COLUMBIA — The 2007 law that accelerated South Carolina's failed nuclear project is being challenged in court, setting up a pivotal legal battle and further jeopardizing S.C. Electric & Gas, the majority owner of the unfinished reactors.
Attorneys representing SCE&G ratepayers asked a circuit judge last week to determine whether the law — known as the Base Load Review Act — is constitutional.
The motion is the first official legal test for the controversial law since the S.C. Attorney General's Office issued an opinion last year calling the statute "constitutionally suspect."
The legal challenge could quickly lead to a precedent-setting case in front of the state Supreme Court, if Circuit Judge John C. Hayes strikes down decade-old legislation.
The high-stakes decision could have far-reaching consequences, possibly forcing SCE&G to refund the more than $2 billion it already collected for the failed project at the V.C. Summer Nuclear Station and undermining the utility's attempt to charge its ratepayers another $3.8 billion over the next 20 years.
"SCE&G will respond to this motion at the appropriate time in court and will continue to defend the company from these lawsuits in the best interest of its customers, shareholders and employees," SCE&G spokeswoman Rhonda O'Banion said.
The 2007 law allowed SCE&G — a subsidiary of Cayce's SCANA Corp. — to bill customers for the nuclear construction project before the reactors were finished. Like similar legislation in other states, it shifted the risk of the multi-billion-dollar investment from SCE&G to the utility's more than 700,000 electric customers — a reality highlighted in The Post and Courier's investigation "Power Failure."
SCE&G's leaders have said the law — drafted by the utility's attorneys — was needed to spur the investment in one of the country's first nuclear projects in three decades. It flew through the Statehouse in 2007, bypassing legislative committees on its way.
Attorneys representing SCE&G's customers along with S.C. Solicitor General Bob Cook allege the law ran afoul of the state's constitution.
It eliminated ratepayers' ability to challenge the nine rate increases SCE&G requested over the course of the project, the attorneys for SCE&G customers say.
Additionally, it limited the authority of the state's utility regulators on the Public Service Commission, turning electric customers into "powerless financiers," according to their arguments.
"The result was that ever-increasing financing charges were passed along to customers for a project that was unnecessary before construction began, never properly planned and mismanaged from the start," the attorneys for SCE&G's customers said.
The crucial legal battle could also stop other companies from using the utility-friendly law in the future, something state lawmakers failed to accomplish so far this year.
If the law firms challenging the Base Load Review Act win, they want SCE&G to pay back the roughly $333 million the utility billed customers since the reactors were canceled last July.
The impact to SCE&G might not stop there. It's likely to have far greater consequences in the Public Service Commission where the utility is attempting to recoup the cost of the abandoned reactors and seal a $14.6 billion purchase offer from Dominion Energy.
If the court deems the law unconstitutional, Dominion Energy's spokesperson, Chet Wade, said it's likely to kill the offer to buy SCANA.
"SCE&G understands the ratepayers of South Carolina want relief," O'Banion said. "We want to provide it to them, which is why we are seeking a combination with Dominion Energy. The Public Service Commission is the best forum for the issues related to rates and customer refunds to be decided."
Bob Guild, an attorney for Friends of the Earth and the Sierra Club, is challenging SCE&G in front of the state's seven utility regulators. He expects to prove SCE&G didn't properly manage the project or follow the law over the course of the project.
If the Base Load Review Act is overturned in court, Guild said, it makes his job that much easier.
"If it's unconstitutional, we win," he said. "It would be an extremely important precedent."