First utility reform bill on cusp of becoming law

This article was originally published on the Statehouse Report on April 13, 2018.

By Lindsay Street, Statehouse correspondent

As the state’s annual legislative session enters its final weeks, zero bills tied to the $9 billion debt incurred on the backs of ratepayers for a shuttered nuclear project have been signed into law.

But that could change next week as the Senate takes up House amendments for a bill that would reduce rates for South Carolina Electric & Gas customers and increase powers of the state’s public utility authority. The bill has already passed both chambers in slightly different forms. Its backers say they hope a compromise will make it to the governor’s desk in the coming weeks.

Still, utility reform advocates and some lawmakers are bemoaning the “all nuclear, all the time” session as particularly disappointing.  They hoped more would be done to reform the state’s energy climate, but point to a session replete with machinations by special interests and the lobbying effort by “big utilities.” Others counter by saying the legislature is being appropriately cautious in meddling with a complicated issue.

Pulling the plug

In 2017, state-owned utility Santee Cooper pulled the plug on a project to bring two nuclear reactors online in Jenkinsville. The decade-long construction project was in joint partnership with South Carolina Electric & Gas, owned by SCANA in Cayce. The project was bankrolled, in part, by a 2007 law that has allowed utilities to raise rates to pay for construction of capital projects.

The nuclear reactors’ construction had huge cost overruns and its partners decided incurring further expense was not worth finishing the reactors. Since that time, lawmakers — mostly in the House where members are up for reelection — have pushed to rollback rates on ratepayers, increase utility oversight, consider privatization of Santee Cooper, and determine whether a private utility sale is in the best interest of customers.

Fanning called the canceled project “the biggest fiasco in the history of the state.”

“The disappointing thing is while everything took a backseat to utility reform, which it should, that would be O.K. if we had passed something but we passed nothing. Nothing has been signed into law,” said S.C. Sen. Mike Fanning, D-Fairfield. He represents the area where the V.C. Summer plant is located.

The S.C. Coastal Conservation League (SCCCL) is one of the organizations that has pushed hard for change, only to come up short.

“We have been watching bill after bill get slow-walked or killed outright despite the $9 billion that ratepayers are being charged for to get nothing. You would think this was going to be a year where reform had a chance,” SCCCL Energy and Climate Program Director Eddy Moore said. “At some basic level there should be a change in the law. If we took a $9 billion hit and they couldn’t find any improvement in the law that needed to be made, then we’re in trouble.”

Fanning and Moore fingered utility lobbying and public messages that have kept big changes from coming in the state. But Mike Couick, president and CEO of The Electric Cooperatives of South Carolina,  said slow progress is a result of lawmakers being “mindful of not doing the wrong thing.”

S.C. Sen. Brad Hutto, an Orangeburg Democrat who has filibustered one reform bill, said lawmakers like him are “absolutely not” in the pocket of big utilities.

“Nobody likes the situation we’re in,” he said.  “I don’t like the situation we’re in. But just because bad decisions were made … doesn’t mean you don’t follow the law.”

‘Very modest’ reform

Hutto is particularly vexed by the bill, S. 954, that stands the best chance of being passed before the session ends next month.

“There’s a process set up for setting rates in South Carolina, adjusting rates in South Carolina, for mergers — and I don’t think we should be putting our fingers on the scale and we should let the process take its course,” he said.

Fanning, who is a cosponsor of the bill, called it “very modest” in terms of reform. The bill seeks to reduce the increased rates from 18 percent to 5 percent, and it would give the S.C. Public Service Commission subpoena power and give the commission more time to review projects. He said the bill was scheduled after the Senate completed deliberations on the budget to give it the best chance possible of passing.

While Fanning and Moore expressed dismay about the session so far, Couick was more optimistic.

“I am delighted. While not everything has been done, there has been solid progress,” Couick said. He spoke in particular about Santee Cooper, citing separate moves by the House and Senate to explore privatization and Gov. Henry McMaster’s appointment of a new chair, both moves still not settled in Columbia. “If those two things (on Santee Cooper) are accomplished, A-plus.”

Restoring ‘openness’ at Santee Cooper

Last month, McMaster appointed former S.C. Attorney General Charlie Condon to chair Santee Cooper’s board. Couick said Condon has a public record of being “big on transparency.”

“Santee Cooper has been challenged. A lot of its decision-making is behind closed doors so it’s not often apparent how deliberate the board is being,” Couick said. “That openness could restore confidence in their board’s processes.”

Palmetto Promise Institute research Oran Smith also praised the move. Smith authored a report for the conservative think tank that provided an analysis of selling Santee Cooper.

“He will bring a fresh perspective to the Santee Cooper board that’s for sure,” Smith said. Read the report here.

The Senate still needs to confirm Condon. The governor’s office did not respond to a request to comment for this story.

On selling Santee Cooper

During budget deliberations this week in the Senate, members spent hours on a proviso introduced by S.C. Sens. Tom Davis, R-Beaufort, and Larry Grooms, R-Berkeley. It called for  a process that could lead to the privatization of Santee Cooper. It ultimately was included in the budget passed Thursday by the state Senate.  The House passed legislation earlier this session that seeks a similar proposition. The chambers still need to come to an agreement on the measure when the budget is in conference.

There has not been consensus among electrical cooperatives in the state on the question of privatizing Santee Cooper, Couick said. But he said exploring privatization will lead toward reforming the state-owned utility, either through a sale or through detailed examination.

“There ought to be some benchmarking being done to find out if somebody else can do it better,” Couick said. “The General Assembly to start a process of receiving bids that detail the value proposition of what they’re going to do to make Santee Cooper more efficient.”

“You have to ask for good ideas from smart people on what they would do on what they would do to make Santee Cooper better and you only get that through the marketplace,” Couick said. He added that then the state can take those ideas and pursue the best options.

Hutto said the proviso and exploring divestment of the state-owned utility could ultimately prove beneficial.

“I would like us to move forward with some process of evaluating Santee Cooper and its assets and whether or not it’s possible, feasible, advisable to look at some sort of sale of them,” Hutto said.

Fanning said it will help keep the issue of utility reform alive between sessions.

Dominion deal

Lawmakers have also grappled with the question of interfering with a Virginia utility seeking to buyout SCANA. Dominion Energy proposed buying SCANA in January, but told lawmakers not to rollback rates related to V.C. Summer or the deal would fall through. SCANA also said it was at risk of bankruptcy if rates were rolled back, a claim later disputed by a legislative study.

S. 954 could jeopardize the Dominion deal, Fanning said. But, he added, it may allow lawmakers to “call their bluff.”

“When we pass 954 and it goes to conference and then the governor’s office … we have now changed the leverage on why Dominion needs the rates,” Fanning said. Dominion has offered a $1,000, one-time rebate for SCE&G customers.

Hutto, who filibustered S. 954 earlier in the year, said lawmakers are in danger of overreaching on the deal.

“Let the companies work out whatever they’re going to work out and let the Public Service Commission set the rates,” Hutto said.