Energy mega-bill reduces checks and balances, pushes new ecodevo projects

Update 3/20/24: The House Labor, Commerce and Industry Committee on Wednesday advanced the bill with amendments. Certain details in this summary may not be reflective of the amended bill. Read our updated summary here.

A massive energy bill (H.5118) gaining steam in the House bears resemblance to past legislation that wound up costing ratepayers billions for a failed nuclear project.

The proposal, called the South Carolina 10-year Energy Transformation Act, endorses a public-private partnership between state-owned Santee Cooper and Virginia-based Dominion Energy to construct a natural gas plant in Colleton County. And like the ill-fated V.C. Summer Nuclear Plant, abandoned in 2017, ratepayers would be on the hook if it goes south.

It also encourages utilities to explore the potential for new nuclear facilities, such as "small modular nuclear facilities." The issue, however, is that utilities could start recovering costs associated with these projects through their rates before they even submit an application.

But that’s not all. The mega-bill looks to make economic development a primary factor in energy decisions, including when it comes to setting and approving electric rates. In fact, H.5118 would offer reduced rates for companies meeting certain job and investment criteria through a new incentives program.

Lawmakers behind the bill say that the changes are necessary to meet the state’s rising demand for energy. But our review finds some major red flags, and we contend the costs of H.5118 far outweigh any potential benefits.

In summary, it would:

Encourage Dominion Energy and Santee Cooper to construct, alone or jointly, a natural gas plant of up to 2,000 megawatts in Colleton County. With lawmakers’ direct endorsement, the project would likely soar through the state’s regulatory process.
Run the risk of putting citizens’ property in the path of new pipeline construction.
Cram down economic development language into the missions of the Public Service Commission (PSC) and Office of Regulatory Staff (ORS). Specifically, the PSC must “recognize the important role of utilities in economic development” and consider economic impacts when deciding whether to approve rate hikes. This would undermine the PSC’s independence and unfairly tilt the scales in favor of new projects.
Offer specialty rates and perks to select companies meeting certain job and investment criteria.
Shrink the PSC by more than half (from seven to three commissioners). A majority decision could therefore be reached with just two commissioners.
Enlist Santee Cooper as an economic development partner of the S.C. Department of Commerce. Specifically, it states that Commerce (with input from Santee Cooper) will allocate natural gas capacity for future economic development needs within its discretion on a project-by-project basis.
Create a new “Energy Investment and Economic Development Fund” housed within Santee Cooper.
Grow government by establishing the “Energy Policy Institute” – a new advisory body for state policymakers. A primary responsibility would be determining the economic impacts of different energy options (how they affect the economy, job market, competitiveness of the state, etc.). The institute would be governed by a six-member board of legislative appointees.
Transfer the Consumer Advocate’s authority to intervene in rate-hike proceedings to the ORS. For context, the Consumer Advocate was created in 2018 specifically to represent ratepayers following the V.C. Summer debacle.
Put broadly defined economic needs at the center of ratemaking decisions, which could conflict with consumer interests.

The Legislature ought to be careful not to repeat the mistakes of the past when it comes to energy. It was in 2007 that lawmakers passed the notorious Base Load Review Act, which allowed utilities to charge ratepayers for the V.C. Summer Nuclear Plant as it was being constructed.

In fact, the PSC approved nine rate hikes related to the project. Of course, the reactors would never generate power, as the project was abandoned in 2017.

Meanwhile, the PSC would lose further independence under the bill because of new mandates to consider economic development. The body is already elected by the General Assembly and subject to legislative oversight. It needs more separation from the priorities of lawmakers, not less.

All of this, combined with an effort to reduce consumer protections specifically adopted after V.C. Summer, could spell disaster for ratepayers.

The bill is slated for two committee hearings scheduled to convene one hour after House adjournment on 3/19, and one hour after House adjournment on 3/20. While addressing South Carolina’s energy needs is certainly a worthy cause, lawmakers must look for better solutions than those offered by H.5118.