It's easy, if not exactly accurate, to blame high gasoline prices on Barack Obama. But do you want to know somebody who could really cause a spike in your monthly expenses? W. Keller Kissam.
Name not ringing any bells? Kissam is the president of retail operations for South Carolina Electric & Gas Co., and his signature appears at the bottom of the public utility company's latest request for a rate hike. SCE&G recently sought approval from the S.C. Public Service Commission for a 6.61-percent revenue increase starting in January 2013, for an estimated $151.5 million annual increase in revenue. For an average consumer using 1,000 kilowatt-hours, the monthly bill would jump from $135 to nearly $142 under the new rate.
On Monday, after everyone from a multinational retailer to seniors on fixed incomes cried foul, SCE&G issued a memorandum of understanding that the company would lower its request to 4.23 percent. Factoring in declining fuel costs and an adjustment based on consumer demand, the net impact to customers is expected to be 1.38 percent, or $32 million.
According to an audit from the state's Office of Regulatory Staff, some of that extra revenue would go to pay for Zumba fitness classes for SCE&G employees and a private club on Sullivan's Island called the Sand Dunes Club.
If your blood isn't boiling yet, consider that seven years ago, a 1,000-kWh bill at SCE&G was only $97. SCE&G has jacked up its rates 18 times since 2005, putting a pinch on the state's residents and businesses in the midst of a major recession.
According to Kissam's application, the rate hike is needed, among other reasons, so that the company can "provide continuing reliable service to its customers, meet the increasingly strict safety and reliability standards imposed on electric utilities by federal law, improve efficiency, and effectively plan for system growth." In 2010, for example, the company spent $280 million on a flue gas desulphurization unit, or "scrubber," to meet federal clean-air requirements at its Wateree Station coal plant in Eastover. The increase would also go to cover tree-trimming near power lines and a reported $21 million shortfall in pensions, an aftershock of the Great Recession.
Jeff Nelson, an attorney with the Office of Regulatory Staff, says some of those expenses are justifiable, while others are not. Staff from his office spent weeks taking samples of SCE&G's receipts and looking for inefficiencies in the way the company spent money from utility bills. "We just use a common sense standard," Nelson says.
Common sense would dictate, for example, that ratepayers' money shouldn't go toward $1,400 worth of alcohol during two board meetings of SCE&G's parent company, SCANA, at Ruth's Chris Steak House in Columbia. According to the auditors' findings, your electric bill helped buy four $50 glasses of 25-year-old scotch and three $56 bottles of wine.
The ORS auditors also objected to $6 million in bonuses the company handed out in the past year; a half-million dollars' worth of operating and depreciation expenses for private employee clubs in North Augusta, on Lake Murray, and on Sullivan's Island; and $150,000 worth of membership dues to a national lobbying organization for utility companies. Other auditors said the company was reporting overly high depreciation on some of its power plants.
One auditor said SCE&G was aiming too high with its goal of a 10.95 percent return on common equity (a measure of the profit a company generates from shareholder investments). The auditor said similar power companies are only getting a 10.25-percent ROE, SCE&G agreed to that rate on Monday.
SCE&G serves about 319,000 natural gas customers and 668,000 electricity customers, few of whom have the option of leaving for another utility company. State law requires SCE&G to apply to the S.C. Public Service Commission, a seven-member body appointed by the Legislature, any time the company wants to change its rates for electricity or natural gas. Rather than reject rate hikes outright, the Commission often grants the company a smaller rate increase than it asked for.
For the current round of rate-hike bargaining, seven different entities signed on as intervenors, formally lodging complaints about the proposal: the ORS, AARP, the S.C. Energy Users Committee (a group of industrial utility customers), the Department of the Navy, Time Warner Cable, Walmart, and S.C. Small Business Chamber of Commerce President Frank Knapp Jr.
Knapp and the Chamber take umbrage with some of the specific expenses in SCE&G's request. "If they want to entertain the SCANA board at Ruth's Chris instead of Lizard's Thicket, let the shareholders pay for it," Knapp said in a phone interview. Any expenses not related to power generation and distribution would hurt small businesses' profit margins and effectively hurt the state's economy, he added.
At a public hearing on the topic earlier this month, InterTech Group executive and Awendaw resident Grant Reeves spoke against SCE&G, calling the company "a corporate bully" and saying that he had spoken to area business leaders who were considering relocating because of the rates. "This utility has had control for too long, and it's time to take control of this monopoly," Reeves said.
At the hearing where Reeves spoke, in the International Longshoremen's Association hall on Morrison Drive, smiling, cordial SCE&G employees in the lobby handed out pamphlets regarding payment options and customer service. They offered cold comfort to the folks who'd come to rail against the company that controls the power supply.
"They ask for money, and they get it, but they get it 2 percent at a time," Mt. Pleasant resident Eleanor Horres said of SCE&G during her testimony at the hearing, addressing the Public Service Commission members. "That's like cutting off a finger a knuckle at a time. It doesn't make it hurt any less."
Nelson of the ORS, who played a role akin to a prosecutor at the hours-long ILA hall hearing, says he was heartened to see hundreds of private citizens show up, as opposed to another hearing in Aiken where only two public witnesses appeared. "A lot of people just think it's inevitable when they see the rate case that the rates are going to go up," Nelson says. "People need to understand that it's a complicated process, but the public witnesses and the testimony that people provide are very important, and the commission considers them."
The Public Service Commission will begin its final public hearing on the topic of the rate hike on Mon. Nov. 26 in Columbia, and the commission must make a decision by Dec. 29. To file a letter of protest in regards to the rate hike, visit the PSC website at tiny.cc/SCEGprotest.