Santee Cooper, Dominion Energy bill mirrors failed VC Summer legislation. Here’s how
Experts say South Carolina’s new energy bill echoes the ill-fated Base Load Review Act of 2007, which left countless ratepayers on the hook for a failed multibillion dollar nuclear power project. The present bill parallels with the one that paved the way for the VC Summer construction debacle in four key ways.
As lawmakers debate the merits and potential pitfalls of a massive, newly-proposed energy bill, H. 5118, concerns linger over past failures stemming from S. 431 — the Base Load Review Act — and the lessons apparently unlearned from the VC Summer fiasco, which cost billions of dollars for a product and service ratepayers will never use.
Critics say the latest bill, dubbed the South Carolina 10-year Energy Transformation Act, mirrors the Base Load Review Act in that it: 1) involves the same two energy companies; 2) provides for the same energy capacity; 3) allows for roughly the same projected timeline for the project’s completion; and 4) shields utilities from fiscal liability, in the event the project fails, while transferring all the risk to ratepayers.
The bottom line?
Santee Cooper and Dominion Energy will see wide profit margins from this proposed energy project while ratepayers bear the burden of upfront construction costs, according to multiple critics testifying before a legislative panel. The amount of money utility customers will have to fork over, though — like during the VC Summer project — remains unknown.
Same energy companies
The 10-year Energy Transformation Act and the former Base Load Review Act involve the same two energy companies, according to energy and utility expert Eddy Moore.
H. 5118 centers around a joint natural gas project between Santee Cooper and Dominion Energy.
S. 431, or the Base Load Review Act, joined Santee Cooper and the now defunct South Carolina Electric and Gas company, which was later acquired by Dominion.
Short of a few top executives being fired under SCE&G, Moore says, following Dominion’s acquisition, the utility essentially remains the same.
“It’s the same utility territory, it’s the same customers, it’s the same revenue stream, it’s the same company,” said Moore, who currently serves as the director of the energy and climate program for the South Carolina Coastal Conservation League. “So, you’ve got the same two companies seeking a joint project” as was with VC Summer.
“Why do we need the legislature to step in and specifically endorse a project by the same two utility companies?” Moore queried.
Same energy capacity with unknown costs
In addition, Moore said both bills allow for the same energy capacity, with unknown production costs.
“The size of the project is the same,” Moore said. “VC Summer was 2,000 megawatts, and the proposed Canadys gas plant legislation (affords) up to 2,000 megawatts.
Multiple critics argue that such a massive plant is not necessary to meet the state’s energy demands, especially not knowing the associated costs that ratepayers could be left on the hook to pay. Instead, they say, multiple smaller plants, which pose less risk, are more practical.
“You don’t have to build a have a single natural gas plant at 2,000 megawatts to meet demand,” said John Clark, former director of the South Carolina Energy Office, which now has been merged with the Office of Regulatory Staff. “You could build smaller 300 megawatt plants as needed, which could be placed in more strategic locations. What that would do is significantly reduce the risk to ratepayers because (upfront) costs between a 2,000 and 300 megawatt facility are hugely different.”
Critics contend that a bill endorsing a massive 2,000 megawatt facility should not be devoid of the potential financial impact to South Carolina ratepayers, as was the case in the VC Summer failure.
“There’s a lot that we don’t know about the impacts of (H. 5118),” John Tynan, president of Conservative Voters of S.C., told a panel of lawmakers last week. “We don’t know the costs of these plants and the other projects that have been noted. We don’t know the impact they’ll have on energy bills. We don’t know where the pipelines will go to serve them, or, frankly, where the natural gas will come from because most of our interstate pipelines are already oversubscribed. We don’t how much private land will be taken. We don’t know the cost to upgrade the transmission facilities to serve these facilitates and we don’t know the environmental impact.
“South Carolina families deserve to know these things before legislation determines that they’re in the public interest.”
