ORIGINAL REPORTING: South Carolina’s Nuclear Woes
What's next for South Carolina's embattled utilities? A failed investment in nuclear puts the futures of SCE&G and Santee Cooper in danger
Herman K. Trabish, April 9, 2018 (Utility Dive)
Editor’s note: The debate over what should happen to this $9 billion-plus money hole goes on.
To keep electricity flowing at affordable prices, South Carolina faces difficult choices about its debt-burdened electric utilities. Public power utility Santee Cooper and South Carolina Electric and Gas (SCE&G), the state’s dominant investor-owned electric utility (IOU), have a combined obligation of more than $13 billion. It was incurred when the expected $9.8 billion cost to jointly finance two new units at the V.C. Summer nuclear facility ballooned to more than $20 billion and the project had to be abandoned. There are five choices for Santee and six for SCE&G, according to new papers. Among the choices, both utilities could attempt to meet their debt by economizing, but the debt is too large for that approach to be effective. They could pass the obligation to customers or taxpayers, but many of the lawmakers responsible for the ultimate decision on the utilities' fates have declared it unacceptable to shift the financial burden to those who did not create it.
A new Palmetto Promise Institute paper says the responsibility should fall on the utilities and investors in the uncompleted nuclear facility. SCE&G, as an IOU, could aid itself and its customers by cutting dividends to shareholders, according to a study done for the state senate by Bates White, a financial consulting firm. Both utilities could sell out if they can find buyers; Dominion Energy has made an offer for SCANA. but completion of the deal is far from certain. Or both could default on the debt, shifting the burden to bondholders and driving the question to bankruptcy courts. The dilemma is complicated by the fact that the utilities’ decision to expand the nuclear facility was made in good faith during the “nuclear renaissance” of the early 2000s. Many in South Carolina (SC) believed it was the right decision. But it was a wrong decision and now somebody must take “a haircut" — a financial world euphemism for a loss. The more legislators discuss options for the utilities, the more unlikely a viable way forward that avoids bankruptcy or sale of the utilities seems… click here for more
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