built in more than 30 years in the United States and new reactors were untested. Meanwhile, natural gas prices dropped.
SCANA's two nuclear reactors in South Carolina were canceled last summer amid a frenzied race to construct new pipelines out of West Virginia and Pennsylvania, where hydraulic fracturing — commonly referred to as fracking — has opened up once unreachable gas reserves.
Many energy companies have sought to cash in on interstate pipelines that will pump billions of cubic feet of gas from the Marcellus Shale region to more populated areas of the country.
Together, Dominion and Duke own 95 percent of the $6.5 billion Atlantic Coast Pipeline that will travel through Virginia and North Carolina before ending 12 miles away from the South Carolina border near Lumberton, N.C.
NextEra has a 31 percent stake in the roughly $5 billion Mountain Valley Pipeline that is now proposed to end in North Carolina just west of Durham. Both proposed pipelines are expected to be finished by 2019.
Neither project is currently set to be built into the Palmetto State, but that could quickly change if SCANA or Santee Cooper is sold.
Dan Weekly, a Dominon vice president, admitted last year in an energy conference that "everybody knows" the Atlantic Coast Pipeline "is not going to end in Lumberton." Dominion's CEO Thomas Farrell denied any current plans to extend the pipeline last week, but he also admitted that it would be an option for his company in the future.
"There's no possibility of it coming here today," Farrell told South Carolina utility regulators. "I'm hopeful it will come."
NextEra officials declined comment for this story.
O'Neal Hamilton, one of South Carolina's seven utility regulators, wants the multibillion-dollar pipelines extended into the Palmetto State.
"We need every tool in rural South Carolina to help with economic development," Hamilton said at a hearing on Nov. 15.
Critics of the pipelines, however, say South Carolina's utility regulators should be careful what they wish for.
They pointed to Virginia, where Dominion has signed a deal that is likely to saddle ratepayers with a pipeline's cost in the coming decades.
Looking behind the contracts?
The legal battles surrounding the Atlantic Coast and Mountain Valley pipelines have centered largely on one question: Have the companies proven the hundreds of miles of pipeline are actually needed?
In split decisions, the Federal Energy Regulatory Commission approved the construction of both pipelines last year after spending months reviewing the multibillion-dollar projects.
The pipelines' developers say the projects are needed to adequately supply growing parts of the country and to prevent price spikes when demand for natural gas peaks.
But critics argue the companies didn't actually prove a lack of natural gas supply.
The federal energy regulators, they say, voted to greenlight the construction by relying on "self dealing" contracts that NextEra, Dominion and Duke signed with their own subsidiaries — including the monopolistic utilities they own in Virginia and North Carolina.
By doing so, opponents — including Ken Cuccinelli, Virginia's former Republican attorney general — argue the federal energy commission handcuffed ratepayers to the expensive pipeline projects without truly evaluating whether they were needed or the lowest cost option.
Dominion spokesman Aaron Ruby says his company spent years internally reviewing other bids from pipeline builders before it ultimately decided to construct the Atlantic Coast Pipeline itself. The federal regulators, he said, would not have given Dominion and Duke approval to build the Atlantic Coast Pipeline unless they determined it was a "public necessity."
The federal energy commissioners, however, admit in their orders that they never fully explored the energy needs of each individual utility that was used to justify the pipeline. Those regulators say they were not required to peek behind the contracts even if they were signed between two affiliated companies.
Will Cleveland, an attorney with the Southern Alliance for Clean Energy and Coastal Conservation League, said it may be too late for customers in Virginia and North Carolina to review the need for the pipelines.
But South Carolina's leaders, he said, could still require a more thorough review upfront before the Atlantic Coast or another pipeline is extended into the state.
The Office of Regulatory Staff, South Carolina's utility watchdog, is advocating for the state utility commission to do just that. They want the state to play a larger role in deciding whether the pipeline is the best fit for customers.
But Dominion adamantly opposes the plan. Farrell, the company's CEO, suggested last week that any additional rules put in place for pipeline construction could cause Dominion to walk away from its proposed takeover of SCANA.
It is a similar threat from Farrell about the failed nuclear project.
He has said repeatedly that Dominion will call off the SCANA sale if state regulators halt payments by South Carolina electric ratepayers for the unfinished reactors.
Correction: An earlier version of this story incorrectly stated the number of ratepayers Duke Energy has in South Carolina. The company has roughly 750,000 customers in the Pee Dee and the Upstate.