COLUMBIA — South Carolina Electric & Gas customers will pay another $2.3 billion for a pair of useless nuclear reactors, state regulators ruled Friday, capping off a year-long legal battle and leaving electricity users with part of the bill for one of the biggest financial calamities in state history.
The ruling by the Public Service Commission also allows Dominion Energy to acquire SCE&G's Cayce-based parent company, SCANA Corp. — a $14.6 billion takeover the Virginia power giant has pursued for nearly a year.
After pitching a series of settlements, Dominion ultimately offered to erase most of the nuclear boondoggle from ratepayers' power bills, but it left them to pick up a smaller piece of the tab over the next 20 years.
Ratepayers will pay about two-thirds less under the final Dominion plan than they would have under SCE&G's original proposal, according to a state analysis.
In return, they won't get a refund check from Dominion. The utility giant advertised heavily its plans to give $1,000 to the typical home to refund the cost of the boondoggle. But regulators opted for a plan that will put that money toward paying down future rates.
Friday's decision ends a legal drama about what sent the Fairfield County construction project careening toward disaster. But the roots of what is still a bitter pill for ratepayers traces its history to a transformation of South Carolina's utility regulations more than a decade ago.
SCE&G's 720,000 customers will be charged for the abandoned expansion of the V.C. Summer Nuclear Station because of a 2007 state law that passed overwhelmingly by the state Legislature at SCANA's urging. The utility's attorneys even helped to write the law.
That law — the Base Load Review Act — allowed the company to start charging electric ratepayers for the reactors before they were finished. And it was written to let them keep charging for billions of dollars' worth of steel, concrete and man-hours even if the project was scrapped.
That was a reality lawmakers didn't anticipate a decade ago, but the project halted on July 31, 2017, when years of construction delays and design problems caught up with a project ballooning over budget. Months earlier, the reactors had bankrupted the company that designed them, Westinghouse Electric.
By then, SCE&G and its project minority partner, state-run Santee Cooper, had spent $9 billion on the partially built reactors.
SCE&G's ratepayers alone have poured more than $2 billion into the troubled nuclear project since 2008. And as a result of Friday's ruling, SCE&G's customers can expect to put $7.10 toward the project for every 1,000 kilowatt-hours they use, or $1,700 in total over the next 20 years for the typical home.
By comparison, customers would have paid just over $6,000 under a plan SCE&G put forward before Dominion stepped in.
“This commission did not leave any stone unturned," said commissioner Justin Williams, who joined the Public Service Commission after the nuclear fiasco. “This has not been a fly-by-night decision.”
By the time the Public Service Commission's ruling came down, it was a foregone conclusion that SCE&G customers would pay something for the unfinished reactors.
The state's utility watchdog, the Office of Regulatory Staff, asked the state's seven utility regulators to make customers pay less, but the agency acknowledged that ratepayers would pick up a substantial bill. Its attorneys argued that the utility misled the public and the regulators about the health of the project years before construction was halted.
But the Office of Regulatory Staff, too, was forced to agree that SCE&G had a right to collect some of the roughly $5 billion it spent on its portion of the project because of the Base Load Review Act.
"We appreciate the consideration the Public Service Commission has given to this extraordinarily complex issue. The commissioners had a difficult decision to make," said Nanette Edwards, director of the Office of Regulatory Staff. "Throughout this process, the Office of Regulatory Staff has fought to represent the interests of customers and remained firm on issues safeguarding customer interests."
The project's demise drew the ire of state lawmakers, who debated utility reforms for months in its wake. The Legislature ultimately ordered SCE&G to temporarily stop charging for most of the nuclear project, a decision that sent the fiasco into federal court. The regulators' decision essentially locks in the rate that lawmakers set, but it means ratepayers will forego savings from federal tax reform.
Over the past year, many state lawmakers, particularly in the South Carolina House, advocated for customers not to pay anything further for the reactors. They were joined by Gov. Henry McMaster, who repeatedly insisted that SCE&G customers shouldn't "pay another cent."
