This blog was written by SACE Decarbonization Director Eddy Moore.
South Carolina Legislature Proposes to Roll Back Rate-Payer Protections
Five years ago, after utility companies spent $9 billion on a nuclear plant that was never finished, the South Carolina legislature reformed the law to increase scrutiny of utility plans and support renewable energy produced by independent developers. Now, a new Speaker of the House is leading a utility-supported effort to roll back those reforms and expand fossil gas-fired power. If passed, the bill would increase costs for residents, undermine the state’s utility planning process, threaten continued buildout of new utility-scale solar, and drive up climate pollution across the state.
Major Fossil Fuel Expansion
The Speaker’s bill indicates legislative support for approximately 9,000 megawatts (MW) of new power plants that would burn fracked gas, plus new fossil gas pipelines. The roughly $9 billion capital cost for the power plants alone would equal almost $2,000 each for every man, woman, and child in the state. The fuel for the power plants will likely exceed the cost of the plants themselves. This bill is a multi-decade deadweight on the future economy of the state.
Just one of the new fossil gas plants—a joint venture of Dominion Energy and state-owned Santee Cooper—could be as large as 2,000 MW and would take seven or more years to build because it first requires expanded interstate fossil gas pipelines across sensitive wetlands and more than 100 miles of electric transmission upgrades. The legislative endorsement of the project, which is working its way through state approvals even without specific legislation, adds extra insurance for the utility companies that ratepayers will be required to foot the full bill if the complex project has major cost overruns. The project also would increase reliance on fossil gas in Dominion Energy territory from the current 40% of all energy generated to almost 60%, tying its customers to international fossil gas price spikes for decades to come instead of signing fixed-price renewable energy contracts.
Eroding Consumer & Environmental Protections
In a state in which the legislature directly chooses the members Commission that regulates utility rates, the legislative endorsements would override the regulatory process. The regulatory process is further undermined by numerous other provisions of the bill. For instance, it requires the Commission to give special consideration to evidence provided by utility company witnesses. It also restores a pre-reform mandate for the Public Service Commission to support the financial integrity of the utility (which is already ensured elsewhere in the law), rather than having regulators focus more on the needs of ratepayers. And it eliminates the authorization for the state’s Office of Consumer Affairs to intervene on behalf of utility ratepayers, which was enacted as a direct result of the nuclear fiasco. These moves to short circuit regulatory review processes are a blow to South Carolina residents since the Public Service Commission and the review processes they oversee stand as the only significant check on monopoly utilities’ profit motive at ratepayers’ expense.
The bill also threatens the number one method of renewable energy development in South Carolina by shortening the length of standard contracts for new utility-scale solar facilities from ten years to five. Under current law, these contracts set the terms under which utilities buy energy from renewable energy providers, and thus are the basis of bank financing for the projects. Cutting the financing period in half will either drastically cut the revenue for solar or drive up the necessary unit cost of energy so that solar is priced out of the market. Either way, this provision would likely kill an otherwise growing solar and battery storage market. And it is patently unfair: for comparison, coal-fired power plants in South Carolina are currently financed by ratepayers for over 70 years.
Remarkably, given the recent history of nuclear project abandonment in South Carolina, the bill also authorizes up to three new “small modular” nuclear reactors. This novel technology is untested and the only project in the United States was recently abandoned for cost overruns. If the South Carolina reactors are abandoned like the last one, utility companies would be required to give a “fulsome accounting,” but still could be allowed to charge ratepayers for the plants.
While the legislation obviously fails to heed the lessons learned after the $9 billion nuclear fiasco in South Carolina, its greater significance is a complete embrace of fossil gas-fired power for decades to come. Out-of-state fossil gas producers and pipeline companies see the electric power business as their only real growth opportunity in the domestic US market. The fossil gas industry is fighting for market share, trying across the southeast to beat renewable energy to the punch as solar prices decline and utilities nationally increasingly turn to battery storage for dispatchable capacity.
Take Action to Fight Back
Hopefully, as legislators hear from constituents shocked by the bill’s backward emphasis on fossil fuel expansion and monopoly profit rather than competitive clean energy, they will pause and reconsider. South Carolina is home to a diverse and growing clean energy economy, and new technology and regulatory approaches can meet our electricity needs at lower cost and risk. For instance, South Carolina should require its utilities to participate in a regional wholesale market to improve reliability, cost, and transparency. The state legislature spent almost a million dollars studying this option and found that it would save over $300 million per year, but shelved the study when utilities complained. Also, competitive renewable energy procurement processes have been demonstrated to lower cost and speed integration of clean energy resources. And binding energy efficiency program targets would speed adoption of the cheapest energy of all—the energy not generated in the first place. But the first step for South Carolina to reliably meet its energy needs should be to rethink the backward legislative approach represented by the recently introduced bill.
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