South Carolina electricity customers could save as much as $1 billion a year thanks to the Obama administration’s Clean Air Plan and steps here to shift from coal toward nuclear power.
But that savings could go up in smoke if S.C. Attorney General Alan Wilson and Gov. Nikki Haley have their way.
Wilson and Haley are part of a coalition of utilities, coal companies and 27 states challenging the Obama plan in federal court.
It’s a titanic legal battle happening amid the global threat of a rapidly changing climate, a fight that pits the fossil fuel industry against an equally hefty alliance of environmental groups, public health advocates and 18 other states.
The impact of this court drama will surge through the nation’s electric grids and ratepayers’ wallets.
In South Carolina, billions of dollars hang in the balance, a Post and Courier analysis found.
How we got here
The issues behind this court battle are complex and full of what ifs, but the stakes are clear.
Carbon dioxide in the atmosphere is at the highest level in hundreds of thousands of years, largely because of a ballooning human population and the burning of massive amounts of coal, oil and other fossil fuels.
This unprecedented release of carbon dioxide has acted like a greenhouse heating the air and oceans, melting equally massive amounts of polar ice. A warmer climate means higher sea levels and likely more rain bombs, such as those that hit the Lowcountry during the past two years, causing record flooding.
The government’s response to this gathering climate catastrophe began with “an oilman from Texas,” Carl Pope, former executive director of the Sierra Club, told Bloomberg News earlier this year. In his first campaign for the White House, George W. Bush pledged to regulate CO2 and other power plant pollutants.
Bush changed course once he took office, but conservation groups continued their calls to regulate carbon dioxide. The Obama administration eventually crafted a “Clean Power Plan” that, among other things, called for a one-third cut in carbon dioxide emissions from power plants.
“The war on coal you’ve heard so much about is really more or less Barack Obama carrying out one of George Bush’s unfulfilled campaign promises,” Pope told Bloomberg.
Under the Obama plan, the nation would dramatically change the way it produces electricity. Utilities that burned coal – the source of 33 percent of the nation’s electricity – would be penalized. Utilities that generated electricity from wind, solar, hydropower and nuclear reactors would be rewarded.
These penalties and rewards would be managed through an elaborate market that turned carbon dioxide emissions into “carbon credits” – a commodity to be bought and sold like soybeans or barrels of oil. And as in any market, this new CO2 market will create winners and losers.
South Carolina goes nuclear
In this future carbon market, South Carolina would be one of the biggest winners.
The reasons for this are rooted in decisions made a decade ago. Santee Cooper and South Carolina Electric & Gas, two of the state’s largest utilities, made a risky bet to invest in nuclear power.
Both utilities at the time were heavily dependent on coal, though the two co-owned a nuclear power plant north of Columbia, at the Virgil C. Summer Nuclear Station.
The utilities believed the state’s growing population would need more power, and with regulations on carbon dioxide on the horizon, investing in new coal plants carried its own risks.
So SCE&G and Santee Cooper agreed to build two new reactors at the Summer Station. For these cautious utilities, it was a big step into the unknown. The last reactor to enter service in the nation was Tennessee’s Watts Bar 1 in 1996, and many utilities are aging out nuclear plants.
If successful, the new reactors would give SCE&G and Santee Cooper a new and robust source of electricity that produces no carbon dioxide – and possibly a way of earning valuable carbon credits if a market for them ever developed.
Michael Couick, head of The Electric Cooperatives of South Carolina, said that if he had to guess what the future looks like, he’d say nuclear “is a good fit for South Carolina.”
It looks to be a good long-term investment despite two hurdles: dramatically increasing reactor construction costs and continued uncertainty over what to do with highly radioactive spent fuel rods.
But the benefits to ratepayers could pay off. Couick estimates that South Carolina ratepayers would save about $1 billion a year if the Clean Power Plan survives its court challenge.
That figure takes into account South Carolina’s investment in the new nuclear power plants – and the costs of building additional ones if the state loses the credit it got for building them in the current Clean Power Plan. The plan as written “clearly works for South Carolina,” Couick said.
South Carolina ratepayers are likely to benefit in another way – as a seller of carbon credits.