The Public Service Commission's unanimous decision all but ends that hope. Under Dominion, the utility will collect a 9.9 percent return on $2.7 billion of SCE&G's nuclear spending.
But by the time the ruling was handed down, some key lawmakers' positions had softened. House Speaker Jay Lucas, a Darlington Republican and one of the many lawmakers who voted for the Base Load Review Act in 2007, ultimately endorsed Dominion's deal, saying it marked substantial progress from the situation ratepayers initially faced last year.
Lucas praised the deal's approval Friday, calling it a "tremendous win for the ratepayers."
"We cannot blame the ratepayers if they think that the Public Service Commission ruling was based largely on political pressure and not on what was in the best interest of the consumer," said Frank Knapp, chief executive of the S.C. Small Business Chamber of Commerce. "The speaker’s inappropriate effort to influence this hearing smacks of a backroom, political deal with a giant Virginia-based utility that spent millions to influence legislators and the public."
Lawmakers' anger was driven by key disclosures about the project's problems that came only after construction was called off. Regulators chided the company for not being more forthcoming about the issues, saying it had damaged its trust in the state.
But the Public Service Commission ultimately voted not to officially say that SCE&G had "intentionally" withheld information, a step commissioner Tom Ervin asked for. Regulators opted to leave the question of executives' intent to law enforcement. State police, the FBI and U.S. Securities and Exchange Commission are still probing the nuclear project.
"It puts all utilities that are regulated by the Public Service Commission on notice that if they do in the future hide or misrepresent facts that should be known to the Office of Regulatory Staff and the commission, they are subject to a finding of imprudence," Ervin said before his proposal was voted down.
Regulators' decision on the case can be appealed to the South Carolina Supreme Court, but it wasn't immediately clear Friday if lawyers representing SCE&G's residential or industrial ratepayers would take that step.
In recent weeks, SCANA and Dominion successfully rallied support behind their plan. They won the support of Lucas, one of the state's most powerful lawmakers, and they settled a separate lawsuit seeking refunds for electricity ratepayers.
Attorneys for Dominion and SCANA — including former Gov. Jim Hodges — convinced several law firms and Attorney General Alan Wilson to settle a class-action lawsuit that was wending its way through state court. The companies offered $115 million and a grab bag of real estate to settle the case.
That lawsuit had threatened to overturn the Base Load Review Act, which would have derailed Dominion's takeover attempt. But the settlement, announced two days after Thanksgiving, instead provided momentum for Dominion's proposal in the Public Service Commission.
The decision should ensure that Dominion, a giant in the energy industry, will now take control of SCANA — once a Fortune 500 company — and its electric and gas businesses in South Carolina, North Carolina and Georgia. It will also ensure that most of the state's electric grid will be controlled by out-of-state companies.
"Dominion Energy is encouraged by the Commission's vote and awaits an order to review prior to making a final decision to close the merger with SCANA," said Dominion chief executive Thomas Farrell.
The only remaining South Carolina-based power provider — the state-owned utility Santee Cooper — was a part owner of the V.C. Summer project. Lawmakers will consider whether to sell it when they return to Columbia next year.
Shares of SCANA's stock had inched upward in recent weeks as Wall Street shed its doubts about the deal's viability. But they soared more than 6 percent Friday as the deal cleared its last roadblock.
If the deal is closed, the company, which was already worth around $50 billion on Wall Street, would control a new fleet of power plants, thousands of miles of power lines and hundreds of thousands of new ratepayers, who can't choose their electric company.
And it would give them new room to grow. The takeover could give Dominion a possible legal justification for expanding the Atlantic Coast Pipeline — a roughly $6.5 billion natural gas line — into South Carolina in the future.
The massive pipeline is currently set to end near Lumberton, North Carolina, just above the South Carolina border.
Farrell, Dominion's CEO, insisted last month that his company had no immediate plans to expand the pipeline. But he told South Carolina regulators that he was "hopeful" it would be extended at some point.