On November 26, 2012, South Carolina residents may have seen an increase in electricity rates. On November 19, 2012, South Carolina Electric and Gas Company signed a memorandum of understanding related to the company’s request for an increase in retail electricity rates. The MOU was entered into with the South Carolina Office of Regulatory Staff, Wal-Mart, Sam’s East, Inc., the Department of the Navy, and AARP.
By signing the MOU, the parties are saying that there are no contested issues surrounding South Carolina Electric and Gas Company’s request for a rate increase. The resulting rates are expected to recover a rate of return on equity of 10.25%. Expected gross revenues are estimated at $97 million a year, according to South Carolina Electric and Gas Company, but given certain fuel and demand-side management reductions, the actual revenue impact is estimated at an annual revenue increase of $32 million. South Carolina Electric and Gas Company cannot come back to the table for more rates before January 1, 2015.
A stipulation between regulatory staff and large energy consumers such as those who signed the MOU means a high likelihood that the rates will go into effect and customer bills will go up approximately 1.4%. Is this necessarily a bad sign for South Carolina? Probably not when you take into account a slow but identifiable growth in the state’s economy.
Like most states, the recession of 2007 took its toll on the Palmetto State. According to the U.S. Bureau of Economic Analysis, the state’s gross domestic product fell 1.2% in 2008 and went into free fall in 2009 with a 5.2% decrease in GDP.
Growth in South Carolina’s GDP has been positive over the past two years. The BEA reported positive growth of 2.2% in South Carolina’s GDP in 2010 and 1.2% growth in GDP in 2011.
South Carolinians also are seeing positive changes in the employment numbers as the residual effects of the 2007 recession continue to wear off. According to the BEA, the unemployment rate in 2008 was 9.3% and jumped dramatically to 12% by the end of 2009. Since that year, South Carolinians have seen the unemployment rate fall to 10.7% in 2010; 9.6% in 2011; and 8.6% as of October 2012.
Improvements in the number of people actually employed are also being seen. In 2008, approximately 1.95 million South Carolinians were employed. The number of employed fell to approximately 1.8 million in 2009, but South Carolina has been pulling itself out of the ravages of the recession, seeing the number of employed reach approximately 1.925 million in 2010, and 1.95 million in 2011.
As the ability to consume electricity grows along with the increase in economic growth and the number of employed, South Carolina Electric and Gas Company can make a stronger argument for increased pressure on its delivery capacity and the need for higher rates to cover these costs. Should South Carolina’s growth trends continue, a rate increase request after January 1, 2015 becomes likely. This is the price for growth.