By Mike Fitts
mfitts@scbiznews.com
Originally published April 12, 2010, in the Business Journal print edition

They have arrived by the hundreds: Letters from customers objecting to the rate increase of more than 9% sought by S.C. Electric & Gas Co. An outpouring of opinion unlike anything in the state’s recent history has put the utility on the defensive.

“Please reconsider this increase! The people in my area are counting on you to stop this highway robbery!” wrote Sharon Azecusky of Chappells to the state’s regulatory body, the S.C. Public Service Commission.

Some of the letters — there have been more than 300 — seem part of an organized campaign, but others clearly were penned at a kitchen table purely out of frustration. An overwhelming theme in the complaints is timing of the electricity rate increase amid the recession.

“I am 81 years of age and a retired Baptist minister. As you know, we have not had a cost-of-living in Social Security benefits in two years. What savings we had for retirement took a tremendous hit with the problems in the economy,” wrote the Rev. Lawrence H. Garrett of Cayce.

And Charles and Bernice Robertson of West Columbia: “We are now on an equal payment plan and we find that it is still hard to pay. ... Are they thinking about their customers or money?”

SCANA Corp., the parent company of SCE&G, says it has put off the rate increase as long as it can and would phase it in through mid-2011. The money is needed largely to pay for required environmental improvements such as coal plant emissions scrubbers, an unavoidable expense, utility managers say.

C. Dukes Scott said he’s seen “nothing even approaching” the outcry against this rate increase in his 25 years in the industry. Scott is executive director of the Office of Regulatory Staff, which represents the public before the Public Service Commission.

Residential customers are not the only ones objecting. Businesses also have voiced opposition, including such varied entities as the S.C. Retail Federation and Wal-Mart. The retail giant has applied to formally argue against the rate increase before the commission.

The economy is the most oft-cited objection from letter-writers, Scott said. The second-most-common is the perception that other utilities are more affordable, Scott said. And the third is that SCE&G has had six smaller rate increases granted in the past eight quarters.

Other increases have gone for fuel costs or toward construction of two new nuclear reactors, but to customers, an increase is an increase, Scott said. “These are the emotional issues,” he said.

Utility officers say they know the timing is problematic for customers, given the recession.

“I can’t say we’re surprised by it,” said Eric Boomhower, manager of public affairs for SCANA.

More than half the increase is to pay for new air scrubbers and the final part of the Saluda backup dam project, both mandated by federal regulations, said Kenny Jackson, the utility’s vice president for rates and regulatory matters.

The money would pay for scrubbers at the company’s two largest coal-fired plants, Wateree Station in Eastover and Williams Station in Charleston. Those scrubbers, already being installed, will reduce sulfur dioxide emissions by 95% and mercury by 85%, Boomhower said.

Different filtering equipment also is being installed at the Cope Station plant in Orangeburg. The equipment is expensive to install, but the utility hopes the move will help it end its purchase of emissions allowances, Jackson said. Because the equipment is being installed, it’s time to start paying down the debt accrued in acquiring them, Boomhower said.

The increase also would pay for more tree-trimming, which greatly reduces outages in a storm, Boomhower said. Higher property taxes and system growth also help create the need for the increase

In submitted testimony to the Public Service Commission, SCE&G President Kevin Marsh argues that the company has cut $110 million in costs but still needs the rate increase. Marsh cites efforts make plants more efficient, be more cautious in capital expenditures and use tax credits more efficiently.

The big new SCANA campus in Cayce is not part of this rate request, Jackson said; because the campus replaces three SCANA offices, including its Main Street headquarters, the utility is projected to save money over previous leases, he said.

Boomhower said the company provides electricity at rate that it near or below the South Atlantic average. He says the company’s rates suffer in comparison with neighbor Duke Energy, but he notes that Duke has the advantage of a larger investment in nuclear power.

Duke’s long-running nuclear plants have had their costs stretched over decades, and current fuel costs favor nuclear. Power stations built more recently pass higher costs on to consumers, and that’s a burden SCE&G has to bear, Jackson said.

Privately held utilities have to consider unhappiness among customers as well as stockholders’ needs, Jackson said.

“The challenge for us is to strike the balance as best we can,” he said.

Some angry customers, though, believe the utility’s balance is askew.

“I along with many other retirees hope that you will with due diligence deny this request and make SCE&G act like a corporation and make budget cuts, not force us out of our homes,” wrote Wayne R. Lodge of Summerville.

In light of the interest in the case, the utility is likely to face more criticism like this at a series of public hearings scheduled by the Public Service Commission.

Evening hearings will be held April 26 in Summerville, April 27 in Charleston and May 24 in Columbia. Also May 24, debate among the involved parties is set to begin on the proposal. A final order is due from the commission on July 15.

The public’s objection “absolutely does influence” how the Office of Regulatory Staff will approach the decision, Scott said. The office will seek some agreement between SCE&G and those opposing the plan. Whatever the result of that effort, the office will propose some resolution to the Public Service Commission.

Utility leaders say they must press forward with the rate filing, despite public opposition. They say, however, that it is open to the negotiations that often are part of the process. The utility will listen to what opposers have to say and will “see what we can work out,” Jackson said.

Reach Mike Fitts at 803-401-1094, ext. 204.