JENKINSVILLE — An independent analysis shows that the pay-as-you go approach in financing construction of two reactor units at V.C. Summer Nuclear Station should save South Carolina ratepayers money, the state Office of Regulatory Staff reported.
The study, conducted by Elliott Davis Decosimo LLC, sought to determine if a state law – known as the Base Load Review Act – benefited consumers. The legislation, passed in 2007, allows South Carolina Electric & Gas Co. to seek annual rate increases to cover the cost of borrowing money to build two 1,117-megawatt reactors at the Fairfield County nuclear plant.
“The results of the Elliott Davis Decosimo analysis confirm that the revised rate methodology under the BLRA is cost beneficial to customers,” said Dukes Scott, director of the state agency. “In addition to being in the customers’ financial interest, the BLRA is in the state’s public interest. The cost savings, as confirmed by the Elliott Davis Decosimo analysis, and the coverage of cost of capital under the BLRA allow for the construction of a reliable, greenhouse gas-free source of generation for decades to come.”
Paying financing costs while construction is ongoing, as opposed to waiting until the project is completed, lowers the cost of building the new units by about $1 billion, which in turn reduces the amount customers will pay through rates for related costs such as the cost of capital, depreciation, property taxes and insurance associated with the project, SCE&G said.
The utility estimate this will save its customers approximately $4 billion in electricity rates over the life of the new units.
But critics charge that over the past seven years since the commission green-lighted the project consumers have seen their electric bills climb 31 percent, partially due to annual rate hikes allowed under the Base Load Review Act.
Bills are likely to go higher as the project is dogged by cost overruns due to construction delays.
In March, the utility notified regulators that the new construction schedule submitted by the contractor anticipates the first of the new units will be completed by June 2019, with substantial completion of the other unit in June 2020 — nearly two years behind the original schedule for the project.
The revisions in the project’s completion have resulted in an estimated cost increase of nearly $1.2 billion, pushing the total price to about $11 billion. SCE&G said its share of the added costs, including those associated with construction delays, could total as much as $698 million.
When the project was announced in 2008, SCE&G and Santee Cooper estimated the project would cost $9.8 billion.
In September, regulators approved an average 2.6 percent increase in electricity rates for SC&G.