South Carolina's governor says that South Carolina Electric & Gas should cover the costs of its scrapped VC Summer nuclear project. That assessment comes after a state government audit cast doubt on the utility's claim that it would be bankrupted if cost recovery for the failed project were to end.

The development could put in doubt plans by the utility's parent SCANA to merge with Dominion Energy.

(Read "Dominion to Buy SCANA in Wake of Nuclear Collapse.")

News reports say that SCANA is increasingly isolated among state government leaders, where some lawmakers are angry over the abandoned $9 billion project that cost nearly 6,000 jobs when it was shut down in late July. Ratepayers also are paying around $37 million a month in project costs.

A study by the Office of Regulatory Staff (ORS) for the state's public utilities commission concluded that SCANA had around a one-in-three chance of filing for bankruptcy protection if cost recovery was ended.

The utility pushed back in a filing, saying that the ORS finding was based on a misunderstanding of accounting principles. The utility says that Generally Accepted Accounting Principles (GAAP) determines whether or which assets should or should not be written off, not company management.

(Read "SCANA and Santee Scrap 'Uneconomic' Nukes.")

"If the Commission grants the request of ORS, then SCE&G will be required to write off its new nuclear investment. ORS misunderstands this basic accounting requirement," the utility says.

Even so, news reports say that South Carolina's House passed by a vote of 114-1 the first in a package of bills meant to stop customer payments and overhaul the utility regulatory system.

In a letter to the Legislature, Governor Henry McMaster said the audit offers all the information needed to cut nuclear-related rates altogether.

If they pass a law that does anything less, McMaster reportedly said, "I will veto it."

Previously, the governor had stopped short of calling for a repeal of the law that allowed SCE&G to charge customers for the scrapped nuclear power project.

"ORS did not expect SCANA to accept an independent analysis that contradicted its claim that the temporary suspension of revised rates revenue would force the company into bankruptcy," the agency's acting executive director, Nanette Edwards, said in a statement.

Regulators gave ORS a month to prepare its analysis. A deep dive into SCANA's finances would likely take three months, ORS said.

The utility also reportedly turned over its financial records a week before the audit was due.

The loss of rate recovery could result in Virginia-based Dominion walking away from its plans to buy SCANA. Dominion has offered to refund most of the money SCE&G customers have paid into the Summer project.