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Henry McMaster Flip-Flops On Dominion-SCANA Deal

SCANA stock plunges, lawmakers brace for protracted legal battle …

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South Carolina governor Henry McMaster – having raised his finger to test the Palmetto State’s political winds – is now asking lawmakers to send him a bill rescinding the state’s controversial Base Load Review Act (BLRA).

That’s the infamous special interest legislation that has socialized more than $2 billion worth of investment risk related to a pair of abandoned nuclear reactors in Fairfield County (a.k.a. #NukeGate).

Passed in 2007 by a “Republican-controlled” legislature and allowed to become law by former governor Mark Sanford, lawmakers are now eager to undo this constitutionally dubious law in the hopes of getting hundreds of thousands of ratepayers off the hook for future payments on these abandoned reactors.

Of course many of the legislators clamoring to get rid of the bill voted for it eleven years ago … and the governor now calling on them to do so has been all over the map on the issue.

The problem with repealing the BLRA?  Doing so could bankrupt one of the utilities associated with the debacle – as evidenced by Cayce, S.C.-based SCANA’s stock price plunging more than five percent in the aftermath of McMaster’s announcement.

SCANA’s stock has already shed a whopping 44.9 percent of its value since last December.

More ominously, repealing the BLRA could precipitate a protracted court battle that eliminates any possibility of a negotiated settlement on the outstanding costs related to this project – which represents one of the most spectacular command economic failures in South Carolina history.

The uncertainty from such a multi-year court battle alone could cost the state billions of dollars in economic activity and tens of thousands of jobs, sources close to the debate tell us.

That’s quite a risk to take in light of the latest South Carolina unemployment data.

Does that mean the state should take a deal without negotiating better terms?  No … but the risks associated with repeal are real.

How did our state wind up in such an exceedingly pernicious predicament?

(Click to view)

(Via: High Flyer)

To recap: With state lawmakers and regulators cheering them on, SCANA and government-run utility Santee Cooper spent the past decade building two next generation AP1000 pressurized nuclear reactors in Jenkinsville, S.C. at a cost of $9.8 billion.  This money was spent, but the reactors were never finished.  In fact they’re not even half-finished – with the cost to complete them reportedly ranging anywhere from $9-16 billion.

In addition to the political fallout, #NukeGate has also prompted a flood of lawsuits and a rapidly escalating, multi-jurisdictional criminal probe.

McMaster’s latest #NukeGate position is in direct contravention to his prior stated support of a deal to purchase SCANA offered by Virginia-based Dominion Energy.  Just weeks ago, McMaster effusively praised the Dominion offer – which would provide ratepayers a one-time payout totaling $1.3 billion (roughly $1,000 per customer) and shave their costs associated with the project by approximately $7 per month moving forward.

Dominion’s offer does keep ratepayers on the hook for substantial costs, though,

“Ratepayers will get most of the money back they paid for the nuclear reactors and will no longer face paying billions for this nuclear collapse,” McMaster said three weeks ago in support of the Dominion offer.

Now the governor is endorsing legislation which – if passed – will result in the Dominion deal being yanked off the table.

“Send me a bill that replaces the BLRA and prevents ratepayers from being charged in the future for the abandoned reactors at V.C. Summer and I will sign it,” he said.  “Send me a bill that continues to place the financial burden of this corporate failure on SC ratepayers and I will veto it.”

What gives?  Is the Palmetto State governor having a “senior moment?”  Or is his flip-flop politically motivated?

We think McMaster’s move is tied to his fading prospects in the 2018 “Republican” gubernatorial primary, which was supposed to have been a cakewalk for him after he was gift-wrapped the governor’s mansion by U.S. president Donald Trump.

McMaster’s campaign has been one disaster after another since then … and #NukeGate threatens to unravel it further.

To wit: The Dominion deal was initially embraced by McMaster’s top rival for the GOP nomination, Lowcountry labor attorney Catherine Templeton.  However Templeton quickly reversed course – and has been wearing McMaster out on this issue over the past few weeks.  She’s been especially adept at tying McMaster’s position to campaign contributions he received by SCANA.

In fact, she pounded McMaster on his flip-flop late Tuesday.

“Why didn’t Henry McMaster speak out as attorney general when this unconstitutional scam was passed?” Templeton said in a statement.  “Where was he when $2 billion of ratepayers’ money was spent on a project to nowhere?  He was taking at least $115,000 in campaign contributions from SCANA executives, doing their bidding, and looking the other way – brokering a deal that would charge ratepayers for two holes in the ground over the next 20 years.  McMaster’s hypocrisy represents the worst in politics – putting shareholders and campaign contributors’ interests over hardworking South Carolinians. The Palmetto State needs a Governor who leads from the front, not the rear.”

Our guess is McMaster – who has been avoiding his GOP opponents on the campaign trail – finally cracked under the pressure.

Whatever the reason for his flip-flop, Dominion seemed to take McMaster’s announcement in stride.

“We will continue to discuss with governor McMaster and other state leaders the benefits of our proposal, most especially the substantial immediate customer payments and the certainty it brings to the energy future of South Carolina,” the company’s vice president of corporate communication Chet Wade told us.  “We believe our proposal – with upfront customer payments equaling $1,000 for an average residential customer and $12.2 billion in total customer benefits over the long term – works to address the concerns of all stakeholders. This includes communities and frontline employees, as well.”

Wade added that “a retroactive repeal of the Base Load Review Act would eliminate refunds to customers, and we believe will result in higher rates than under our proposal even if the repeal is upheld in the courts. We will continue do our best to help people understand the benefits of what we have presented. We have said from the beginning that our proposal may not be perfect but it provides a much brighter future with much greater certainty.”

So far Dominion is the only company to step forward and submit an offer for SCANA.  Rumors abound that Florida-based NextEra Energy is interested in submitting an offer for both SCANA and Santee Cooper, but as of this writing no such offer has materialized.

Meanwhile McMaster has yet to produce a promised offer for Santee Cooper, which he is hoping to unload in a fire sale.

***

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