Once online, the state’s nuclear reactors, along with its much smaller portfolio of hydropower and solar generators, would ring up valuable carbon credits.
With these credits in hand, South Carolina utilities could sell them to CO2-spewing utilities in other states that need them, according to a new study by Duke University’s Nicholas Institute for Environmental Policy Solutions.
A Post and Courier analysis of the study’s findings shows that the state could receive as much as $1.2 billion in credits between 2022 and 2030 as the Clean Power Plan phases in to full effect.
Those credits are expected to go straight into the pockets of South Carolina electricity customers in rate cuts.
Marilyn A. Brown, a professor of sustainable systems at Georgia Tech, said the turn to nuclear fuel to produce electricity “could become a big economic advantage for South Carolina.”
Shot in the foot
In February, however, the U.S. Supreme Court delivered a blow to the Clean Power Plan. Voting 5 to 4 along ideological lines, the court halted its implementation until the court battle is settled. The court had never before blocked an Environmental Protection Agency rule.
Officials in coal-producing states were ecstatic. West Virginia Attorney General Patrick Morrisey called it a “historic and unprecedented victory” over the EPA.
The court’s decision came after a powerful coalition of coal mining states, fossil fuel producers and states’ attorneys generals, including South Carolina’s, argued that the plan was an unconstitutional power grab that will increase costs and hurt business. They contend it's Congress' job, not the president's.
“This flawed plan demonstrates yet again the EPA’s disregard for the rule of law,” Attorney General Alan Wilson said after the Supreme Court order. “I am hopeful the federal courts will eventually strike down this unconstitutional overreach.”
Haley also has spoken out against the Clean Power Plan.
The Post and Courier asked Wilson’s office whether they considered the potential losses to the state’s electricity ratepayers if they succeed in killing the Clean Power Plan. Hayley Thrift Bledsoe, Wilson’s communications director, said in an email response, “Our office has not changed its position.”
Conservationists said state leaders are shooting ratepayers in their collective foot.
The Clean Power Plan “could bring millions of dollars in electricity bill relief to South Carolina citizens while reducing the threats to our coastal economy from rising seas and violent storms,” said Blan Holman, a lawyer with the Southern Environmental Law Center in Charleston. “Why any elected official would try to blow that up is a real head-scratcher.”
Dana Beach, executive director of the Coastal Conservation League, called the opposition “a foolish, ideologically driven reaction that flies in the face of the facts and the best interests of the state and the environment.”
Will we win or lose?
For years, customers of both SCE&G and Santee Cooper have watched cash drain from their pockets to fund construction of the two new nuclear reactors. Those ratepayers have watched helplessly as cost overruns pushed the construction bill from an estimated $10 billion to $14 billion.
Instead of paying for the reactors' construction costs, such as a homeowner through a long-term mortgage, the utilities made ratepayers pay for them as they were being built.
The utilities did this by constantly raising electricity rates.
Since 2009, SCE&G has raised them each year for a total of almost 17 percent. And those increases are just for the reactors; the utility also hiked rates for other reasons – 29 percent overall.
Santee Cooper’s customers have seen slightly lower increases, mainly because the power company has borrowed heavily to cover the costs, a bill ratepayers also will eventually have to foot.
Will these pay-as-you-go costs ever pay off for South Carolina ratepayers?
The utilities say they will: Not only would the electricity from nuclear cost less, construction costs would be some $2 billion lower and ratepayers would save at least $4 billion in other costs over the 60-year life of the reactors,
Add to that the potential $1.2 billion in emission credits and the more than $1 billion a year in cost savings under the Clean Power Plan as currently written.
Most of that would disappear like steam from a reactor cooling tower if South Carolina, fellow states and the coal industry prevail in killing the Clean Power Plan.
The state’s electricity users would get it from both ends, environmental lawyer Holman said.
“State officials passed a law basically ensuring that South Carolina ratepayers would have to pay for expensive nuclear plants. But now the state is attacking the plan that would give citizens a return on that investment.”
Reach Doug Pardue at (843) 937-5558 and Tony Bartelme at (843) 937-5554