Columbia attorney Scott Elliott appeared by himself before the South Carolina Supreme Court Tuesday morning, April 6, to determine whether the South Carolina Public Service Commission lacked the authority under the Base Load Review Act to approve capital cost contingencies and include them in the forecast of the anticipated capital costs.
Representing appellant S.C. Energy Users, Elliott took the position the PSC overstepped its authority when it allowed SCE&G to include a $438 million contingency fund in its construction cost estimate in building a nuclear plant – actually, two nuclear generators in joint–venture between SCE&G and Santee Cooper and planned for operation in Fairfield County by 2016 and 2019. SCE&G will pay $4.5 billion of the estimated $9.8 billion project cost. SCE&G’s $438 million contingency fund is about 10 percent of the $4.5 billion share.
Besides the lawyers at respondent SCE&G’s table, including Columbia’s Belton Zeigler of Pope Zeigler, who spoke to the justices, the courtroom’s front pew facing the justices was filled with lawyers on the SCE&G team: Catherine D. Taylor and K. Chad Burgess, both of SCE&G; James B. Richardson of Columbia; Mitchell Willoughby and Tracey Green, both of Willoughby & Hoefer of Columbia; Lee E. Dixon, also of Pope Zeigler of Columbia. Present with the SCE&G team were Florence P. Belser, Nanette S. Edwards, and Shannon Bowyer Hudson, all of Columbia and all for the respondent Office of Regulatory Staff (ORS).
Elliott argued the PSC failed to protect the rate payers in allowing SCE&G’s $438 million contingency fund under the state’s Base Load Review Act, where “contingency is not the same as contingency cost.”
The time line for the nuclear power plant construction runs 12 years, plus another 18 months as a time contingency, which is far enough to consider contingency costs. But Elliott argued his side had no idea what the contingency costs could be or whether they will even occur. And he was somewhat implying that SCE&G had no idea, either; hence, the rounded rough 10 percent in the total contingency of $438 million.
Inflation, Elliott said, was already figured in before the request came out for the $438 million.
Justice Hearn asked about change orders, the typical tactic in construction when more money is needed. She noted the state’s Base Load Review Act allows for such requests.
Justice Pleicones worried the available $438 million could encourage imprudence, like a slush fund.
Justice Hearn asked about oversight if the $438 million contingency fund were available, and Elliott said there was none. He asked if the rate payer could trust SCE&G to hold costs while there was no oversight.
Belton Zeigler began his presentation with the conclusion inflation was figured in, and assuming inflation occurred at the low predicted rate, the pricing was still stuck with no contingency costs if the $438 million were not approved.
As to oversight, Zeigler said all nine categories of costs would be reviewed quarterly during the entire length of the construction time line.
Capital costs, not contingency costs, Justice Hearn said, are ordinarily put into the rates paid by the electric power customer. All sides need regulatory certainty, she added.
Zeigler shared his team’s concern South Carolina needed to welcome nuclear power – make nuclear power readily possible in the state. Zeigler didn’t say, but SCE&G’s electric power rates to the homeowner are close to 12 cents per kilowatt hour, the national average. Duke’s customers in the Upstate and Progress Energy’s people from the Pee Dee to the N.C. line all have it cheaper due to advances in nuclear power well ahead of SCE&G’s nuclear developments.
The State newpaper reported last month, March 18, that at the time, the average monthly SCE&G bill was $18 more than Progress and $31 more than Duke
Elliott stood in response and said the state’s Base Load Review Act allowed the PSC the authority to approve costs, not budgets.
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