COLUMBIA — Delivering a huge political blow, a new financial analysis found South Carolina Electric & Gas can stop collecting much of the $37 million in monthly nuclear charges from customers without ruining the utility company.
The study, commissioned by the S.C. Senate, shows lawmakers can temporarily cut SCE&G's electric rates by at least 13 percent — if not more.
The utility's 700,000 customers pay 18 percent of their bills for a pair of unfinished reactors.
A cut that large would drop power bills for the typical home by $19 per month while regulators and the courts hash out a permanent solution to the failed V.C. Summer nuclear project.
Those savings are far from a sure bet. The Senate could begin debating a rate cut as early as Wednesday but a partial rollback of the nuclear charge would need the approval of the House and Gov. Henry McMaster.
The analysis, conducted by Washington, D.C.-based financial consulting firm Bates White, takes dead aim at the dividends SCE&G's parent company, SCANA, pays to its shareholders. SCE&G passed along $319 million in dividends to investors last year, including $120 million directly tied to customer payments for the partially built reactors.
The study found the company could weather the 13 percent cut to its rates simply by eliminating those quarterly payments to investors. The findings were similar to a study conducted by a Columbia corporate bankruptcy attorney on behalf of the Office of Regulatory Staff, the state's utility watchdog.
The new study's findings were expected to spur state senators into action, reigniting a stalled debate about the nuclear project and the profits SCANA has earned from it.
SCANA's stock price was hammered after the project near Jenkinsville was canceled and the company became consumed by the political outrage that followed. The expansion of V.C. Summer Nuclear Station in Fairfield County cost $9 billion before SCE&G and the state-owned utility Santee Cooper abandoned the site last summer.
The S.C. House voted overwhelmingly two months ago to halt SCE&G's nuclear charges. The Senate put the brakes on that proposal after the utility's lobbyists warned of SCANA's impending bankruptcy and some senators demanded a more detailed study of the Cayce-based utility's financial health.
Lawmakers now have that information.
"SCE&G's financial status is not nearly as precarious as what they have told us," said Senate Majority Leader Shane Massey, R-Edgefield. "We can take a significant rate cut and they will be able to pay their bonds. They will still have access to the credit market. They will be secure."
"The shareholders may not like that," Massey added.
SCANA spokesman Eric Boomhower declined to comment on the study's findings, saying the company hadn't reviewed the report.
If the Senate acts, the Legislature would suspend SCE&G's nuclear charges only until the financial crisis can be sorted out. Utility regulators on the state Public Service Commission will ultimately decide whether the power company or its ratepayers foot the bill for the reactors.
Under a Senate plan, those regulators will have until December to review the utility's handling of the canceled project. Then they'll decide whether customers keep paying — and how much.
The Bates White analysis considered how far lawmakers could drop rates before the SCANA's credit rating was downgraded, and the utility became too risky to investors. Lower ratings make it more expensive to borrow money.
The study also cast further doubt on SCANA's claims of imminent bankruptcy. For months, the power company warned a rollback in rates would throw its balance sheet out of whack and cut off its credit lines. If that happened, the company says it could run out of cash and start missing payments.
Even if the nuclear charges are eliminated entirely, the analysis by Bates White says SCANA would not lose access to credit. That's true even if the state's utility regulators permanently rolled back the nuclear-related charges, according to the analysis.
There are other risks on the horizon, however.
It's not clear whether the courts would let lawmakers cut SCE&G's rates — even temporarily. The company believes such action would be unconstitutional and says any action by the Legislature would likely result in a lawsuit.
SCE&G collected more than $2 billion for the useless reactors over the past nine years using a utility-friendly law passed by the Legislature in 2007. That law allowed investor-owned utilities to easily charge customers before the reactors were finished.
A substantial cut to SCE&G's rates could also end Dominion Energy's bid to purchase of the utility. Virginia-based Dominion has proposed a partial rate reduction and refund. But SCE&G's customers would pay another $3.8 billion over the next two decades under that offering.
Dominion defended its plan, which would give the typical home a $1,000 refund and initially cut rates by 7 percent, as "the best long-term solution for SCE&G customers."
"Ours is the only proposal that provides certainty and avoids risky, lengthy and expensive litigation that would further damage the state’s reputation and ability to continue to attract and retain business," Dominion spokesman Chet Wade said in an email.
House leaders, for their part, would prefer to see the nuclear charges wiped out entirely. But they may have to defer to the Senate, which has resisted moves to completely eliminate SCE&G's nuclear charges.
"I think you have to make this right for ratepayers," said Rep. Peter McCoy, a Charleston Republican who led an investigation of the nuclear project. "Any charge on ratepayers is wrong. But I will always listen. I am always up for debate."