Duke Energy files for 15.1% electricity rate hike—WOW!

Last week Duke Energy told the SC Public Service Commission that it wants its 540,000 customers to give it more money…a lot more money.  $220 million more a year to be exact.

Duke’s filing is for electricity rate increases for residential (16.3%), small businesses (14%) and industrial (14.4%).  In February of last year Duke received a 6% average rate hike.  If Duke’s gets the hike it wants, that would mean a staggering 21% increase to customers in about a year.

While Duke wants its customers to pay more, it is fighting in the Legislature to stop them from being able to pay less.  Duke and the other energy utilities successfully derailed a bipartisan bill just several weeks ago in the House that would have allowed third parties to finance and own solar panels on buildings and sell the electricity generated to the owners of the buildings.  Other states have successfully gone this route and taken away the biggest obstacle to more use of solar energy by residential and commercial buildings—the upfront cost to the building owner.

But Duke says no to this great free-market idea and instead wants it to be “studied” more.  Fortunately the idea will get more study in the Senate where 15 Senators on both sides of the aisle have filed the same bill (S.536).  The act is called the “Energy System Freedom of Ownership Act”. 

For those keeping score, 15 Senators is 33% of the entire Senate.  Duke and its energy buddies will have a lot harder time burying this bill.

But back to Duke’s massive rate hike request.  The South Carolina Small Business Chamber will be intervening to fight the increase.  We have the experience and a solid track record (from my personal participation with SCE&G rate cases) to take a hatchet to this over-stuffed filing. 

Stay tuned.  It’s going to be fun.

A present for small businesses

If you’re small business pays South Carolina Electric and Gas (SCE&G) for electricity, your holiday gift arrived yesterday. 

Back in June SCE&G had filed for a 6.6% average general electricity rate increase.  As I have done numerous times I intervened as an individual in the process to argue against increasing rates. 

You might remember the controversy I caused in revealing that included in the justification of the rate hike request was the cost of Zumba classes for SCE&G employees and expensive alcohol and dinners for SCANA board members.  To read this information and an explanation of how the regulatory process works, click here.

Now for your gift.

Yesterday the SC Public Service Commission approved a Memorandum of Understanding between SCE&G and most of the intervenors in the company’s rate case.  The net impact to small businesses will be only a 0.08% increase in electric rates.  The agreement also provides for no other general SCE&G electric rate increase until January 1, 2015. 

SCE&G will have a net revenue increase of $32 million or 1.38%.  The significant decrease from the original proposal was due to several factors.  The agreement moved-up an anticipated decrease in fuel costs, the company’s rate of return on equity was reduced from the requested 10.95% to 10.25%, and the Office of Regulatory Staff struck out $1.4 million in unallowable company expenses.

Residential, medium size businesses and large businesses will also benefit from the settlement.  The net rate increases for residential customers will be 1.8%, 0.63% for medium size businesses and 1.67% for large businesses.

This is very good news and I am very appreciative of the dedicated efforts of the Office of Regulatory Staff (ORS), which is responsible for making sure consumers and power companies are both treated fairly in the regulatory process.  ORS worked with all the intervenors to craft this very favorable agreement for small businesses and the other groups. 

Happy Holidays!

Auditors Question $1.4 Million in Expenses for SCE&G Rate Hike--Zumba Classes, Single Malt Scotch Among Costs

