The most important part of the disgraced ex-SCANA CEO Kevin Marsh’s recent return to the news wasn’t that he was sentenced to two years federal prison.
Yes, this is important to all those people who believed there was no corporate responsibility and that SCE & G, Santee Cooper and the electrical cooperatives’ payers would pay the full cost of the $ 9 billion worth of the VC Summer nuclear power plant debacle. Who knows? Perhaps the verdict will restore their confidence in the justice of our criminal justice system. It could also send a message to other white collar criminals who might find it tempting to lie to regulators, investors, and business partners.
But a jail sentence that requires judicial approval was part of the deal Mr. Marsh made with state and federal attorneys last year when he pleaded guilty to pleading guilty to his role in South Carolina’s biggest corporate failure of all time.
Most importantly, his return to the news was the history and accountability lesson that Prosecutor Creighton Waters presented in state court last week before Mr Marsh was sentenced to a state sentence concurrently with the federal sentence.
Mr. Waters, who heads the state grand jury, likened Mr. Marsh to the proverbial frog in boiling water: He had no intention of deceiving shareholders and state regulators about the problems with the construction project, but he did, and even as he did Realizing that he himself had been misled, he continued to claim that the project was on the right track because it continued to give him hefty bonuses. But while he made it clear that Mr. Marsh was ultimately responsible for his actions – as criminals always are – he was not the only culprit. In fact, it wasn’t just corporate executives to blame: they were supported and favored by “the legal and regulatory environment” in South Carolina that “created inconsistency” associated with “hubris in leadership”. at SCE & G to create the debacle that will cost toll payers for decades.
“How did that happen: How did an otherwise … good man lose his way?” Mr. Waters asked the court rhetorically. “Part of that was the legal regulation that was put in place. That would be the Base Load Review Act, the BLRA. In the past, a system had to run and generate electricity before an energy supplier could bill its customers. And the problem was that the financial markets, Wall Street, refused to pay to build a nuclear power plant because the risk was too high.
“So what was the solution? The solution was to pass a law, the BLRA, that would allow the energy company to put that risk on Everyday Joe and Everyday Jane, the tariff payers, instead of putting that risk on Wall Street. … And that kind of environment created a situation where risk was separated from the people who were spending the money. The way the articles of association are organized … you win when you lose. If the project has failed, if you abandoned it, you also have to recoup the costs and returns from the customers. “
Fortunately, lawmakers repealed the Base Load Review Act after SCE & G and Santee Cooper abandoned the two nuclear reactors in the middle of construction in 2017. Legislature also amended a contemporaneous law that deprived the state’s consumer advocate of representing tariff payers in utility tariff cases and required the new Office of Regulatory Staff to put the interests of monopoly utilities above the interests of tariff payers – which they Public Service Commission alone had always done pretty well. And for now, at least, the legislature is electing PSC commissioners who recognize that their job is to act without the normal free market economy in order to protect tariff payers who, under state law, have no choice of where to get their electricity.
But lawmakers haven’t done anything to change their own internal problems that the Baseload Review Act undisputedly made possible: false trust and inadequate review.
In fact, the Base Load Review Act was a prime example of what happens when a really complicated proposal comes from a special interest that has been able to maintain a trusting relationship with lawmakers with its campaign donations and lobbying stable.
When SCANA asked about a new law to ease funding to build the nuclear reactors most legislators wanted, they didn’t look closely enough to see that the legislation was based on perverse and guaranteed incentives: the more the company spent , the greater the profit for the company and its executives – even if the project failed.
We cannot purge this improper trust from our entire political system, but the fee payers can stop having to subsidize it: In return for the regulated monopoly status, which is a virtual money printing machine, the legislature should give regulated monopolies the right to lobby the legislature – and depriving executives and corporations of their right to campaign contributions.
Legislators should also fill the information vacuum with a system – similar to the one we have for tax and spending law – that delays the debate on certain complex bills until they are checked for constitutional errors and explained in plain English by neutral experts.