SCE&G Nuclear Plant Financing Overruns Likely to Be Paid by Customers
The South Carolina Public Service Commission (SCPSC) is scheduled to decide by the end of this month whether to approve a 2.8 percent rate hike proposed by South Carolina Electric & Gas (SCE&G) to help pay for financing costs that already have been incurred in association with the ongoing construction of two nuclear reactors. If it gets the go-ahead, this would represent the utility’s eighth rate increase since 2009, intended to help pay for costs related to the continuing construction of two new nuclear reactors – for a cumulative increase over the past six years of 27.7 percent , or about $35.67 per month for the average customer.
Specifically, if the SCPSC approves the utility’s filing, SCE&G’s electric rates for its 700,000 customers would increase on October 1 as follows:
- 2.8 percent for residential customers (the monthly bill of a customer using 1,000 kilowatt hours of electricity would increase $4.01, going from $145.87 to $149.88);
- 2.9 percent for small commercial customers;
- 3.0 percent for medium commercial customers; and
- 2.6 percent for large commercial/industrial customers.
The spiraling cost of construction of the two new reactors at the V.C. Summer Nuclear Station in Jenkinsville has been vigorously opposed by consumer groups and environmental groups — mostly prominently, by AARP, which argues that its 600,000 member base, including many retirees, will be paying for the project on a fixed income.
Indeed, the price of financing the $6.8 billion project is being absorbed by regional ratepayers under the provisions the state’s Base Load Review Act (BLRA). The 2007 law enables a utility to avoid the financial risk of building nuclear power plants by shifting the costs of construction financing to customers– often, years before those customers see any benefits from the electricity the plants are intended to produce, the consumer groups claim.
Conversely, SCE&G argues, “Paying financing costs while construction is ongoing, as opposed to waiting until the project has been completed, lowers the cost of building the new units by about $1 billion, which in turn reduces the amount customers will pay through rates for related costs such as the cost of capital, depreciation, property taxes and insurance associated with the project. SCE&G estimates this will save its customers approximately $4 billion in electric rates over the life of the new units.”
The utility is adamant about the fact that the costs have been misconstrued in the media. “In fact, it is investors, not customers, who provide the upfront capital required for construction of the new nuclear units,” clarified Eric Boomhower, director of Public Affairs for SCE&G’s parent company, SCANA Corp, adding, “That money is raised through the issuance of debt (bonds) and equity (shares) by … SCANA.
“Under the BLRA,” he noted, “SCE&G can file for annual rate adjustments during nuclear construction to recover only the financing costs associated with that debt and equity.”
Finally, the SCPSC unanimously approved a revised cost and construction schedule for the project on September 2 — but the vote on a proposed rate hike to help pay for those and other costs is still weeks away. SCE&G filed for the rate adjustment in May under provisions of the BLRA.
The construction schedule , as approved by the seven-member commission, calls for completion of the two new nuclear units in June 2019 and June 2020 — about three years later than initially planned.
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