Free Times
October 31, 2012

BY EVA MOORE

South Carolina Electric & Gas Co. is asking state regulators for permission to raise rates. But auditors with the state Office of Regulatory Staff found some eye-raising expenses in documents provided by SCE&G to show that the rate increase is needed. Among the expenses the auditors called into question: Over $1,200 worth of alcohol at two meetings of the SCANA board, SCE&G’s parent company, at Ruth’s Chris Steak House — including several glasses of Macallan 25 scotch, which runs $50 a glass. (Some opted for the Macallan 18, at $30 a glass; others for the Macallan aged only 12 or 15 years.) The company also included 166 Zumba and body-sculpting classes for employees in its filing. “How does Zumba help SCE&G provide service?” auditors wrote in the notes column of their report. Altogether, Office of Regulatory Staff auditors categorized $1.4 million in expenses as unallowable, including alcohol, advertising costs, gifts and novelty items. SCE&G will now have a chance to challenge those findings as the state Public Service Commission holds hearings on the rate hike. The audit was shared with the media by Frank Knapp, president of the South Carolina Small Business Chamber of Commerce, who is intervening in the rate hike case. He called the findings “appalling and offensive.” “Intentionally including these costs to justify a rate hike demonstrates a blind eye toward their customers’ economic struggles,” Knapp said. “There is nothing wrong with Zumba classes for SCE&G employees but the employees or the company should be paying for them, not the customers.” The Zumba classes are a legitimate part of SCE&G’s employee wellness program, which lowers health care costs, according to spokesman Eric Boomhower. “We have a very comprehensive health and wellness initiative,” he says. “Health care costs are part of what is involved with providing service to our customers.” “Those exercise classes just happen to be a Zumba class,” he adds. Including the alcohol, on the other hand, was absolutely a mistake, says Boomhower. When the company files its financial reports with the state, it’s supposed to code all expenses as either rate-related or shareholder-related. “This was human error,” Boomhower says. “Those are absolutely not costs that should have been coded to the customer side of the ledger.” SCE&G is asking for an average rate increase of 6.61 percent. However, the company is also asking permission to adjust fuel rates ahead of schedule, says Boomhower, passing on some savings to customers. That means the hike it’s requesting would raise the average bill by about 4.85 percent. According to Office of Regulatory Staff director Dukes Scott, the average residential user would pay $141.73 per month under the proposed rates. His agency is charged with balancing consumer interests with economic development and corporate well-being in utility cases. The rate hike is necessary because SCE&G has spent millions to improve reliability and comply with federal regulations, SCE&G’s Boomhower says. “Since our last filing we’ve spent $300 million improving transmission,” he says. That includes trimming trees, and replacing poles and lines. The company also installed a $280 million scrubber at its Wateree station to reduce emissions. The Charleston Post & Courier’s editorial board writes that customers should be “outraged” by the rate hike, given the unallowable expenses — not to mention the fact that SCE&G’s rates are already much higher than those of the other big utilities in the state. Indeed, Knapp points out that SCE&G’s rates are 22 percent higher than Duke Energy, and 28 percent higher than Progress Energy. Knapp has intervened in four previous rate hike cases, and has seen rate hikes cut by as much as 50 percent as a result. “It’s almost like a little game that’s played where the company comes in for much more than they expect,” Knapp says. Boomhower says that’s not a fair characterization. “I don’t think it’s a game,” Boomhower says. “We file for what we feel like we can stand up for,” he says. “Is there some subjectivity to the process? Certainly.” The Public Service Commission holds two more public hearings on the proposed rate hike: In Charleston on Nov. 5; and in Columbia on Tuesday, Nov. 27, 6 p.m., at 101 Executive Center Drive. http://www.free-times.com/index.php?cat=1992912064022708&ShowArticle_ID=11013010124236628

 

Say ‘no’ to SCE&G rate hike

Charleston Post & Courier
Editorial
October 28, 2012

If SCE&G has its way, its average customer will pay $141.73 per month. That’s 42.4 percent more than customers of Duke Energy, 40.6 percent more than customers of Progress Energy and 25.8 percent more than Santee-Cooper customers.

SCE&G customers should be outraged at the disparity. But then they should have been outraged all along. They already pay 35.7 percent more than Duke’s, 34 percent more than Progress’ and 26.1 percent more than Santee-Cooper’s customers.

SCE&G contends that it needs the rate increase because of several situations. At the Wateree Station power plant, a new “scrubber” ($280 million) was brought into service in 2010 to meet federal clean air standards. Nearly $30 million has been spent on other environmental upgrades and projects.

With the downturn in financial markets, SCE&G has incurred additional expenses associated with employee pensions.

And SCE&G wants to add to a storm reserve to help in the event of another Hurricane Hugo.

Still, it is puzzling that SCE&G should need so much more for operations and maintenance than its counterparts.

Maybe the utility needs to economize. If expenses cited by the state’s Office of Regulatory Staff are any indication, there’s room for cost-cutting, and maybe for a change of attitude, too.

Case in point: An audit of SCE&G by the ORS, which serves as the state’s consumer advocate on utilities, found that one member of the board of directors charged a $50 glass of scotch whiskey to the company.

And SCE&G paid $370 for a $37 steak at a Ruth’s Chris Steak House. The ORS says the restaurant made a mistake on the bill, but it’s alarming that SCE&G’s accounting department didn’t question paying $370 for a steak. Even a $37 steak is pretty pricey.

Auditors for ORS caught those two charges by reviewing just a sample of the utility’s expenses. You have to wonder what a top-to-bottom audit might produce — and what it might reveal about the utility’s mindset on budgeting and spending.

SCE&G customers who don’t want to see their already-high bills get higher can send a loud message to the S.C. Public Service Commission, which must approve or deny the request.

The PSC has scheduled three public hearings across the state to gather public input. On Nov. 5, the hearing will be at 6 p.m. in Charleston at the International Longshoremen’s Association Local 1422 on Morrison Drive.

