SCE&G backs off some on rate hike

  • Posted: Tuesday, November 20, 2012 9:45 p.m.

SCE&G will slash its rate increase request to the S.C. Public Service Commission for electric customers, the company said late Monday after reaching a deal with several parties opposing the increase.

The deal would save the average customer about $50 a year and would reduce the return for investors.

The company plans to ask for a 4.23 percent, or $97 million, increase down from the initial 6.6 percent, or $152 million, request, company officials said. Several groups had mobilized against the rate hike, saying it included unnecessary items and excessive returns for investors.

The new rate increase request still must be approved by the Public Service Commission when it meets on the issue beginning Monday in Columbia. If the commission agrees to an accompanying request made in the initial rate hike request, the impact to ratepayers could be lowered further still, down to $32 million, based on lowered natural gas fuel costs SCE&G is experiencing.

As originally planned, the public still will get an opportunity to speak out on the new rate hike request at 6 p.m. Tuesday at the commission offices located near Broad River Road at I-20 in Columbia.

“We understand we had to come to an agreement,” Robert Yanity, an SCE&G spokesman, said. While the initial $152 million rate increase request contained legitimate costs incurred by the company, Yanity said, the new proposal also is acceptable to SCE&G, because it provides for a decent return on equity and allows the company to recover necessary costs.

Some SCE&G customers had been mobilizing against the proposed rate hike that one state official said included “excessive” returns for the utility’s investors.

Return on equity – the amount of interest the company could guarantee future investors who put up capital for the company to do future construction projects – was one of the main sticking points in the initial request, according the South Carolina Office of Regulatory Staff and other parties involved in the rate hike issue.

SCE&G had asked for a 10.95 percent guarantee on return of equity for investors, but the Office of Regulatory Staff said the return should have been 10.25 percent, which the parties agreed upon in a new memorandum of understanding.

Four of the six parties named in the rate hike request as “intervenors” agreed to the 10.25 percent return on equity, the company said.

In addition to the Office of Regulatory Staff, the other parties include Wal-Mart Stores East LP and Sam’s East Inc., the Department of the Navy, AARP and Frank Knapp Jr.

The S.C. Public Service Commission is set to take testimony from all sides in the S.C. Electric & Gas rate hike case over two days beginning Monday.

In the original rate increase request, when paired with the fuel-cost reduction, the rate hike would have come out to an extra $6.67 a month – or about $80 a year – for a customer who uses 1,000 kilowatt hours a month, the utility estimated. Under the new agreement, customers using 1,000 kilowatt hours a month would see their electric bills increase by only $2.59 a month, or just over $31 a year, Yanity said.

The eight-member Public Service Commission will not see letters from the public that have been submitted in the case, he said, considering instead only testimony from the public hearing.

SCE&G said the rate increase is necessary to offset costs the company has incurred meeting federal reliability and regulatory compliance issues, including $300 million in tree trimming costs. The company says it also has spent $600 million to $700 million since 2010 installing scrubbers at generating plants to help clean emitted air.

The last such rate hike increase requested by SCE&G came in January 2010, when the utility was granted a 4.88 percent increase that was phased in over three steps. The last portion of that rate hike went into effect this summer.

But SCE&G ratepayers also have been socked yearly by the utility since 2009 with another type of rate increase under the state Base Load Review Act, which allows the SCANA-owned company to recover financing costs of the two new $10 billion nuclear reactors under construction at the V.C. Summer Nuclear Station in Jenkinsville, north of Columbia.

In 2009, the Public Service Commission approved ratepayer increases of 0.4 percent in May and 1.1 percent in October against the $9.8 billion cost of building the two new plants, then approved increases of 2.2 in 2010, 2.4 percent in 2011 and 2.3 percent this year.

Co-owned by SCE&G and the state-owned utility Santee Cooper, the new reactors are scheduled to go online in 2017 and in 2018.

Included in SCE&G’s new rate increase request this year was also the request that the commission allow the utility to factor in lower wholesale natural gas costs to the company, which have fallen even since May, because of increased availability.

If the commission allows the lower natural gas prices to be factored in now, rather than at mid-year when they normally are, it would lower the current rate hike request to 1.38 percent, SCE&G said.

For residential ratepayers, based on an average 1,000 kilowatt-hour usage rate per month, that increase would raise the average electric bill to $137.65, if approved by the commission.

Electric rates for businesses also would rise under the current rate hike request.

Other signed opposers to the SCE&G rate hike include a group called the South Carolina Energy Users Committee and Time Warner Cable Inc.

Knapp, who is president of the S.C. Small Business Chamber of Commerce but is intervening in the case as a private resident, has called out the utility for including in its request for higher rates certain unallowable expenses totaling $1.4 million, and also for including improper food and liquor bills for SCANA executives.

“Intentionally including these costs to justify a rate hike demonstrates a blind eye toward their customers’ economic struggles,” Knapp said.

SCE&G spokesman Eric Boomhower last week said that the company should not have included such unallowable expenses in the rate increase request, but he defended other disputed costs outlined in the request, including in the company’s claim for a 10.95 percent return on equity allowance.

But others disagreed.

“We think that’s excessive,” said Scott, of the Office of Regulatory Staff, adding that a 10.25 percent return for investors should be adequate.

“That’s probably the major difference we have,” he said.

AARP South Carolina posted a phone bank to alert its members about the SCE&G rate hike request. People who want to get involved can call (866) 389-5655.

SCE&G serves 669,000 electrical customers in South Carolina. About half of those are in metro Charleston.

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