This is a companion publication to Santee Cooper’s Uncertain Future.
by Katie Player, PhD & M.T. Maloney, PhD
Eight months ago, on July 31, 2017, Santee Cooper and SCE&G announced they would abandon work on the V.C. Summer nuclear project. Since then, South Carolina leadership has been grappling with the best path forward to reduce the burden of the nuclear fallout on the residents of South Carolina.
Palmetto Policy Institute is releasing revised rate increase projections as the South Carolina General Assembly wraps up its regular legislative session for the year. In our March 20 report, we called on our legislators to create a Commission on the Sale of the South Carolina Public Service Authority, to seek valuation of Santee Cooper assets and vet potential offers for the purchase of Santee Cooper by an entity which could assume the agency’s billions of dollars in V.C. Summer debt, rather than passing that debt along to Santee Cooper and rural electric co-op electricity customers.
Responding to Palmetto Promise Institute’s initial report, Santee Cooper acknowledged that customer rates must increase by at least another 7%. It did not, however, provide the methodology for this calculation. Rates have already increased 15.2% since 2012.
As our initial rate increase projections revealed—and our new estimates which anticipate even higher rate increases being needed to service Santee Cooper’s V.C. Summer debt confirm— inaction is not an answer. Delaying action on Santee Cooper leaves ratepayers paying down the debt, and delaying rate increases to service the debt only ensures that the rate increases must be even higher than if they were instituted immediately.
However, in the opinion of the authors of this paper, having customers pay the debt would be nearly criminal. The customers of Santee Cooper, many of them already challenged economically, do not deserve to be saddled with additional costs due to the failure of Santee Cooper. We urge the General Assembly to empanel its fact-finding committee as soon as possible and get that commission moving forward on its critical work.
Overview of findings:
Our previous analysis of the effects of the VC Summer expansion project on the South Carolina Public Service Authority (Santee Cooper) indicated that rates would need to increase between 11.7 percent and 40.7 percent for all customer classes. This equates to an increase in average annual residential electric bills of $167-580. However, given the new information from recently released 2017 financial statements, our estimate is now that rates would need to increase between 13.7 percent and 45.41 percent for all customer classes in 2018 (which equates to an increase in average annual residential bills of between $195-$647 per year).
The differences in these new rate estimates from our analysis released March 20, 2018 are due to four main factors: (1) Electrical sales in 2017 were not as high as anticipated which reduces the overall future sales forecasts for the entire model, (2) Average electrical rates across all customers were higher in 2017 than our 2016 model accounted for, (3) It is unlikely that funds from the Toshiba note will be used to pay down principal on debt, and (4) The total cost of the project reduced slightly due to Santee Cooper re-purposing (or salvaging) some of the assets and fuel associated with V.C. Summer 2 & 3 which reduced the total cost of the defunct project by a several hundred million dollars.