That didn’t take long. On Tuesday, we reported that SCANA announced at least a year’s delay in the construction of its Summer reactors. Apparently all the money from those six rate increases already imposed on South Carolina ratepayers–and the seventh it has pending–doesn’t buy decent construction help these days. Of course, having enough money never prevented construction delays in the past. And the reality is that delays cost even more money.
And that’s now true for SCANA and its largest subsidiary, South Carolina Electric & Gas (SCE&G). Today, the ratings firm Fitch downgraded both companies’ stock from “stable” to “negative.” That means both companies will have to pay higher interest rates for their loans. And despite the fact that money is being collected from ratepayers in advance of the reactors being built under South Carolina’s early cost recovery tax, it still takes loans to finance multi-billion dollar nuclear reactors.
The Negative Rating Outlook for SCG and SCE&G reflects the heightened regulatory and financial risk of SCE&G’s nuclear construction program following the announcement of a longer than expected delay in the construction schedule and the uncertain cost impact. With the most recent delay, SCE&G will most likely exceed the cost and 18-month schedule contingency previously approved by the South Carolina Public Service Commission (PSC), making full cost recovery less certain.
Fitch is particularly concerned about the extent of the potential cost increase and the PSC’s willingness to have rate payers shoulder the entire burden.
Will the PSC decide to stand up for ratepayers and not allow SCANA to put the entire burden of the upcoming cost increases on them? That could make the credit rating of the utilities drop even further. But if the PSC sides with the utilities, rate increases will be even higher than previously projected.
And so the current nuclear construction cycle repeats the mistakes of the past. And this time, as the adage goes, it really is farce, because this time everyone involved already knew better.
August 15, 2014
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