Barring effective action from state regulators and lawmakers, SCE&G and Santee Cooper customers are on the hook for a combined $9 billion to pay for two failed nuclear reactors. They don’t need a few hundred million more dollars added to that devastating total.
But that’s exactly what could happen if a state audit finds that Santee Cooper and SCE&G parent company SCANA owe sales taxes on the equipment and materials they used to build the abandoned reactors.
At question is whether a state tax exemption on factories applies to the reactors, even though they’re not being used. Tax officials have told both SCANA and Santee Cooper that sales taxes may now be due on “previously tax-exempt purchases,” according to a story Thursday by Post and Courier reporter Thad Moore.
The S.C. Department of Revenue investigation started in January.
But the auditors should proceed with caution. Applying sales taxes to the nuclear project could wind up being a backdoor tax hike on the roughly half of the state population that gets its electricity from either SCE&G or Santee Cooper.
It’s unclear how much new money would be owed, but a 6 percent tax on a $9 billion project would be enormous. That would be an unacceptable burden on hundreds of thousands of South Carolina residents and businesses.
SCANA, as an investor-owned utility, could theoretically pass any sales tax on to its shareholders to avoid raising electric rates. But so far, it has shown no willingness to make shareholders help pay for the failed reactor project. That’s not likely to change unless the utility is forced by lawmakers and state regulators to cut its dividends.
Santee Cooper, on the other hand, can only raise revenue by charging customers more or cutting costs. It has already slashed its budget to help pay down the nuclear costs. Some legislators and Gov. Henry McMaster want to sell the state-owned utility in order to pay off the rest of its share of the nuclear debt, but doing so carries substantial risks for customers.
With less than a week left in this year’s legislative session, lawmakers have a lot of work to do to provide electric ratepayers with some long-overdue relief. The state House and Senate must agree on a rate cut for SCE&G customers, for example. And a strategy to help Santee Cooper ratepayers should be put into place.
If auditors find that millions more must be added to the nuclear total, state lawmakers will need to act to ensure that ratepayers are given a tax break to make up for the added cost. The $9 billion already owed is too much as it is.