History shows that people can make a difference by speaking up in a night hearing. In 2010, after catching considerable flak from understandably alarmed customers, SCE&G dropped its initial proposal for a boost in electricity rates from 9.52 percent to 6.55 percent over one year. Then it dropped its proposal to 4.88 percent — over three years.

Writing letters of protest helps, but the ORS says commissioners do not see those letters. They do pay heed when customers speak out in person.

The ORS is still determining what it will recommend to the PSC. It will definitely protest part of the rate increase request, and it might well protest a significant portion of the request.

Other entities expected to address the rate hike include AARP, industrial customers, the Navy, Walmart and the South Carolina Small Business Chamber of Commerce, which described SCE&G’s rationale for a rate hike as “appalling and offensive.”

Consumers should be advised that SCE&G also is likely to portray itself as the good guy by proposing a reduction in fuel costs to customers. But the fact is that state regulations dictate that the reduction would happen regardless of whether a rate hike is approved, according to the ORS.

SCE&G’s ability to continue providing electricity is vital to our state’s citizens and to its economic future. But it’s difficult to imagine that the utility can justify a rate scale that tops others by 40 percent and more.

If the PSC can rein them in, well, we’d drink to that — though with something less expensive than a $50 glass of scotch.

http://www.postandcourier.com/article/20121028/PC1002/121029273/1021/say-no-to-sceg-rate-hike

SCE&G asks customers to pay for employee Zumba classes, expensive dining and alcohol for SCANA Board

                                      Expenses called “Appalling and Offensive”

Columbia, SC—With many South Carolinians still struggling to simply put food on the table and small businesses trying to keep their doors open, South Carolina Electric & Gas (SCE&G) wants its 668,000 customers to pay an average 6.6% increase in electricity rates.  SCE&G justifies its need for an increase in revenue in part because of “Zumba and body sculpt classes” for its employees as well as dinner and drinks at an expensive restaurant for SCANA Board members.  This public information was released today by the South Carolina Small Business Chamber of Commerce that opposes the rate increase.

On June 29, 2012, SCE&G filed for a general rate hike that calls for residential customers to pay 7.35% more for electricity while businesses would pay 4.19% to 6% higher rates.  The new rates on their own would bring in about an additional $151 million to the company.  SCANA, parent company of SCE&G, reported a 29% increase in earnings to $72 million in the second quarter this year compared to last year.

The documents provided to the S.C. Office of Regulatory Staff (ORS) to justify the rate hike show that SCE&G paid nearly $3200 for 166 “Zumba and body sculp” classes for employees from a private trainer in 2011.  This company expense was just part of the $1.4 million in unallowable expenses found by the ORS.  SCE&G also wants its customers to pick up the tab for dinners and drinks at Ruth’s Chris Steak House in Columbia for the SCANA Board members.  Those bills showed $593 of liquor at a January 2011 dinner and a $643 alcohol tab at the same restaurant in August 2011.  Included in those drink charges were four Macallan 25 Scotches at $50 each and five $56-bottles of wine.

“Asking the SCE&G customers to pay for Zumba classes and alcohol is appalling and offensive,” said Frank Knapp, Jr., president and CEO of the South Carolina Small Business Chamber of Commerce.  Mr. Knapp has formerly intervened in the SCE&G rate case as a private customer as he has done four times before.

“While these costs are small compared to the total revenue sought by SCE&G,” Knapp continued, “the company knows that they are absolutely unallowable expenses to be included in a rate case.  Several years ago SCE&G tried to include the cost of massages and ORS rightfully threw that out.”

“Intentionally including these costs to justify a rate hike demonstrates a blind-eye toward their customers’ economic struggles,” said Knapp.  “Just going out for a family dinner is out of reach for many SCE&G customers because they have so many other bills they must pay, like the electric bill, which for SCE&G residential customers is already 22% higher than Duke customers and 28% more than Progress Energy customers.”

Knapp added, “Every unnecessary dollar paid by a residential customer to SCE&G is a dollar that won’t be spent in a local small business to help grow the economy.  And every unnecessary dollar paid by a small business to SCE&G is a dollar that can’t be used for paying higher wages to workers.  This issue is not just about keeping SCE&G financially healthy.  It’s about how to do that without hurting the state’s economy by asking consumers to pay more than is absolutely necessary.”

At the rate hearing set for November 27, Mr. Knapp will also challenge SCE&G’s rate hike request for a much higher Return on Equity (ROE) than the rate Duke Power currently has.  “SCANA is a profitable company because our regulators make sure that it is.  Wall Street doesn’t need anywhere near the 10.95% ROE that SCE&G is asking for in order to entice it to buy the company’s paper.  Wouldn’t we all like to get even 10% return on our investments,” asked Mr. Knapp.

