Nuclear debacle poised to get worse
“Some will rob you with a six-gun, and some with a fountain pen.” — Woody Guthrie
In 2008, South Carolina Electric and Gas and Santee Cooper applied to the U.S. Nuclear Regulatory Commission for a permit to build and operate two nuclear power reactors in Jenkinsville, 20 miles northwest of Columbia. The facilities were to be built next to the Virgil C. Summer Nuclear Generating Station that has been in operation since 1984.
The power companies also received permission from the S.C. Public Service Commission to raise their rates by $1.2 billion (2.5 percent) to partially finance capital costs. The facilities were to go on line in 2016 and 2019. The original combined cost was $11 billion, with SCE&G’s share at 55 percent and Santee Cooper’s at 45 percent.
Since then, things have gone from bad to worse to disastrous.
Both projects are still unfinished. They are not even close: 33 percent compete. A Morgan Stanley analysis in March said the cost could be $22.9 billion if they are competed at all. This is double the original cost. By comparison, the entire budget for the state this year is about $7.5 billion.
At the root of this tangle of financial issues is an insidious legal provision called the base load rate. In 2007, the power companies got the Legislature to pass a law that said ratepayers have to pay in advance for the construction of new power plants. Plus, the power companies would be guaranteed a profit of 10.25 percent.
Think about this for a minute. The power companies are able to bill us in advance for their projects and no matter the cost overruns or how bad the management screws up, they are guaranteed a 10.25 percent profit.
To make things even worse, the companies responsible for the construction and financing are in deep financial distress. Westinghouse, which is building the reactors, has gone bankrupt and its parent company Toshiba will probably declare bankruptcy soon.
Plus, the federal tax credit the utilities say is vital to finishing the project is due to expire soon, costing billions more.
Full disclosure: I have nothing against the state’s utilities. Back in the 1980s and ’90s when I was director of the Palmetto Project, two of our board members were Virgil C. Summer, retired chair of the board of SCANA (the parent company of SCE&G), and Al Ballard, head of the Electric Co-ops of South Carolina, the retail distributors of Santee Cooper’s power.
Virgil was the founding chairman on the Palmetto Project. Both of these men exemplified the highest values of corporate integrity, accountability and putting the people of our state first.
A more recent full disclosure is that in the last few years I have solicited, without success, financial support from SCE&G and Santee Cooper for nonprofit projects.
No one knows what will happen next. Perhaps they will continue building both units. Perhaps they will abandon one unit and build the other. Or perhaps they will abandon both units and essentially walk away from the whole thing.
To add insult to injury, SCE&G officials have said if they do walk away from these nuclear debacles, they will still get their 10.25 percent profit and have to build another power plant, most likely natural gas, to meet the state’s projected energy needs.
Ratepayers would have to pay for this plant in advance and SCE&G would still be paid its guaranteed profit. One way or the other, someone is going to lose billions of dollars. The only question is who.
In 2016 and 2017, Santee Cooper increased its rates by 3.7 percent. SCE&G has had nine rate increases of nearly 20 percent since 2009. The average residential bill is $147.53 a month, with about 20 percent going to the cost of the nuclear facilities. This is already one of the highest average utility bills in the country.
In the months and years to come, this huge mess will grow bigger and bigger as the issues of who is going to pay for it will be fought in the courts and Legislature.
The irony is that those most responsible will most certainly suffer the least: senior management and the boards of SCE&G and Santee Cooper. Those who have absolutely no responsibility will certainly suffer the most: ratepayers and taxpayers.
The question for the state’s politicians, business community, media and citizens is simple: As Woody Guthrie asked in another song, “Which side are you on?”
Phil Noble has a technology company in Charleston and writes a weekly column for the S.C. Press Association. Contact him at firstname.lastname@example.org.