South Carolina Electric & Gas is seeking a court order to stop the state from cutting its electricity rates, accusing state legislators of passing an unconstitutional law to make it eat the cost of its failed nuclear project.
The utility filed a lawsuit in federal court on Friday, days before regulators on the S.C. Public Service Commission met to implement a steep rate cut. The Legislature voted last week to have regulators temporarily cut SCE&G’s electricity charges by 15 percent.
SCE&G collects $37 million a month from electricity users for its failed effort to expand the V.C. Summer nuclear power plant north of Columbia. The utility’s unfinished reactors cost the typical household $27 a month. Under the rates approved by the Legislature, they would only pay $5 a month.
The Public Service Commission officially ordered the temporary rate cut on Monday — more than nine years after the regulatory body OK'd the V.C. Summer project with a "generic" construction schedule and an unfinished reactor design. Unless the courts stop the reduction, rates would fall in August.
The temporary rates will only last until the end of the year, when regulators make a final decision on who should pay for the project.
SCE&G is seeking a court order blocking the rate reduction from taking effect, but it isn’t clear when a U.S. district judge could take up the matter. By filing its case in federal court, the utility is bypassing a state Supreme Court whose justices are elected by the Legislature.
The dispute over the temporary rate reduction is worth tens of millions of dollars a month for SCE&G, but the utility says it is also trying to stave off a far bigger penalty, one that could be worth billions.
The new law made it easier for regulators to stick SCE&G with the project’s bill. SCE&G owned just over half of the project, which cost $9 billion in all.
The utility says it’s unfair to cut its rates and change the rules a decade after the project began. It accuses the state of unconstitutionally taking its property and denying it the due process of law.
The utility's attorneys said lawmakers were "singling out and severely punishing SCE&G for its decision to abandon construction." And they suggested it was only because of the "political and media firestorm" that engulfed the company since last summer.
"The General Assembly has elected to change the rules of the game after it has ended," SCE&G's lawyers wrote in their complaint.
For months, SCE&G warned lawmakers that slashing rates, even temporarily, would destroy the company's finances and possibly kill a proposed $14.6 billion takeover by Dominion Energy.
But last Friday, as SCE&G was filing its lawsuit, Dominion CEO Thomas Farrell met with Gov. Henry McMaster at The Greenbrier resort in West Virginia.
Brian Symmes, the governor's spokesperson, said Monday that Farrell told McMaster during the meeting that his company would not pull their offer for SCANA, SCE&G's parent company, as a result of the temporary rate cut.
The key to SCE&G's argument in federal court is that the V.C. Summer expansion only began after the Legislature passed another law intended to protect the utility's investment. The 2007 Base Load Review Act made it easier for SCE&G to collect on a risky project — an ambitious effort to build America's first new nuclear reactors in three decades.
Regulators approved nine increases to SCE&G's electricity rates under that law. The project eventually accounted for nearly a fifth of ratepayers' monthly bills, and when construction was called off last summer, it set off a wave of public attention and outrage.
Lawmakers said they pushed for a rate cut because they felt SCE&G had misled regulators and papered over mounting issues at V.C. Summer. The Legislature ultimately decided that the utility shouldn't get credit for any rate increases it won after 2010. That's when it began withholding payments from the project's contractors, suggesting that problems were emerging.
But SCE&G accuses the Legislature of succumbing to the public outrage that has overwhelmed the company over the past year.
"Bowing to extreme political pressure, the South Carolina General Assembly now wishes that it had not enacted the (Base Load Review Act) and, through two new laws seeks to punish SCE&G by retroactively eliminating all rate increases since 2010," SCE&G says in its lawsuit.