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Energy Market Reform Update 2.0

Updated: Oct 7

Last week the South Carolina General Assembly passed an Electricity Market Reform Measures Study Committee. Introduced on January 15th of this year, it took seven versions for it to pass. The goal of the final bill though is simple: to study whether to recommend adoption of electricity reform measures and the potential public benefits with each of the measures.

Background


The impetus of the energy market reform study is inextricably tied to the failure of a planned nuclear facility. In 2008, SCANA (renamed Dominion Energy South Carolina) and Santee Cooper, a South Carolina state owned utility, announced plans to add two nuclear reactors to the V.C. Summer Nuclear Station in Jenkinsville, SC. Westinghouse Electric Company oversaw the construction. The Public Service Commission of South Carolina approved the plan, construction began in 2012, and it was expected to be operational in 2016. Both SCANA and Santee Cooper were well aware of shortcomings, mismanagement, and lack of oversight that eventually made the reactors impossible to complete. By 2017, Westinghouse declared bankruptcy. In July 2017, SCANA notified the Nuclear Regulatory Commission (NRC) that it had stopped construction on the two new nuclear reactors. The decision was not surprising given the cost overruns and annual delays. Thanks to a 2007 South Carolina state law, utilities are allowed to pass on rate increases to customers for yet-to-be finished and even abandoned projects, which means residents in South Carolina are footing the bill for the $9 billion massive failed nuclear reactor program for the next 20 years. Making matters worse, Santee Cooper as noted above is a state-owned utility.

State leaders were incensed about the failure of the V.C. Summer plant especially given the fact that South Carolinians have been paying the country’s highest electricity bills— about $400 more than the U.S. average, according to U.S. Energy Information Administration (when considering the price of electricity and the consumption).[1] In a state that has tenth highest poverty rate in the country (15.3% in 2019), lawmakers began to consider what to do about energy. Energy market reform seemed like an appropriate way to proceed.

South Carolina Energy Market Study

The study committee will evaluate several options for South Carolina including:


· whether the state should join an existing Regional Transmission Organization such as PJM;

· whether South Carolina should establish an energy imbalance market (i.e., a voluntary collection system operators in which real-time kilowatt-hours, not power plants, are bought and sold as needed.);

· whether vertically integrated electrical utilities should divest their generation or transmission assets, or both;

· whether there should be full or partial consumer retail electric service choice; and

· whether there should be community choice aggregation in South Carolina.

The study must include the costs and benefits to consumers and the financial and operational impacts to integrated service providers of any market reform measures recommended. The final report is due on November 1st of 2021.

What Will North Carolina Do?

Like many states, North Carolina thought about deregulation; in fact, in April 2000, a study commission unanimously recommended limited retail and wholesale competition. But the California blackout put everything on hold. However, that was 20 years ago.

What will North Carolina do now that South Carolina has a study? Since Duke Energy is in both states, it makes sense that the North Carolina General Assembly would authorize a similar study when it reconvenes for the Long Session in January 2021. While North Carolina doesn’t have a failed nuclear plant, an $8.5 billion bill to clean up coal ash is eerily similar.


Still several studies have been conducted showing that a large Southeast power market would make sense to lower prices and increase clean energy deployment.


Here are two:

· Duke University, “Evaluating Options for Enhancing Wholesale Competition and Implications for the Southeastern United States,


· R Street, “Electricity Reform as a Free Market Climate Strategy


No one denies that reforming an energy market is an easy task. But it makes no sense for our Southern neighbor to do it without us.

[1] Based on 2016 data. Average residential energy expenditures for 2016: SC $1,753, Alabama $1,757, Connecticut $1,706, Maryland, $1,665, and Hawaii, $1,665. When it comes to overall electricity usage, South Carolina has the sixth highest usage per customer.

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© 2020 by Diane Cherry Consulting.