State utility watchdog rarely bared teeth in V.C. Summer debacle

January 24, 2018

Investigative Reports

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By RICK BRUNDRETT

Over the years, the state’s utility watchdog acted more like a lapdog in reviewing rate hikes for the now-abandoned V.C. Summer nuclear project.

The S.C. Office of Regulatory Staff (ORS), which under state law is supposed to represent ratepayers’ interests, didn’t oppose any of the nine South Carolina Electric & Gas rate hikes that ultimately were approved by the state Public Service Commission for the failed $9 billion nuclear project.

From March 2009 to November 2016, those rates skyrocketed from 48 cents in an average monthly residential bill for 1,000 kilowatt hours to $27.03 in the average bill, ORS records show –  a hike of more than 5,500 percent. The $27.03 represents 18.32 percent of a $147.53 average bill.

And ORS signed off on later rate hikes even as its regulators knew of escalating construction costs and delays in projected completion dates.

SCE&G customers collectively have paid more than $1.7 billion for two never-finished reactors at the V.C. Summer plant in Fairfield County. SCE&G and its partner, state-owned utility Santee Cooper, abandoned the project July 31, costing the jobs of more than 5,000 workers.

The Nerve last week reported that a powerful, legislatively controlled committee called the State Regulation of Public Utilities Review Committee (PURC), which essentially controls the hiring and oversight of ORS’ executive director, directed ORS to do the research for a report published nearly a decade ago touting the need to expand nuclear energy in South Carolina.

That report claimed, among other things, that more nuclear energy was needed because many South Carolinians were too illiterate to understand energy conservation measures, or were too poor to afford higher-priced, more energy-efficient appliances.

The nuclear-energy drumbeat by ORS, PURC and the PSC, whose seven members are nominated and evaluated by PURC, continued largely unabated throughout the years.

In a January 2016 report paid by ORS and labeled as an “independent analysis,” the Greenville-based Elliott Davis accounting firm agreed with SCE&G management’s claim that revenue collected from ratepayers in advance of the V.C. Summer project’s completion, as allowed under the 2007 state Base Load Review Act (BLRA), would reduce total construction costs by about $1 billion and also lower “future depreciation and cost of capital” by about $4 billion over the two planned reactors’ expected 60-year life.

Then-ORS Executive Director Dukes Scott in an accompanying press release offered high praise of the report: “The results of the Elliott Davis Decosimo analysis confirm that the revised rate methodology under the BLRA is cost beneficial to customers. In addition to being in the customers’ financial interest, the BLRA is in the State’s public interest.”

“The cost savings, as confirmed by the Elliott Davis Decosimo analysis,” Scott continued, “and the coverage of cost of capital under the BLRA allow for the construction of a reliable, greenhouse-gas-free source of generation for decades to come.”

Yet less than 15 months after the Elliott Davis report was issued, the V.C. Summer main contractor, Westinghouse Electric Co., would file for bankruptcy – a major reason in the decision by SCE&G and Santee Cooper to abandon the project several months later.

In an ironic twist, ORS in a report issued last Friday and prepared by a Columbia bankruptcy attorney contended that Cayce-based SCE&G or its parent-company, SCANA Corp., likely would not go into bankruptcy if customers didn’t have to continue paying for the failed project.

Asked why ORS hired the Elliott Davis firm to do the 2016 analysis, Nanette Edwards, the agency’s interim director, said in an email Tuesday to The Nerve: “We were receiving questions about (SCE&G’s) claim that BLRA saves ratepayers $1 billion and $4 (billion) over the life of the units. We needed to test that claim.”

The Elliott Davis report that was publicly released was just two pages long, yet when asked if ORS expected something more in-depth from the accounting firm, Edwards said only, “We asked for the answer to the question above.”

S.C. Comptroller General records show that ORS paid Elliott Davis a total of $37,500 in fiscal 2015-16, near the time when the report was released. Asked to verify that figure as the cost of the two-page study, Edwards in her email replied, “That amount sounds correct.”

The stated mission of the Office of Regulatory Staff is to “represent the public interest in utility regulation by balancing the concerns of the using and consuming public, the financial integrity of public utilities, and the economic development of South Carolina.”

A House bill (H. 4379) that received a key approval vote Tuesday would largely leave ORS’ conflicted roles untouched, though it would create a “utilities consumer advocate” position in the S.C. Attorney General’s Office, and give ORS subpoena power, according to a recent analysis by the South Carolina Policy Council, the parent organization of The Nerve.

State and federal criminal investigations were launched after a secret report, known as the Bechtel report, which was prepared for SCE&G and Santee Cooper and detailed major problems with Westinghouse’s handling of the V.C. Summer project, was publicly released in early September.

Under the existing Base Load Review Act, ORS has the “right to inspect the books and records regarding the (V.C. Summer) plant and the physical progress of construction upon reasonable notice to the utility.” Contacted Tuesday, ORS spokesman Ron Aiken couldn’t immediately say if the agency specifically sought Westinghouse records in its ongoing review of the project.

Brundrett is the news editor of The Nerve. Contact him at 803-254-4411 or rick@thenerve.org. Follow him on Twitter @RickBrundrett. Follow The Nerve on Facebook and Twitter.

  • Tom Clements

    Thanks for this article revealing what the Office of Rubber Stamp (ORS) was up to. Keep up the good reporting on the nuclear debacle.