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#NukeGate: Deal Is Down To Henry McMaster

South Carolina’s governor could hold the Palmetto State’s energy future in his veto pen …

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LAWMAKERS SCRAMBLE AS BELEAGUERED EXECUTIVE MULLS THE BIGGEST DECISION OF HIS ADMINISTRATION 

The future of a $14.6 billion private sector energy deal – and $1.3 billion in cash rebates to South Carolina energy consumers – could fall squarely on the shoulders of governor Henry McMaster.

What will the “Republican” chief executive do?

It’s complicated.  First, McMaster must know what he’s dealing with … which at the moment is not a certain proposition.  Members of the S.C. House have passed one proposal related to this deal, while members of the State Senate have approved another.

What ultimately winds up on the governor’s desk is still very much up in the air … although that issue should be settled sometime this week.

Further thickening the plot, McMaster has staked himself out previously on this deal… twice, actually.

The “deal,” of course, is Virginia-based Dominion Energy’s proposal to purchase embattled Cayce, S.C.-based utility SCANA – which supporters say would generate $18.7 billion worth of economic activity for the Palmetto State.

Along with state-owned utility Santee Cooper, SCANA is still reeling from the after effects of #NukeGate – a spectacularly failed command economic experiment in the nuclear power industry.

Together, the two utilities were able to effectively socialize more than $2 billion worth of investment risk associated with the construction of two next generation nuclear reactors in Fairfield County, S.C.  This socialization was made possible thanks to the now notorious Base Load Review Act (BLRA), which was advanced by liberal state lawmakers and allowed to become law in 2007 by former governor Mark Sanford.

The two utilities spent ten years building (or as it turns out, not building) these reactors a cost of $9.8 billion.  The project wasn’t completed, though.  In fact it’s not even half-completed – with the cost to finish it reportedly ranging anywhere between $9-16 billion.

(Click to view)

(Via: SCANA)

Clearly, that’s not happening – yet ratepayers are still on the hook for the reactors.

Drowning in debt, Santee Cooper pulled the plug on the project nine months ago – killing an estimated 5,600 jobs, squandering billions of dollars in investment and throwing the state’s energy future into chaos.  The government-run utility’s decision has also prompted a flood of lawsuits and criminal investigations – as well as a full-court press by lawmakers to try and undo the damage they did (or at least give that impression to voters).

What have they come up with?  Not much … 

The House proposal would set an “experimental rate” of zero for the 18 percent nuclear surcharge currently in place (i.e. the portion of ratepayers’ monthly bills that is earmarked for these abandoned reactors).  However this “experimental rate” would soon be replaced by an “interim rate” established by the embattled S.C. Public Service Commission (SCPSC) – a legislatively controlled panel that failed miserably in its job to oversee the BLRA.  Eventually this “interim rate” would be replaced by an “actual rate.”

Sound sketchy?  It is …

The Senate’s proposal honestly isn’t much better.  Introduced last month by the chamber’s “majority” leader, Shane Massey, it would roll back the surcharge from 18 percent to 5 percent – but again, only temporarily.  The five percent rate would be locked in for six months – but the same SCPSC bureaucrats could raise it thereafter.  Perhaps in perpetuity.

Inexplicably, this the deal senators have insisted upon – although even Massey has acknowledged any repeal (even a partial repeal) of the hated BLRA is fraught with constitutional peril.

Also, in case it’s not abundantly clear from the “fine print” outlined above – none of this is a permanent solution.  It’s election year posturing.

“They aren’t repealing the BLRA,” a lobbyist who has been following the proceedings over the last few months told us. ‘It’s just about their political careers until the primary (elections).  They helped create the problem and are now making it worse.”

Indeed …

Temporary. Experimental. Interim.

These are weasel words, not stances of firm conviction … which is why we threw down the following gauntlet for lawmakers last week …

No half-measures. If the S.C. General Assembly wishes to (once again) insert itself into the Palmetto State’s energy economy – risking a constitutional crisis over its previous catastrophic mismanagement of a nuclear power project – then it needs to go “all in.”  No half-measures.  No excuses.  No “partial” or “interim” deals subject to change at a later date.  Seriously, if lawmakers are going to take $1.3 billion out of the hands of citizens and risk the bankruptcy of the state’s largest utility, then they need to pass a permanent and complete repeal of the BLRA, one that is effective immediately.  

Such an immediate, permanent repeal might be worth ditching the Dominion deal over … but that’s not what lawmakers have put forward.  Instead, they are looking to kill a deal that enjoys broad public support for what amounts to another political promise.

***

Dominion’s deal would lower the 18 percent rate to zero over two decades – but it has the benefit of $1.3 billion in immediate relief, which equates to roughly $1,000 for each SCANA ratepayer.

As of this writing, it appears as though the S.C. House is inclined to go along with the partial rate reduction proposed by the State Senate.

“Presumably,” one legislative leader told us, arguing that if the House failed to accept the Senate’s offer that uber-liberal state senator Brad Hutto (who has actually made a few good points during this debate) would endeavor to kill the legislation during a conference committee of lawmakers from both chambers.

“Hutto will try to prolong the conference committee and kill it so that the utilities can maintain the 18 percent rate,” the legislative leader told us.

Not all House members are on board with that idea, though, including state representative Peter McCoy – who led the deliberations over this legislation in the S.C. House.

Assuming the House acquiesces to the Senate proposal, McMaster would be faced with the most significant decision of his administration.

Back in early January, the governor enthusiastically endorsed the Dominion deal.

“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 at the time.

Three weeks later, though, he challenged lawmakers to pass legislation that would kill it.

“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?  Good question …

This week, McMaster’s office told reporter Avery Wilks of The (Columbia, S.C.) State newspaper that he preferred the House “solution.”

“He’s going to keep his promise to the people of South Carolina,” McMaster’s press secretary told Wilks. “It’s important for people to keep their word, and the governor hopes that House members will fight for what they passed.”

In other words, if House members go along with the Senate’s proposal – McMaster is likely to veto it.

House members – who have acknowledged to us that they “need Henry on board” – are scrambling to convince him that the Senate bill gets the surcharge “between two and zero … once you factor the Trump tax cuts.”

Of course that would require the legislature to dictate to SCANA – a private company – how it must spend the corporate tax relief approved last December by U.S. president Donald Trump, an ally of McMaster’s.

Frankly, that adds yet another layer of legal and constitutional intrigue to what is shaping up as a debilitating, protracted legal battle (one taxpayers are likely to subsidize with no chance of victory).

This news site hasn’t endorsed the Dominion deal.  But we sure as hell aren’t supporting these legislative half-measures, either.

As we’ve said all along, our goal here is simple: A reasonable settlement that maximizes ratepayer relief, within the confines of what the courts will accept and the markets will bear.

Killing a credible deal on the basis of promises from politicians is madness … especially considering many of these politicians landed us in this mess in the first place.

***

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