South Carolina utility companies want to bill customers along the way for the cost of new construction, before power plants become operational. Consumer and environmental groups warn lawmakers to beware. (File/Getty Images)
COLUMBIA — South Carolina utility companies want to bill customers along the way for the cost of new construction, before power plants become operational. Consumer and environmental groups warn lawmakers to beware.
As a Senate panel over the coming weeks and months weighs the future of energy in the rapidly growing Palmetto State — seeking to balance the electricity and natural gas needed to power a larger number of homes and businesses with the rising cost to customers — power companies are suggesting they consider a new funding tool: A capital cost tracker.
South Carolina’s power debate kicked off earlier this year, when state-owned utility Santee Cooper sought legislative permission to partner with Dominion Energy on a 2,000-megawatt natural gas-fired power plant. The companies want to build it on the site of a former coal-fired power plant along the Edisto River in Colleton County.
The legislation was fast-tracked through the House, but senators hit the brakes. They’re meeting in the off-session to find a solution.
Santee Cooper CEO Jimmy Staton estimates the Colleton County gas plant could jointly cost the utilities up to $2.5 billion to build.
SC Senate panel considers future of energy in the growing state
What is a ‘cost tracker?’
It’s also expected to take seven years to build. Power companies are at a disadvantage when they have to wait that long to recuperate an investment. It would be better, said Dominion Energy South Carolina President Keller Kissam, if companies could go to regulators every couple of years for permission to up power bills each time a construction milestone is met.
“As far as what you invest, you get more immediate recovery,” said Kissam, the Virginia-headquartered utility’s top executive in South Carolina.
“And, therefore, investors are more inclined to want to be a part of what you do,” he told senators.
Kissam went on to say that during the company’s latest application process to raise utility rates, he heard from a pair of residents on a fixed income who asked why the company couldn’t increase rates more gradually. With intermittent, moderate increases, power customers are less shocked than with 14% or 15% increases on their monthly bills, he said.
Senators have reacted with a mix of intrigue and skepticism.
At last week’s public hearing, consumer and environmental advocates opposed the idea. They compared the mechanism to a much-maligned piece of legislation pushed by utility companies that, 17 years ago, paved the way for a failed nuclear power plant in the state.
“It’s sort of like a quasi Base Load Review Act, right?” asked Sen. Tom Davis, R-Beaufort, as he listened to the pitch.
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“I think what you’re talking about actually makes sense,” Senate Majority Leader Shane Massey said in response to Kissam’s testimony. “But there’s got to be a trust factor, too. … The problem is there are too many people right now who don’t trust.”
The Edgefield Republican was among those who pressed pause on efforts in the House earlier this year to jumpstart the natural gas plant at Canadys and overhaul utility regulations in the state over fears the plan had not been fully vetted.
The bill backed by House leaders did not include the so-called capital cost trackers that companies are now suggesting.
This time would be different, Kissam said. The utility would subject itself to more oversight from regulators along the way and wouldn’t get up-front approval to charge for all costs.
Where are ‘cost trackers’ used?
Besides, 37 other states already use them, Kissam said.
South Carolina is the only state in the Southeast that doesn’t, he said, holding up a map produced by a national association of investor-owned utility companies.
A map of state’s where utilities have capital cost trackers in use of a wide variety of projects. The payments show up on customers’ bills as riders. (Provided as part of public testimony by Dominion Energy South Carolina)
Duke Energy is approved for these payments, which show up on customers’ bills in the form of riders, on 11 projects across five states. The riders pay for environmental improvements, renewable energy projects and large power transmission lines, according to the 2023 report by the Edison Electric Institute.
Dominion Energy has riders for 13 projections in Virginia, including solar, wind, broadband and two natural gas-fired power plants.
Only one state (California) and one company (San Diego Gas & Electric) have more. The 15 riders held by the southern California utility pay largely for electric vehicle charging and microgrids.
“I recognize that puts us at a disadvantage,” Massey said. “You got to be able to attract capital to build the generation that’s necessary to keep the lights on … But there’s a reason we are where we are right now.”
Massey spoke of the battle to reach a deal with Dominion in the fire sale for SCANA Corp., the parent company of the now-defunct South Carolina Electric & Gas, after the company abandoned an expansion of the V.C. Summer Nuclear Station in Fairfield County.
The joint project with Santee Cooper started in 2013. But delays, cost overruns and fraud led to its shuttering four years later, but not before the companies jointly spent $9 billion.
In its buyout of SCANA, Dominion ultimately swallowed a portion of the debt, knocking down what residential customers were paying by about $22 per month. But that relief didn’t come without intense negotiations.
“All those things that sounded like they were so altruistic, they were not,” said Massey, who co-led a Senate panel investigating the failed project. “They threatened Sen. (Nikki) Setzler and I every day that they would walk away and SCANA would go bankrupt.”
Here’s how much SC power customers are still paying for a failed nuclear project
In the end, Dominion’s 800,000 customers in South Carolina saw their bills reduced but they’ll still be paying on $2.3 billion worth of debt for the next 14 to 15 years.
“I can’t put that behind and I don’t think I’m the only one,” Massey continued. “There are a lot of people who don’t have a seat at this table … the people who are paying the bills.”
Santee Cooper’s share of the debt was $3.6 billion. About 5% of power bills for its 2 million customers — including those in Berkeley, Georgetown and Horry counties served directly and those served by power cooperatives that buy power from Santee Cooper’s plants — goes toward paying that off.
Those bills are expected to climb next year, when a rate freeze implemented as part of a lawsuit settlement expires.
Utility regulators were meant to have oversight on the VC Summer expansion, but contractors and utility executives would later be charged and plead guilty to fraud in federal court for hiding information from investors, as well as regulators.
A risk to customers
John Roof, representing consumers who are members of the AARP in South Carolina, also noted that mismanagement preceded the fraud. Allowing for capital cost trackers, he and others said, does nothing to prevent poor management.
Eddy Moore of the Southern Alliance for Clean Energy compared it to paying a repair man upfront for painting your house before you know the job is done well.
And Taylor Allred of the Costal Conservation League said a lag in the payback actually incentivizes utilities to keep operating expenses low and complete projects on time and on budget.
Besides, he said, natural gas plants are touted as quicker and easier to build than a massive nuclear reactor such as those at VC Summer, which marked the first attempt at a new nuclear plant in decades.
“Our state’s investor-owned utilities are surely capable of financing them under the current regulatory framework,” Allred said of gas plants.