Earlier this month, South Carolina lawmakers let the clock run out on the 2018 legislative session without addressing #NukeGate – the Palmetto State’s spectacularly failed command economic intervention in the energy industry.
Think about that for a moment: The single biggest issue facing the state – one which lawmakers have spent the better part of the last year bloviating about – came down to absolutely nothing.
For now, anyway …
A six-person panel of legislative leaders from the S.C. House of Representatives and State Senate will meet in the capital today (.pdf) in the hopes of hammering out an agreement on two pieces of pending legislation related to #NukeGate – S. 954 and H. 4375.
These two bills were included in the legislature’s adjournment resolution – meaning lawmakers can still consider them during special legislative sessions held over the next few weeks as they wrap up work on the state budget.
Will state lawmakers use this opportunity to pick up the gauntlet we laid down for them? Good question …
The hurdles ahead are high … and the clock is ticking to clear them.
Negotiating for the House on these bills? Judiciary subcommittee chairman Peter McCoy, state representative Kirkman Finlay and House minority leader Todd Rutherford. Meanwhile on the Senate side we have minority leader Nikki Setzler, “majority” leader Shane Massey and judiciary committee chairman Luke Rankin.
Wait … Rankin? Isn’t he one of the lawmakers who bears the most responsibility for his fiasco? Yes.
For those of you uninitiated, #NukeGate refers to the failure of crony capitalist utility SCANA and government-run utility Santee Cooper to complete a pair of next generation nuclear reactors at the V.C. Summer nuclear power station in Fairfield County, S.C. Announced in 2007, the reactors were supposed to have been operational in 2017 at a cost of $9.8 billion.
That clearly didn’t happen …
(Click to view)
(Via: SCANA)
The money was spent, the reactors simply weren’t completed … and the utilities couldn’t afford the $10-16 billion price tag to finish them.
Last July, Santee Cooper pulled the plug on the project – killing an estimated 5,600 jobs and throwing the state’s energy and economic future into chaos. The state-owned utility’s decision – announced just eight days after it proposed new rate hikes to fund the project – has also prompted a flood of lawsuits, criminal investigations and full-court press by lawmakers to try and undo the damage they did (or at least give that impression to voters).
That’s why it’s so surprising lawmakers were unable to get something done during the 2018 session.
Lawmakers are on the hook because SCANA and Santee Cooper were able to socialize more than $2 billion (and counting) of the investment risk related to this project thanks to the now notorious Base Load Review Act (BLRA). This law paved the way for the utilities to impose an eighteen percent “nuclear surcharge” on ratepayers – a charge they are still paying.
Under the terms of the current Senate proposal, the nuclear surcharge would be lowered from 18 percent to five percent immediately. This five percent rate would only be locked in for six months, though. Unelected bureaucrats on the embattled S.C. Public Service Commission (SCPSC) – which is the entity responsible for setting rates – could raise them again after this year’s elections. Perhaps in perpetuity.
The current House proposal is even more complicated. It would set an “experimental rate” of zero, however the SCPSC would soon replace that rate with an “interim rate.” And eventually this “interim rate” would be replaced by an “actual rate.”
Confused? You should be …
“What are we doing on it? I don’t have a clue,” one House member following the negotiations told us this week. “Everybody is in the dark on the deal and the constitutional considerations.”
This news site has taken a dim view of the legislature’s posturing.
“Does anyone really believe these politicians are serious about eliminating this surcharge?” we wrote last month. “If they were, they would have done it … months ago. We’ve heard plenty of talk from lawmakers but – as usual – we’ve seen precious little from them in the way of action.”
It’s about to get even more convoluted.
According to our sources, House members are planning to acquiesce to the Senate’s (temporary) five percent rate proposal – although they want the rate back-dated to August 1, 2017 (the day after Santee Cooper pulled the plug on the project).
Details of this proposal are supposed to be unveiled at this week’s conference committee meeting.
Will senators go along with such an idea? It’s not immediately clear … nor is it clear whether it matters.
One state senator – Brad Hutto – has hinted that he may filibuster any conference committee report (a.k.a. rate compromise) that doesn’t meet with his approval.
Lawmakers have tried twice to sit Hutto down on this issue – unsuccessfully.
“Hutto is the only one really playing the long game, and his whole game is to run out the clock,” one lawmaker told us. “I guess you could try to find the votes to sit him down, but we already tried that twice unsuccessfully.”
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Assuming the Hutto hurdle is cleared, the next challenge is getting a “compromise” across the desk of governor Henry McMaster. The 71-year-old career politician has already vowed to veto any proposal that doesn’t completely eliminate the surcharge – meaning the deal being floated by the House is a non-starter for him.
In addition to the House and Senate proposals, there is the deal put on the table by Virginia-based Dominion Energy. Under the terms of this proposal, the nuclear surcharge would be lowered from 18 to 11 percent over the next seven years and from 11 percent to zero over the next 12 years. Of course Dominion’s offer includes something neither the House nor Senate can provide – $1.3 billion in upfront relief to ratepayers.
That’s roughly $1,000 in upfront cash to each SCANA customer.
Based on our calculations, it would take nine-and-a-half years for the Senate plan to match that level of relief – and more than five years for the House plan to hit that threshold.
Are we to believe lawmakers won’t push their political appointees to raise rates at any point during that time?
We haven’t endorsed the Dominion deal yet because we believe the company can afford to kick in a little more in longer-term ratepayer relief. Of course, if confronted with a choice between Dominion’s cash-in-hand offer and lawmakers’ promises … that’s a no-brainer.
Especially now that other private sector solutions appear to be off the table.
Speaking of “off the table?” Dominion’s deal will likely be yanked in the event lawmakers pass either of their current proposals – or the rumored House compromise.
That’s something lawmakers might want to consider as they continue their deliberations.
As we’ve repeatedly noted, the question here is simple: What is the best deal to be gotten without torpedoing the whole process and ushering in a debilitating, multi-year legal battle? The uncertainty from a protracted court fight could cost the state billions of dollars in economic activity and tens of thousands of jobs.
That’s why we have pushed from the very beginning of this process for “a reasonable settlement that maximizes ratepayer relief, within the confines of what the courts will accept and the markets will bear.”
Will lawmakers listen? It’s doubtful …
We told them a decade ago to sell Santee Cooper when it could have netted the state billions of dollars – but they refused. Now Santee Cooper is on the verge of a multi-billion dollar implosion – the consequences of which will fall squarely on the shoulders of ratepayers and taxpayers.
Do we really want to keep allowing state government to run our energy industry?
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