Electricity is delivered to South Carolina residents through two regulated monopolies — Duke Energy and SCE&G, which is soon to be Dominion Energy — and state-owned Santee Cooper and its various electric cooperatives.
It’s a system that dates to the New Deal era, when big interstate holding companies were broken up and hundreds of utilities were granted monopolies in exchange for providing reliable power to customers at regulated rates.
At the time, it made sense for regulated monopolies to own both the means of producing electricity and the transmission lines. But perhaps not so much today.
Part of what led to the multibillion-dollar V.C. Summer boondoggle can be traced to having a system of regulated monopolies and, of course, the Base Load Review Act that allowed SCE&G to charge ratepayers in advance for the now-abandoned nuclear project.
Economic incentives push for-profit utilities to make expensive, risky investments rather than, say, try to help customers reduce their energy consumption.
But adding more competition to the mix through deregulation, as many other states have successfully done, could shift the balance of power back to ratepayers.
State Sen. Tom Davis, R-Beaufort, broached the topic in a recent column, and the Palmetto Promise Institute just published a study that showed consumers have generally benefited from deregulation. It’s an idea worth exploring.
In its simplest terms, deregulation starts with separating generation from transmission. Transmission is turned over to an independent, quasi-governmental agency that operates the “grid,” blindly buying wholesale electricity at the lowest cost and matching supply to demand.
The electricity market is then opened to producers, giving customers a choice between providers and the types of generation: solar, hydroelectric, wind, gas or coal. That creates competition among electricity producers and, at least theoretically, pushes consumer rates down.
And that’s particularly important given that the state Public Service Commission approved a deal Friday that will leave SCE&G ratepayers on the hook for $2.3 billion related to the failed V.C. Summer project and let Dominion take over SCANA.
It’s also possible that Santee Cooper could be sold in the near future, leaving its customers vulnerable to rate hikes.
Without a major shift in the way utilities are allowed to do business in South Carolina, it’s all but inevitable that rates across the state will keep going up.
Energy-rich Texas has probably had the most success with deregulation, driving down rates for gas and electricity while expanding consumer choice. But some states like Ohio have started to reverse course after encountering problems that caused consumer costs to rise. In California, the manipulation of the wholesale electricity market had disastrous results in 2001.
Certainly, such a substantial change in South Carolina would require serious study.
But South Carolina’s regulated monopoly system has obviously failed ratepayers. Lawmakers should at least be willing to have a conversation about South Carolina’s energy future, and that discussion should include some form of deregulation.