COLUMBIA — South Carolina Electric & Gas customers’ power bills will drop by 15 percent on Tuesday after a federal judge allowed a temporary rate cut to take effect, sealing a major victory for the state Legislature.
U.S. District Judge Michelle Childs ruled that SCE&G was unlikely to win the lawsuit that challenged the state's ability to cut the company's rates following the cancellation of two nuclear reactors at V.C. Summer station last year.
The federal ruling will cost the utility around $270 million, and it will lighten the monthly electric bills of more than 700,000 homeowners and businesses through the end of this year.
Those customers will also receive a rebate for the power they purchased between April and July.
The average SCE&G residential customer will save $198, or $22 a month, as a result of the rate cuts. The rebates for the electricity purchased over the past four months will be credited to people's bills in August, too.
The rate cut marks one of the first major concessions that SCE&G and its parent company, SCANA Corp., have been forced to make since abandoning their $9 billion nuclear project in Fairfield County last year.
But the judge's decision may cause even more financial pain for SCE&G. The order also raises the prospect that SCE&G will now be forced to refund all of the money it collected for the abandoned reactors in South Carolina since construction ended last July.
The judge seemingly agreed with the attorneys for the legislature who argued in court that SCE&G should have stopped charging customers the moment roughly 6,000 construction workers streamed off the job site.
"SCE&G cannot legitimately claim an entitlement to revised rates collected after abandonment because it was no longer constructing the project," Judge Childs wrote.
As a result, Nanette Edwards, the director for the state's utility watchdog agency, said the roughly $444 million that SCE&G collected since abandonment last year is likely to be called into question in front of the state's utility regulators on the Public Service Commission.
SCE&G's customers already shoveled more than $2 billion into the failed nuclear project due to a 2007 state law that allowed the utility to charge customers during the construction.
As a result, the average SCE&G customer this year paid around $27 per month for the unfinished reactors that will never produce electricity. The temporary cut that kicks in Tuesday will drop that cost to around $5 per month.
SCANA's stock plummetted 5 percent after the market closed on Monday and the federal order was handed down.
"We will review the court’s order and decide quickly whether to appeal the decision," said Eric Boomhower, SCANA's spokesman. "In the meantime, the company will strive to offset the operational impact of the temporary rate reduction by continuing to cut costs and delaying spending without sacrificing safety and reliability."
Lawmakers who pushed for the temporary reduction in people's power bills called it a victory for the entire state.
"That's a great win for SCE&G customers and South Carolina as a whole," said Senate Majority Leader Shane Massey, R-Edgefield. "We knew they were going to sue no matter what we did. I think it's a testament to just how smart and capable our staff is."
"It's a huge step forward to get us through this horrendous debacle in South Carolina," said Senate Minority Leader Nikki Setzler, D-West Columbia.
It may be a legislative win but its still unclear who will pay for the reactors — one of the biggest economic failures in state history — in the long run.
The state's utility regulators have until December to decide whether SCE&G or its ratepayers foot the bill for the abandoned power plants over the next several decades. SCE&G's attorneys and a small army of lawyers opposing the power company are gearing up for hearings in November that will decide that issue.
SCE&G and project partner Santee Cooper pulled the plug on the South Carolina nuclear reactor just over a year ago, after promising for years that construction was on track. Since then, audits, emails, memos, voicemails and depositions have surfaced that paint a grim picture of the project years before the two utilities announced the shutdown.
That information has raised serious questions about whether SCE&G's leaders lied to the public and whether the company made prudent decisions with the information it had at the time.
The attorneys for SCE&G and the S.C. House and Senate argued over those issues in federal court last week. But it will ultimately be up to the state's utility commission to judge SCE&G's actions over the past nine years, as it sought to build two of the first nuclear reactors in the country in three decades.
State lawmakers believe the federal ruling on Monday emphasizes their power to determine how electric rates are set in South Carolina and justifies the work they put in over the past year.
"The Legislature was in the right on this, and we've taken the first step to providing relief to ratepayers," said Rep. Peter McCoy, a Charleston Republican who investigated the nuclear cancellation. "You spend so much time on the issue and to get a win is just so big."