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