How SC’s nuclear project collapsed: A timeline
If a proposed SCANA-Dominion Energy merger falls through, other suitors are waiting in the wings, a financial analyst told the S.C. Public Service Commission on Tuesday.
“I know that (Florida-based utility) NextEra is here, but I would think there would probably be (interest from) others as well,” said analyst Kevin O’Donnell, who testified on behalf of SCANA’s industrial electrical customers, represented by the S.C. Energy Users Committee. “I’d be surprised if Duke (Energy) wasn’t interested.”
O’Donnell’s testimony came on the ninth day of PSC hearings into the failed $9 billion effort by SCE&G, a SCANA subsidiary, to build two nuclear reactors in Fairfield County. The commission also is considering SCE&G’s future electric rates and a proposal by Richmond-based Dominion Energy to buy its parent, Cayce-based SCANA.
At stake is who will pay for the failed nuclear project — SCE&G’s customers, SCANA’s shareholders or both — and how big the future power bills will be for SCE&G’s roughly 730,000 electric customers.
SCE&G increased the electric rates for its typical residential customer by about $27 a month to pay for the nuclear project before it pulled the plug on the unfinished reactors in July 2017. Subsequently, the PSC cut SCE&G’s nuclear-related rates temporarily.
The state’s utility watchdog, the Office of Regulatory Staff, argues SCE&G withheld key information from regulators in March 2015 when requesting a rate hike to help finance the nuclear project. Attorneys for SCE&G say Regulatory Staff was well aware of the project’s flaws and are using the utility as a scapegoat.
Should S.C. regulators bar SCE&G from charging its customers to pay off its nuclear-related debt from the abandoned project and Dominion Energy to walk away, as it has threatened, the Cayce-based utility has options to avoid bankruptcy, including selling its North Carolina natural gas subsidiary, PSNC Energy, O’Donnell told commissioners Tuesday.
SCANA Chief Executive Jimmy Addison last week testified NextEra made an informal offer to pay $2.2 billion for the N.C. gas business. In December 2017, midway through negotiating a deal with Dominion, Addison met with a NextEra executive, who said that utility was interested in buying SCANA. NextEra also made a separate offer to buy PSNC Energy.
That bid was rejected after Addison advised SCANA’s board that the offer undervalued PSNC.
O’Donnell’s testimony came a day after SCANA Chief Financial Officer Iris Griffin testified that a permanent rate cut for SCE&G electric customers would put the utility in dire financial straits.
Griffin said the S.C. Office of Regulatory Staff’s proposed rate cut would make it harder for SCANA to borrow and maintain a healthy cash flow. Additionally, rate cuts could lead to further downgrades of SCANA’s credit. That, she said, would hamper the utility’s ability to invest the roughly $500 million a year it needs to spend to “maintain safe and reliable service,” including replacing obsolete equipment, extending service to new customers, and expanding its generation and transmission capacity.
O’Donnell, however, told commissioners that SCANA could reduce further or eliminate the dividends that it pays shareholders, cut operating costs and sell PSNC to get out of its nuclear hole. He compared it to a family selling their luxury car to keep their home after defaulting on their mortgage.
“They ought to look strong and hard at that,” O’Donnell said of selling the N.C. gas business.
Commissioners on Tuesday also heard from witnesses testifying on behalf of the S.C. Coastal Conservation League, Southern Environmental Law Center and Southern Alliance for Clean Energy. The groups want V.C. Summer’s nuclear debt refinanced through bonds sold to investors, and some of the proceeds reinvested in more renewable energy sources and energy conservation to reduce customers’ bills and pollution.
Securitizing V.C. Summer’s debt could save ratepayers up to $2 billion, according to testimony from Colorado energy analyst Uday Varadarajan.
The groups also called for a guarantee of competition if a utility makes a case that more natural gas pipelines are needed in the state.
Dominion is building a natural gas pipeline from West Virginia to North Carolina, which conservationists worry could be extended across South Carolina, leaving ratepayers to foot the bill.
Gas expert Greg Lander testified South Carolina has more than enough capacity in existing natural gas pipelines, thanks to the Transco pipeline that delivers gas to the state’s existing gas distribution network.