South Carolina legislators today seemed skeptical of a report by a consultant that recommended electric market reforms. The report asserted there could be savings amounting to $362 million per year if South Carolina joined a regional transmission organisation.
The final report, which was submitted by The Brattle Group last week, appeared to be a source of considerable concern for the majority of the eight members who make up the Electricity Market Reform Measures Study Committee. The report looked at four different market structures that Brattle claims could save the state between $6 million and $362 million per year by 2030.
Some members were concerned that South Carolina consumers would be forced to pay for the production of electricity in other states. Some members feared an RTO's governing authority could overrule state regulators in local electric utility matters. Some questioned if the state would be able to maintain a reliable source of power to support its economy if it did not have enough power reserves.
Chairman defends the report and idea of market reform
Five members of the committee, including co-chair Rep. Jay West IV (R-Anderson), expressed serious doubts. The chairman of the committee, Sen. Tom Davis (R-Beaufort), was the only one to consistently defend the study and its recommendation that regulators examine electric market alternatives.
"If we set out certain objectives, we could probably reach a consensus on them and then give the (S.C. Public Service Commission), authorizations to explore. Then allowing the PSC make decisions about what aspects of involvement are appropriate given the objective.
Davis was one the main movers in the 2020 legislation which established the study panel and authorized Brattle to perform the $750,000 study on market alternatives. One of the supporters, Sen. Wes Climer (R-York), was not present at the hearing.
Brattle battles to put legislators at ease
Nobody mentioned the elephant in the living room. South Carolina can only save significant amounts of money by joining an RTO if North Carolina joins as well.
John Tsoukalis is a principal of Brattle and head of the team who prepared the report. He worked to answer legislators' questions and put their minds at ease. He explained that the study was merely an exploration of alternative market options. The study strongly recommends that the state join an integrated wholesale market, but does not offer any recommendations on which type of integrated market it should be.
Even if sometimes they seemed to misunderstand the RTOs' operation, legislators expressed serious concerns.
Rep. Russell Ott (D-Calhoun) repeatedly raised questions about RTO interference in the SCPSC despite the same repetitive replies that the commission remained independent and was the board responsible for overseeing utility operations within the state.
Brad Hutto (R-Orangeburg) maintained that the profits made by state utilities on selling electricity to other states should go to shareholders of utility companies, not customers. He wasn't satisfied with Tsoukalis’ assertion that state regulators had authority over how utilities distribute income to customers and how many profits they keep for shareholders.
Sen. Larry Grooms (R-Berkley) objected to the fact that South Carolina's cheap electricity would be sold by PJM and not to S.C. consumers. Tsoukalis had repeatedly explained that the surplus power generated by utilities in South Carolina would only be exported. He said that South Carolina would be able to purchase power from other PJM-states when it was cheaper.
South Carolina utilities are less enthusiastic
The power companies of the state Dominion Energy Inc., Duke Energy Corp., and Santee Cooper have already voiced their opposition to the proposals for market alternatives.
Duke's spokesman Ryan Mosier claimed that the report was inaccurate.
He said that the proposal "overstates savings", fails to account for joining costs and ongoing administrative expenses, and would keep coal plants operating much longer than planned. It would also put South Carolina's Energy Policy in the hands a federal bureaucracy, despite Brattle's attempts to refute these points. Duke Energy is looking forward to continuing the conversation in the committee as South Carolina plans a smarter future for electric customers.
Duke's main lobbyist for North Carolina at the State Energy Conference last week predicted flatly that the S.C. General Assembly will reject the findings of the report.
Report on market options was originally confidential
The Brattle Report compares four reforms to the electricity market in South Carolina with the benefits of maintaining the current utility market that the state shares North Carolina. Each proposal is a step up the ladder, starting with an alternative that can be implemented under the current S.C. laws and ending with the creation of a RTO market which requires significant legislative action.
The S.C. Legislature established the Energy Market Reform Measures Study Committee in late fall 2020. S.C. Electric & Gas (which was later bought by Dominion) and Santee Cooper invested more than $9 billion in what was estimated to be a project worth $26 billion before abandoning it. This led to a significant backlash against the state's monopoly.
Davis and West were co-appointed to the eight-member Committee. The law provided funds for the hiring of consultants to assist the committee in determining whether or not the legislature should be considering market-based reforms on electricity sales and determining any public benefits from such reforms.
The committee hired Brattle on February 1, 2022 to conduct the study.
Brattle finished a draft report by the end of February 2023. The Charlotte Business Journal received a copy of the confidential draft in March, despite the fact that it was supposed to remain confidential.
Final version addresses criticisms received from stakeholders
Brattle hosted a public meeting in mid-March with the 23 members of the advisory board to get reactions and give utilities and other stakeholders a chance to criticize the initial effort.
The final version of this report included revisions that were based on the reactions.
The recommendation to integrate into a more structured wholesale market was not changed. The analysis of savings in various alternatives has changed but to a limited extent.
The savings associated with switching to PJM remained virtually unchanged. At the low end of the scale, the savings dropped from $285 to $281 millions annually. Brattle continues to put the top end at $362 millions.
According to the final report, forming a new Southeast RTO that includes North Carolina and portions of eight Southern states could save between $115 million and $187 million. This is up from $140 to $183 in the draft.
Although they were still orders of magnitude behind RTO, the two remaining options saw the greatest increase in savings potential.
Savings from a market for electricity imbalance across ten Southeastern States, which would streamline the sale of electricity in 15-minute intervals, but not allow the planning of days in advance in an RTO have increased from $4 to $9 million.
The final report states that a joint dispatch agreement between Duke, Dominion, and Santee Cooper would result in savings of up to $11,000,000. Initial estimates put the savings at between $1 million and $4 million per year by 2030.