South Carolina Electric & Gas could stop charging for its failed nuclear project completely and stay afloat, according to a financial analysis commissioned by state regulators, a finding that comes at a key juncture for the power company.
SCE&G could stop paying dividends to its shareholders to make up for the $37 million a month it currently collects for the project from ratepayers, according to the study by the accounting firm Baker Tilly. The utility would probably also need to spend less on big infrastructure projects.
The findings, which were filed with utility regulators this past weekend, drop into a crucial week for the ongoing debate over the future of SCE&G’s rates. State lawmakers are reconvening Wednesday to debate whether the company can continue to collect on an unfinished project that increased ratepayers’ bills by 18 percent over the last decade.
Both the House and the Senate have approved legislation that would temporarily cut SCE&G’s rates, but the legislative chambers are at loggerheads over how low they should go. It’s not clear that they’ll reach a compromise before the two-day special session ends.
The General Assembly’s deliberations are important even though lawmakers are debating a rate cut that would only last through the end of year.
Depending on where they land, they risk scuttling a plan proposed by Dominion Energy to buy SCE&G and its parent company and refund some of the money ratepayers have already paid into the nuclear project. And the Legislature’s decision is widely seen as a signal to the regulators who will make the final, permanent call on rates.
The Baker Tilly report, which was ordered by regulators on the S.C. Public Service Commission, highlights that there are limits on what the state can squeeze out of SCE&G as it wrestles with the abandoned expansion of the V.C. Summer Nuclear Station.
It suggests that the utility doesn’t have the financial wherewithal to handle a rate cut and a refund of the roughly $2 billion electric users have paid so far for the project. Its ability to stay current on its debt would be “severely compromised” if ratepayers got both, the study found.
Both SCE&G and its partner at V.C. Summer, the state-owned power company Santee Cooper, borrowed enormous sums for the Midlands project, which cost a total $9 billion before they walked away last July. That has raised fears that the utilities could be forced into bankruptcy if their finances are stretched too thin.
But in analyzing what would happen without a refund to ratepayers, Baker Tilly figured SCE&G had options to “weather the outcome.” The firm didn’t study whether the utility would file for bankruptcy because it wouldn’t be a purely financial decision.
SCE&G didn’t respond to a request for comment on the analysis.
Lawmakers this week also face an electorate that appears to have mixed feelings about SCE&G’s future. Surveys earlier this year indicated that most South Carolina residents backed Dominion Energy’s plan to buy the power company, but internal polling suggests that support waned in the spring, when advertisements promoting the deal went off the air.
Dominion spokesman Chet Wade said the company has seen “extremely strong support for the merger” based on community meetings it has held and calls to SCE&G’s customer-service line.
Still, a presentation describing polls commissioned by Dominion shows that in April, the margin by which South Carolinians supported the deal was narrowing. At the same time, the surveys found, SCE&G’s customers held an unfavorable image of the company. The polls were conducted while pro-utility ads weren’t airing.
“A majority of voters and electric customers still believe there should not be any deals made until electric customers are guaranteed they won’t be charged at all for the cost of the failed nuclear plants,” according to the presentation, which was released to regulators last week. “There is a desire for punishing the companies for this failure.”
How that will translate into policy could come into focus Wednesday: House and Senate negotiators are scheduled to discuss the V.C. Summer project at 10 a.m.