(Supporting documents and Mr. Knapp’s full statement can be found at www.scsbc.org under issues.)

Energy deregulation hype busted

In the next several weeks you will be reading and hearing more about the South Carolina Electric & Gas (SCE&G) proposed overall electric rate hike of 6.61%.  Many of you will complain that if we just deregulated the energy market and stop forcing residential and commercial customers to get their energy from SCE&G, Duke, Progress or a co-op, competition would bring down rates.

That’s what they did in New York in the late 1990s.  So it is instructive that the N.Y. Public Service Commission (PSC) recently undertook a review of exactly how their state’s deregulation of the energy market affected what customers paid.

You can read the whole Associated Press story on this review here.  But if you want a quick synopsis of the report, here it is.

An initial review by the PSC found some New Yorkers, including many in low-income neighborhoods, paid much more than if they had stayed with the big utility companies. They were sold on promises of lower utility rates, the report found.

The Chairman of the N.Y. PSC is quoted as saying about deregulation, “it's working very well for large industrial customers and sophisticated shoppers. The concern is residential and small commercial customers who don't have the insight or information they need."

We regulate utilities in South Carolina.  Yes, that means that power companies have monopolies but it also means that consumers get to influence how our PSC rules on proposed rate increase requests. 

I’ve already started writing about the current SCE&G rate hike proposal and soon I might have some negative things to say about it.  But this won’t mean that the grass is greener on the other side of the regulatory fence. 

If you don’t like what SCE&G is trying to sell to the PSC, speak up and let the PSC know how you feel about the proposed SCE&G rate hike by November 27^th.  There are three public hearings. All public hearings will start at 6 pm.

--Wednesday, October 24th, at the Aiken Technical College, Amphitheater (Room 701), 226 Jefferson David Highway, Graniteville, SC.

--Monday, November 5th, International Longshoremen’s Association Local 1422, 1142 Morrison Drive, Charleston, SC.

--Tuesday, November 27th, Public Service Commission of South Carolina, 101 Executive Center Drive, Columbia, SC.

You can check out the SCE&G filing (NO. 2012-218-E) at the PSC website, www.psc.sc.gov. If you would like to comment by mail, send it to SC Office of Regulatory Staff, 1401 Main Street, Suite 900, Columbia, SC 29201.

SCE&G wants more of your money

For those of you in the South Carolina Electric & Gas (SCE&G) territory, get ready to mark your calendars.  The power company is asking for an overall rate increase of 6.6% on electricity for its 660,000 customers.  For small businesses the rate hike would be 4.19% and residential customers would pay a whopping 7.35% more for electricity.  The total new money being sought from customers by SCE&G with this filing is $151.5 million.

This rate hike has nothing to do with the SCE&G construction of the two nuclear reactors under cosntruction that they are also requesting another $238 million from their customers.  And this has nothing to do with regular fuel adjustments.  This is all about regular operational costs for SCE&G.

Is the increase justified?  We’re going to find out because the S.C. Public Service Commission (PSC) will hold its hearing on the matter right after Thanksgiving.  I have formerly intervened in the process which gives me the right to cross examine all witnesses.  I have done this numerous times in the past and at the end of the day SCE&G proposed rate increases have been knocked down by up to 50%.

So what’s the prognosis this time?  Here are some facts.

--SCE&G already has the highest rates of the commercial power companies in South Carolina.  The average monthly residential bill for a 1000 kWh customer is $130.64 for SCE&G, $106.77 for Duke and $101.58 for Progress.

--SCE&G is asking to increase its return of common equity (the rate offered to Wall Street financiers to entice them to by SCE&G paper) from 10.7% to 10.95%.  This would be 0.45% higher than what Duke has been given by the PSC. 

--The parent company of SCE&G, SCANA, had a 29% increase in earnings in the second quarter of this year compared to the same period the year before.  That means that SCANA took in $72 million in profit in May, June, and July this year. 

If you want to let the PSC know how you feel about the proposed SCE&G rate hike, there are three public hearings.  All public hearings will start at 6 pm.

--Wednesday, October 24^th, at the Aiken Technical College, Amphitheater (Room 701), 226 Jefferson David Highway, Graniteville, SC.

--Monday, November 5^th, International Longshoremen’s Association Local 1422, 1142 Morrison Drive, Charleston, SC.

--Tuesday, November 27^th, Public Service Commission of South Carolina, 101 Executive Center Drive, Columbia, SC.

You can check out the SCE&G filing (NO. 2012-218-E) at the PSC website, www.psc.sc.gov.  If you would like to comment by mail, send it to SC Office of Regulatory Staff, 1401 Main Street, Suite 900, Columbia, SC  29201.