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This week, the South Carolina state House of Representatives, in a virtually unanimous vote, voted to fire all seven members of the state’s public utility commission. The reason is simple. The legislature's action is what in common parlance is called a smokescreen, a distraction.
It was the French novelist Honore de Balzac who said that at the heart of every great fortune lay a great crime. The “crime” in this case is wasting $12 billion on the now cancelled VC Summer nuclear plant near Jenkinsburg, South Carolina.
But who is the “perp” in this case? The state legislature itself. In 2007 the legislature approved significant changes in the way its consumers would pay for new, large power generating facilities. In the old days, the utility built the plant first, and if it was up to spec, the ratepayers paid for it. Easy, peasy.
But after the innocuous sounding Base Load Review Act passed in 2007, utility customers paid for new power plants as they were being built. Big difference. This inordinately generous guarantee preceded the financial recklessness of SCANA and the state power agency, Santee Cooper.
What the legislature accomplished was to completely shift the risk for building new nuclear power plants from the utility’s shareholders to customers. And the best part was that shareholders would still receive outsized compensation in return for now very little risk. As the saying goes, nice work if you can get it.
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But there is always something. After spending over $11 billion on the VC Summer project, the utility builders have cancelled it, and it looks as if their customers are, as a result of the legislature’s 2007 largesse, on the hook for the entire amount.
The legislature is now casting about for villains.
But when we think of our early heroes, George Reeve’s Superman is at the top of the list. OK, Henry Cavell looks a lot better in tights but still. It was what he supposedly stood for that we remember: “Truth, Justice and the American Way”.
Looking at recent events in South Carolina, we little truth and for consumers no justice. But it does look like this is becoming the “American Way”.
By Leonard Hyman and Bill Tilles for Oilprice.com
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Leonard S. Hyman is an economist and financial analyst specializing in the energy sector. He headed utility equity research at a major brokerage house and…