Why Santee Cooper is on the chopping block
South Carolina lawmakers will wait until next year to decide Santee Cooper’s fate, leaving the troubled state-owned utility’s more than 1,600 employees guessing about their future until then.
In the meantime, the state will spend months fielding and evaluating offers from companies to purchase or take over the management of the utility, which supplies power to 2 million South Carolinians.
On Tuesday, S.C. lawmakers overwhelmingly approved that plan of action, the culmination of months of debate this year over Santee Cooper’s role in South Carolina’s nuclear debacle and what should be done to protect its customers.
“Governor McMaster commends the General Assembly for taking this bold and historic step to protect ratepayers and taxpayers,” the governor’s spokesman, Brian Symmes, said Tuesday. “Resolving the future of Santee Cooper is no longer a question of ‘if’ — it’s now a question of ‘when and how.’”
State House leaders say the plan gives the state Department of Administration time to vet the options for Santee Cooper’s future after the 85-year-old power company wasted $4 billion on the failed expansion of the V.C. Summer nuclear power plant.
But it also leaves the utility’s 1,625 employees — whose jobs have been clouded by uncertainty since the project’s unexpected collapse in July 2017 — in limbo for at least another year.
“We are in completely uncharted territory as a state,” said Senate Judiciary Committee Chairman Luke Rankin, an Horry County Republican who represents many of Santee Cooper’s direct-serve customers. “No other state has gone in this direction before.”
Higher power bills?
Santee Cooper’s future matters to those employees and the 2 million South Carolinians in all 46 counties who rely on the Moncks Corner-based utility’s electricity. Those customers are on the hook to pay off that $4 billion in debt in the form of higher power bills over the next four decades.
That will cost Santee Cooper’s direct-serve customers in Horry, Georgetown and Berkeley counties about $6,200 per household. It will cost customers of the 20 electric cooperatives who distribute Santee Cooper’s power about $4,200 per household.
Supporters of selling Santee Cooper, including Republican Gov. Henry McMaster, say only a sale can pay off that $4 billion in debt so customers aren’t made to do so.
But opponents say selling the not-for-profit state agency to a for-profit company likely will lead to layoffs and higher electric rates in the long run.
Another option, pitched by Santee Cooper defenders, would be hiring a private firm or power company to manage Santee Cooper more efficiently. A management agreement would save some money while keeping the utility state owned, but customers still would pay thousands for a power plant that never produced electricity.
Santee Cooper has attracted suitors. The state already has received 15 anonymous, non-binding offers to purchase or manage the utility. Of four credible bids to purchase the entire utility, three would have paid off all the V.C. Summer debt, according to a consultant hired by the General Assembly.
This time around, lawmakers are seeking serious, binding offers. They have empowered the state Department of Administration to hire a consultant — likely a high-powered investment bank — to review those offers and bring the best ones back to the General Assembly for a final decision.
The deal reached Tuesday gives the department until Jan. 15 of next year to return to the General Assembly with the top offers. But the agency could request another two months if it needs it.
After that, the House and Senate’s budget committees will meet to review three options: the best offer to purchase Santee Cooper, the best offer to manage Santee Cooper, and Santee Cooper’s own proposal to improve and save customers money if it is allowed to remain independent.
Lawmakers plan to pick one of those options by the end of the 2019-20 legislative session next spring, Senate Majority Leader Shane Massey, R-Edgefield, told reporters Tuesday.
Key to the decision will be how each bidder plans to treat Santee Cooper’s current employees and future electric rates.
Each bid must include a 20-year projection of electric rates. It must also include a five-year projection of Santee Cooper’s employment levels — essentially explaining how many employees will lose their jobs in order to lower electric rates.
However, the proposal does not legally require the bidders to meet their 20-year rate projections. That briefly concerned some lawmakers.
“What I don’t want to see in the future is for an entity … to come in with a sweetheart looking deal that appears to be really good, and then we don’t have a mechanism by which to hold them to that,” said state Rep. Russell Ott, D-Calhoun.
Any agreement to sell Santee Cooper likely will come with a three- to five-year rate contract, Massey said. It won’t be longer because it is too difficult to project utility and fuel costs beyond that.
Massey and Senate Minority Leader Nikki Setzler, D-Lexington, assured Ott that if Santee Cooper is sold, the S.C. Public Service Commission — which sets S.C. utility rates — will be skeptical of any substantial rate hike requests from the purchaser.
“If there is a rate case that is filed at the Commission and it deviates substantially from the projections, they are going to have ... to give a pretty daggum good explanation of why that deviation is warranted,” Massey said.
The plan passed by the General Assembly Tuesday makes it illegal for companies that submit bids to the Department of Administration to market those offers in online, print or television ads.
That proposal comes a year after Virginia-based Dominion Energy spent millions of dollars advertising its offer to purchase SCE&G — the majority owner of the failed nuclear project — even as the General Assembly debated slashing SCE&G’s electric rates, which could have jeopardized that deal.
“If we were to consider a sale, it would be the largest transaction ever, not just in South Carolina, but across the country, for a public utility like this,” Massey said. “What we want to do is make sure that the decisions that we make are as much as possible influenced by policy rather than politics. We don’t want to get a bunch of phone calls and cards that make the General Assembly more likely to make a decision based on politics that we will likely regret.”