Bates White provides analysis in South Carolina electric rate reduction matter
The South Carolina Senate retained Bates White to analyze the impact of an interim rate reduction for South Carolina Electric and Gas Company (SCE&G) customers. In July 2017, SCE&G announced that it would abandon its partially built V.C. Summer nuclear power units, following the bankruptcy of the lead contractor. At issue is who should pay for construction costs already incurred. In 2007, the state had enacted the Base Load Review Act, which enabled SCE&G to pass power plant capital financing on to customers during construction. Typically, ratepayers do not begin paying for facilities until plants are operational and power is being generated.
Currently, $445 million per year in costs—$3.8 billion in total—is being collected through customers’ monthly bills for the abandoned nuclear units. Proposals to suspend the collection of these costs are under review by the South Carolina Public Service Commission (PSC). Removing these costs would reduce customer bills by about 18%. SCE&G has stated that severe financial consequences, including bankruptcy, would result if these costs are disallowed, endangering its ability to operate as a viable utility.
Over two weeks, Bates White analyzed three questions: (1) what options were available to SCANA (SCE&G’s parent company) and SCE&G in response to an interim rate reduction; (2) what interim reduction in rates could be absorbed by SCANA and/or SCE&G without significantly increasing the likelihood of insolvency; and (3) what are the estimated impacts on SCE&G’s financial metrics associated with various levels of rate reduction?
Bates White’s report showed that SCE&G’s interim electric rates could be cut by 13% without significantly increasing the likelihood of insolvency for SCE&G and SCANA. On March 28, the state Senate approved an amendment to temporarily reduce the rates by 13%.
Local media cited the Bates White report prominently, as did US News and World Report.