South Carolina Electric and Gas asked the state Public Service Commission in May to approve a 2.8 percent rate hike that would appear on customers’ electric bills in the fall.
If authorized, it would be the seventh SCE&G rate increase since 2009 related to financing the construction of two new nuclear reactors at the V.C. Summer site in Jenkinsville. And it will hardly be the last.
To an extent, customers knew this was coming. In 2008, the PSC approved a construction plan that would let SCE&G start paying for the new nuclear reactors through annual customer rate increases years before the new plant goes online in 2016 and 2018.
But a series of construction delays now threaten to push the first reactor’s completion date as late as 2019, with the second reactor coming online a year later. Those setbacks mean customers could be on the hook for an extra $1 billion in unexpected costs if the PSC decides that SCE&G can include those expenses in future rate hikes.
And that’s assuming construction goes smoothly from now on.
The fact that SCE&G can have customers cover such a dramatic cost overrun should be enough to raise the eyebrows of state legislators — especially those who crafted a generous 2007 bill that allowed the practice.
That bill — the Base Load Review Act — lets investor-owned utilities raise consumer rates to pay for new generator construction before plants begin producing electricity.
Paying more up front can help utilities save billions in financing costs, which could in theory save customers money on their bills down the road. SCE&G hopes to save more than $4 billion over the life of its two new nuclear reactors by financing them under the BLRA, for example.
Other provisions included in the BLRA are decidedly less consumer-friendly.
The BLRA also allows utilities to charge customers higher rates if construction costs increase, as long as they can show that additional costs are prudently incurred.
That’s a serious disincentive for utilities and their construction partners to keep projects on schedule and under budget. And it’s especially problematic for South Carolinians who signed on for new nuclear reactors at one price, but are already likely to pay much more.
Exactly how much more remains tough to determine, especially since portions of SCE&G financial data related to the reactors’ construction costs are redacted in documents submitted to the Public Service Commission. The utility claims the documents contain confidential trade secrets protected under the Freedom of Information Act.
But that information could also be of significant interest to customers, who are legally allowed to review proposed rate increases and submit comments to the PSC during a public input period.
The Public Service Commission has no obligation to grant SCE&G’s request to redact financial information. Indeed, the commission will consider that request when it meets today. It shouldn’t keep the public in the dark.
SCE&G customers are already paying about 15 percent of each monthly bill in financing costs for the nuclear reactors under construction. They deserve to know exactly how that money is being spent.
South Carolina needs reliable, cost-effective electricity to power the homes of millions of residents and propel the state’s economy. Nuclear power offers an efficient alternative to dirtier fuels like coal and gas. (It would be an even more attractive source of power if the federal government would provide for disposal of nuclear waste, as the law requires.)
But each expensive delay, rate increase and adjusted construction cost related to the new V.C. Summer reactors says that the state needs to adjust how utilities finance their projects in order to better protect consumers.