The S.C. Public Service Commission (SCPSC) voted unanimously on Friday afternoon to approve a proposed merger between crony capitalist utility SCANA and Virginia-based Dominion Energy – the seventh and final hurdle to this $15 billion deal.
The decision to approve the merger was accompanied by a rate reduction that will lower the average monthly SCANA residential power bill by 15 percent – from $147.53 per month to $125.26 per month.
That was Dominion’s final offer – which actually came in just below the level of relief envisioned by members of the Republican-controlled S.C. General Assembly, whose short-sightedness a decade ago is what landed the Palmetto State in its energy mess in the first place.
Unfortunately, the deal accepted by the commission will not provide ratepayers of SCANA’s subsidiary, SCE&G, with up-front relief – although SCE&G customers will likely receive some up-front relief from a recently settled class action lawsuit against SCANA.
In approving the merger, the SCPSC rejected a 20 percent cut advocated by the S.C. Office of Regulatory Staff (ORS), a deal which would have likely scuttled the merger – and invited a protracted legal battle the state was unlikely to win.
In making the motion to approve the deal, SCPSC commissioner Elliott Elam termed the proposed merger the “least-worst remedy” to the dire straits in which SCANA has found itself.
That’s about the best description of the situation we have heard …
The long-awaited SCPSC verdict represents the first significant resolution related to #NukeGate – last summer’s spectacular collapse of a $10 billion nuclear power collaboration between SCANA and state-owned utility Santee Cooper. A defining failure of government intervention in the marketplace, the fallout from #NukeGate has spawned what we have referred to as “a multi-layered maze of criminality, corporate intrigue, political maneuvering and high-stakes legal battles.”
To recap: In 2007, SCANA and Santee Cooper announced their intention to build a pair of next generation, pressurized water reactors in Fairfield County at a cost of $9.8 billion. These reactors were supposed to have been operational in 2016 and 2017, respectively.
(Click to view)
(Via: High Flyer)
The money was spent, the reactors simply weren’t finished … and the utilities couldn’t afford the additional $10-16 billion required to complete them.
Last July, Santee Cooper pulled the plug on the project – killing an estimated 5,600 jobs in the process. Compounding the problem? It soon became clear executives at both utilities knew the projects were doomed – yet continued to request (and receive) rate increases from regulators anyway.
Santee Cooper even proposed a massive rate hike tied to “costs associated with nuclear construction and other system improvements” just eight days before killing the project. Not only that, weeks after the project collapsed it gave its former leader a multimillion-dollar, taxpayer-subsidized golden parachute.
Santee Cooper’s fate remains unresolved – although its financial prospects have grown increasingly bleak. And its proximity to the looming criminal probe is high. Dominion has offered to operate the debt-addled government-run utility as part of a management agreement with the state, while there are reportedly other private sector offers on the table to purchase the state-owned power provider outright.
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That battle – and a broader war over the deregulation of the energy marketplace in the Palmetto State – represent two of the still-unfolding fronts in the larger debate.
And make no mistake: The SCPSC vote to approve the SCANA-Dominion deal, while a major milestone in this saga, is by no means the end of the road.
A full-fledged energy war has erupted in South Carolina, with multiple major players from across the southeast vying for supremacy in a marketplace that continues to be a moving target.
From the beginning of the debate over #NukeGate, this news outlet pressed for the maximum amount of relief that “the courts will accept and the markets will bear.”
“We favor engaging the free market to gain the maximum amount of ratepayer relief the markets will bear – and the courts will allow,” we wrote last month. “Dominion is getting closer to that objective, but we believe more can be done to make ratepayers better … knowing that in the aftermath of this command economic debacle they will never be made ‘whole.'”
Did Dominion get where we wanted it to go? No … but nevertheless, we recommended last week that the SCPSC accept the company’s final offer as opposed to risking everything on an ORS proposal that would have yielded only a modestly lower monthly bill for the average ratepayer.
“Frankly, if South Carolina is going to roll the dice on its energy future like this we would recommend doing it via a total repeal of the crony capitalist Base Load Review Act (BLRA) – the law that enabled SCANA to socialize its investment risk in this project,” we wrote just yesterday.
Doing away with the BLRA would have eliminated all of the nuclear charges moving forward.
In fact, we threw down precisely such a gauntlet for state lawmakers back in April – but they failed to pick it up.
In lieu of that, we concur with Elam … this is the “least-worst remedy” on the table.
UPDATE: Dominion has just issued the following statement in response to the SCPSC decision.
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