Over the past decade, South Carolina’s two largest utilities have collectively spent $8 billion on an ill-fated nuclear reactor that will never generate a kilowatt of electricity.
A lot has changed since the decision to pursue nuclear power and the adoption of the Base Load Review Act, which created a rate program that allows utilities to collect customers’ money before actually delivering electricity, including:
• Natural gas prices are at an all-time low;
• The cost to build natural gas-fired power plants is $1,000 per kilowatt, compared to $8,000 per kilowatt for nuclear. For an average-size 1,000 megawatt power plant that translates into the difference between $1 billion and $8 billion;
• Solar power can be generated below 6 cents per kw, cheaper than coal;
• Electric consumption has stayed flat and in some cases declined despite significant population and industry growth as a result of increased efficiency (such as LED light bulbs); and,
• The complexity of construction projects of this size and the necessary regulatory compliance requirements have become so high, that we simply do not have sufficient capabilities to properly execute a project of this scale.
While the pursuit of justice and retribution for the alleged wrongdoing provides some satisfaction in the short term, we must not miss the opportunity to focus on positioning ourselves for reliable, competitive and environmentally sustainable power going forward.
Electrical service is complex, but ultimately there are four critical elements needed:
Electricity is often taken for granted ... until the lights go out. The need for high reliability is critical especially at our places of work.
Competitive electricity is one of the largest economic drivers in our state. Low energy costs are proven to be directly linked to economic prosperity. And even if we are only being charged the equivalent of one Starbucks drink per week for the failed nuclear project, when added up, our state is now at a collective disadvantage of close to $1 billion per year versus our neighbors. Cost matters.
Our transition to non-emitting and renewable energy sources such as solar and wind has lagged behind national and international progress. In light of massive solar and wind potential in our state, this is disappointing. It became unacceptable when the cost for renewable sources decreased to the point where they are lower than coal in the last few years. We need an acceptance of and a commitment to renewable sources for a successful future.
4. Balanced energy portfolio
There are two important reasons why a balanced energy portfolio is critical.
First, we must position ourselves to be resilient against changes in energy markets. The price for energy feedstocks is volatile when viewed over 20-year periods. Case in point are nuclear and natural gas. It is unwise to pursue a monoculture of generation assets. Over time, diversity will protect us from violent market swings.
Second, we must acknowledge that technology is simply not mature enough yet to allow elimination of generating sources that are independent of sunshine or wind. For the moment, we must accept that a gas plant will have to run on a quiet night in South Carolina to keep our lights on.
How do we get there?
We need to be served by a strong progressive utility
This includes financial strength, process strength, an existing strong and diverse generating and distribution network, and operating expertise. At the end of the day, SCANA is a small local utility that can not survive independently long term with or without the nuclear liability. The cost to do business in a regulated utility environment is so high that critical mass is key.
We need robust and consistent utility laws
Large manufacturing investments, especially utility investments, require long investment horizons. Charging customers for the cost of a large plant over a short period of time would double energy costs. South Carolina’s passage and now potential repeal of the Base Load Review Act is concerning for anyone seeking to invest in our state.
We need to move on. The painful but inevitable reality is that rate- and/or taxpayers in our state will pay for the failed nuclear project whether it’s through the current Base Load Review Act, SCANA’s threatened bankruptcy, years of litigation or loss of investment in our state by companies seeking to do business here.
I am convinced that the judicial process will sort out the past. Meanwhile, the tremendous talent in our state must look forward and use this opportunity to focus on our collective successful future.
Our future must be built around long-term ownership of SCANA by a utility that offers reliable, competitive, environmentally sustainable power from diverse sources of energy.
While ultimately I don’t know exactly who the best future owner of SCANA is, I do know that Dominion is one of less than a handful of companies that offer a balanced mix of generating sources, lower costs and a reliable operating record. I also know it is the only game in town at the moment.
I think we would be best advised to create regulatory certainty quickly, find the most competitive offer for the sale of SCANA and MOVE ON.
And one last thing … keep in mind that the same laws we enact and repeal now, will inevitably be the solution to the other partner in the nuclear plants: Santee Cooper. If you are not convinced that a solution involving punishment of SCANA’s stockholders and debtholders is anything other than a self inflicted wound, by the time the intended or unintended consequences of our contemplated legislative actions roll around to Santee Cooper, the buck stops with its stock- and bondholders. And that is all of us South Carolinians.
Marc Fetten, a resident of Berkeley County, is chairman of the Trident CEO Council.