H. 5118: A familiar pattern
South Carolina lawmakers are again wrestling with energy policy in light of the state’s purported growing demand for more energy. Some lawmakers, including House Speaker Murrell Smith, R-Sumter believe the 10-year Energy Transformation Act is the solution.
The proposed legislation seeks to incentivize investment in new nuclear and natural gas infrastructure, which, some argue, mirrors provisions of the Base Load Review Act. Multiple environmental advocates told lawmakers that the bill fails to adequately address the flaws that contributed to the VC Summer debacle, raising concerns about the potential for history to repeat itself.
Same timeline
Moore said the Base Load Review and 10-year Energy Transformation Acts essentially share the same completion timeline, which, he says, contradicts arguments made by Smith and others that the state needs an immediate solution to its alleged growing energy demands.
VC Summer’s estimated completion date was eight years at the time of inception. Under H. 5118, the Canadys plant is projected to go online in the next seven years.
“The projection for the gas plant is that it will come online in seven years, and if that’s if everything goes right,” Moore said. “There’s 200 miles of transmission projects that have to be coordinated between two utility companies before it can start working. Plus, there’s the gas pipeline, the location of which is still a secret and the cost of which is still a secret. So, all those things have to happen first to meet the seven year timeline. So, I’m going to call that the same timeline” as the VC Summer project.
Utilities get same fiscal protections
Under H. 5118, Santee Cooper and Dominion Energy have the same fiscal protections — if the project fails — as did Santee Cooper and SCE&G behind the VC Summer fiasco, according to Moore.
Moore said there’s no need for a single utility to pursue legislation to build a power plant because regulatory mechanisms are already in place to accomplish that, namely, through the South Carolina Public Service Commission — an adjudicative and regulatory body that oversees public utilities in the interest of the public.
“The VC Summer project was predictably, extremely financially risky,” Moore said. “And so, when the legislature endorses something, it goes over the head of the PSC, and it becomes the legislature’s direction and endorsement, not just the management decision of the utility company.
“So, if something goes wrong, and there’s a big cost overrun ... the utility company will point to the state law, and say, this is in the public interest and the public has to pay for it. That’s a huge parallel” to VC Summer, Moore said.
As massive and technical H. 5118 is, Clark said the bill was likely written by utilities, who serve to benefit most from its provisions, and who are now fast tracking it.
“This is a hugely complex subject involving billions of dollars of South Carolina citizens’ money,” Clark said. “Basically, the utilities wrote this bill and are fast tracking it, and the faster track you get, then the less public scrutiny you get and the less understanding, even by legislators. This (bill) needs to proceed at a rate where everything can be analyzed ... to put this something of this financial magnitude through the Legislature is a disservice to ratepayers.”
What was the Base Load Review Act?
Enacted in 2007, the Base Load Review Act was intended to protect South Carolina ratepayers by “enhancing the certainty of investments” in the construction of new energy plants aimed at serving customers in the state.
Under the law, utilities Santee Cooper and SCE&G were allowed to charge ratepayers in advance for the construction costs of two new nuclear energy plants, with the promise of cost recovery upon the plant’s completion. The legislation, however, proved to be a double-edged sword, granting utilities significant financial incentives while exposing ratepayers to substantial risks.
The VC Summer debacle
The Base Load Review Act paved the way for the construction of two new nuclear reactors at the VC Summer site, a project hailed as a cornerstone of South Carolina’s energy future. The venture, however, ultimately unraveled amid a series of setbacks, delays and cost overruns. The project was abandoned in 2017 by investors, leaving the people of South Carolina on the hook for billions of dollars in stranded costs, and raised serious questions about regulatory oversight and accountability.
“Even if (the instant project) comes online, there’s no benchmark for how much they can proclaim in expenses, Clark said. “So, they can say, ‘We’re going to build this 2,000 megawatt natural gas facility and the transmission lines,’ and even if they give an upfront cost, they’re not going to be held to it.
“Once (utilities) get something approved up front, there’s no incentive to even contain costs.”
