Y’all remember the fiasco we faced with the collapse of the VC Summer project (where many energy officials were indicted and went to jail, faced jail time)? North Carolina is considering a similar project and I was asked to share my opinion and advice after what we went through. My editorial (below) appeared is making the rounds.
As the old saying goes, “the definition of insanity is doing the same thing over again and expecting different results.” If North Carolina moves forward with pending legislation that would give electric utilities the ability to charge customers upfront for power plant construction costs, the state will bring that cliché to life.
Let the experience that rocked South Carolina be a cautionary tale for North Carolina’s Senate Bill 261. Customers in our state were subject to paying upfront construction costs for what was supposed to be the VC Summer nuclear plant. South Carolinians are still paying $9 billion for a plant that has never operated for a single minute.
This unwise practice, known as Construction Work in Progress, is likely being presented by North Carolina power companies as something to help with rate “stability.” But ask any South Carolinian, and we can tell you firsthand that the only folks who get price stability from having customers pay upfront construction costs are the electric utility. I assure you that the consumer experience of paying all the costs and having nothing to show for it is far from “stable.”
The quick background is this: In the early 2000s, state officials and utility companies embarked on a grand plan to build two new nuclear reactors at the VC Summer site near Columbia. Then-South Carolina Electric & Gas and Santee Cooper, South Carolina’s state-owned utility, began construction with the promise that the project would be a game-changer for our state’s energy infrastructure.
But things did not go as planned.
The project, originally estimated to cost $11 billion, quickly ballooned in price, and construction deadlines were missed repeatedly. By 2017, after more than a decade of work, the project was abandoned, leaving customers with nothing to show for it except a hefty $9 billion invoice. The failure of VC Summer became one of the largest and most costly public-sector failures in South Carolina’s history, with the financial burden placed squarely on the shoulders of the people of this state, not on utility shareholders.
The pay-up-front provision was a key factor leading to the catastrophe on the customer side. Ratepayers were stuck with a massive tab and no new power plant. The fact that South Carolina’s residents were effectively funding a project that would never deliver the promised electricity — and that they would be paying for this failure for decades to come — is a stark reminder of why other states should not adopt the CWIP model.
Among the tragic consequences of serving up this advantageous cost structure for the utilities is the now-broken trust between utility companies and the people they serve. When ratepayers were told that their contributions to the VC Summer project would support an ambitious energy project that would benefit the state for generations, they were sold a bill of goods.
In reality, ordinary citizens ended up paying for a colossal failure that has lightened their wallets and undermined their faith in the electric providers, which operate as mandatory monopolies with no choice for consumers. VC Summer is an enduring symbol of what can go wrong when utility companies are given free rein to charge for projects that may never come to fruition.
Meeting the growing energy needs of the Carolinas is a daunting task. I appreciate the challenges utilities face. But to propose a law to make captive utility customers responsible for all the costs and all the risk — while shareholders rake in profits on what consumers are forking out — is nothing short of irresponsible. In South Carolina, it ended up being criminal. Utility executives were convicted of crimes, with some serving prison time and paying fines.
Tread carefully, North Carolina. Let South Carolina’s painful experience with the VC Summer project serve as a powerful example of why the misguided CWIP approach could expose North Carolinians to the same financial pain that South Carolinians have faced for the past decade.
We learned the hard way that this type of provision benefits only the utility, while the cost of its failure is borne by every hardworking family and business that pay their electric bills.
North Carolina, don’t do the same thing South Carolina did and expect different results. That would be insane.
Rep. Nathan Ballentine, R-Richland, represents District 71 (parts of Lexington and Richland counties) in the South Carolina House of Representatives. He also is co-chairman of the South Carolina Energy Caucus.