The political furor swirling around South Carolina’s failed nuclear project is likely to hurt SCANA Corp.’s finances, a major credit-rating agency said Monday, as it moved the energy company into speculative status.
Moody’s says SCANA is no longer an "investment grade" borrower because politicians are eager to make the Cayce-based owner of South Carolina Electric & Gas pay for part of its abandoned nuclear reactors.
It also dinged SCE&G’s outlook but stopped short of declaring it a speculative investment.
"The downgrade of SCE&G and SCANA is driven by a political and regulatory environment that has become exceedingly contentious and uncertain, and our assumption that SCE&G will ultimately be required to make considerable rate concessions to move forward," Moody’s senior credit officer Laura Schumacher said in a statement.
The downgrade from Moody’s comes less than a week after lawmakers in the state House of Representatives voted to strip the nuclear project’s costs from SCE&G’s electric rates. The failed expansion of the V.C. Summer Nuclear Station accounts for nearly a fifth of its customers’ electric bills.
That proposal still needs the approval of the state Senate, but it has the blessing of Gov. Henry McMaster if it reaches his desk. The bill would cut off the nuclear payements while regulators and the courts decide how to divvy up the project’s costs.
Moody’s thinks the political storm brewing in Columbia will weigh on the regulators who sit on the Public Service Commission, which sets utility rates. The credit-rating agency expects that rates could be set lower because the landscape in South Carolina has "deteriorated markedly."
Moody’s isn’t the first of the Big Three rating agencies to put SCANA below investment grade. Fitch Ratings took that step in October.
SCANA has previously warned that politicians’ efforts to punish the power company for its lead role in the failure of the $9 billion V.C. Summer project could have unintended financial consequences. It says it could be forced into bankruptcy, and it says its weakening credit profile could make it more expensive to borrow money — and ultimately raise rates.
In a statement, company spokeswoman Rhonda O'Banion reiterated that sentiment Monday, saying that cutting off the nuclear funds "would increase SCE&G's borrowing costs, resulting in substantially higher costs for customers over the long term and creating other problems for the company, its customers, and the residents of South Carolina."
Those dire warnings have fallen flat in Columbia, where politicians say their trust in SCANA’s financial predictions has frayed. Regulators, meantime, have ordered a full audit of the financial implications of a rate cut.
One consequence would be more immediate: The legislation could allow Virginia-based Dominion Energy to walk away from its agreement to buy SCANA. The $14.6 billion deal includes a partial rollback of the nuclear-related rates and a refund of most of the money customers have paid into the project.
Dominion has said the bill "could threaten" its offer, but it hasn’t said definitively if it would walk away if the proposal becomes law.