Suitor to buy state-owned Santee Cooper proposes cutting 700 jobs, acquiring debt
BY JOSEPH BUSTOS AND MAAYAN SCHECHTER
FEBRUARY 11, 2020 11:25 AM
COLUMBIA, S.C.
South Carolina lawmakers now have three options for deciding the fate of Santee Cooper, the state-owned utility that racked up $4 billion in debt associated with a failed nuclear construction project in Fairfield County.
They can sell it, allow another company to manage it, or allow it to move forward as is with a reform plan of its own. Those options were outlined in a much-anticipated report, released Tuesday, that gave details of the three proposals to buy, manage or reform and allow Santee Cooper to remain publicly owned and operated.
Driving the debate is the question of which plan will best protect Santee Cooper’s roughly 2 million customers from shouldering even more of the cost of the now-abandoned nuclear project, which will never generate power for them.
But supporters of Santee Cooper also say the decades-old utility is worth saving and that keeping it state owned is the only way to ensure ratepayers are protected from rate hikes down the line.
S.C. Gov. Henry McMaster, who was an early advocate of selling the utility, shared his favorite option Tuesday, shortly after the report’s release.
Talking to reporters, the Columbia Republican said the General Assembly “must act quickly” to sell Santee Cooper, adding that the company with the top bid to buy the utility — Florida-based NextEra — “is a fine company.”
“My strong recommendation is that Santee Cooper be sold. Otherwise, the citizens of our state and the ratepayers will be burdened with billions of dollars in debt with no way to pay for it,” he said.
“The reactors are not being built. This debt was going to be paid through selling electricity made by those reactors. They’re not going to be built, so where are we going to get those billions of dollars to pay those loans off?” McMaster said.
The options facing lawmakers were detailed in a more than 100-page report, put together by the state Department of Administration with help of outside consultants.
The report named NextEra as the company to buy Santee Cooper, and Virginia-based Dominion Energy as the company to manage the utility, if lawmakers choose to sell or contract operations of Santee Cooper to another company.
NextEra’s bid to purchase Santee Cooper includes taking on Santee Cooper’s debt, up to $6.859 billion and paying the state $500 million at closing in addition to other cost-defraying payments. It also promises a temporary rate freeze of four years for customers and nearly $1 billion in relief to customers through refunds or rate reductions. But NextEra also is proposing a 42% reduction in workforce — a loss of 705 people — as part of its bid.
Dominion Energy provided the recommended bid for managing Santee Cooper, whose board would remain in place. Dominion would install senior level executives with management experience in Santee Cooper who would report to Santee Cooper’s chief executive officer. Dominion would receive reimbursement for those employee costs, but would not receive any management fees. Instead, the company would benefit from developing a partnership between the utility it owns in South Carolina — the former SCE&G — and Santee Cooper which is adjacent to Dominion’s holdings in many parts of the state.
The report did not draw any conclusions about whether Dominion’s proposal would have any benefit for ratepayers.
The winning proposals could pit the interests of two powerful investor-owned energy companies against each other — Dominion, which recently made a significant investment in the state’s energy sector, and NextEra, which has no holdings in the Palmetto State yet. Both are publicly traded, with stock listings on the New York Stock Exchange.
While NextEra has no holdings in South Carolina, Dominion is the latest newcomer to South Carolina’s energy sector, having merged with then Cayce-based SCANA in January of last year. SCANA was the parent company of SCE&G, Santee Cooper’s senior partner in the failed nuclear project.
Asked Tuesday about Dominion’s offer to manage Santee Cooper, McMaster said NextEra’s offer to buy the utility was “far superior.”
At this point, it’s unclear from lawmakers, who only got the report once it became public Tuesday, what choice they will make.
The House Ways and Means Committee and the Senate Finance Committee have 30 days to recommend a path forward of what to do with the utility.
That process begins with a joint meeting on Thursday between the two committees where the Department of Administration will give a presentation to legislators about the report. The House Ways and Means Committee then plans to have discussions of the report beginning the last week of February.
“Even with our 30-day time constraint, and the budget process picking up in committee, I am confident this ad-hoc committee will work with diligence and vigilance,” said House Ways and Means Chairman Murrell Smith. “I look forward to leading the next step forward on this incredibly important issue.”
Senate Majority Leader Shane Massey, R-Edgefield, said he hopes to get to the Santee Cooper debate soon, but now is the time to read the report and hear from experts.
“The only responsible position I think at this point is for people to digest what the details are of the report and then make a decision based on that information,” Massey said.
A NUCLEAR FAILURE
Lawmakers have been debating whether to sell Santee Cooper since 2017, when the utility and its partner, SCE&G, announced it was pulling the plug on a $9 billion plan to build two nuclear reactors at the V.C. Summer nuclear plant in Fairfield County.
Santee Cooper, the junior partner owning 45% of the project, lost about $4 billion in the failed project and has about $3.6 billion in debt remaining. Dominion bought SCANA, SCE&G’s parent company, last year.
Since shortly after the announcement, McMaster began pushing for the sale of Santee Cooper, saying the state should get out of the utility business. Critics of selling the utility have argued that keeping it state owned could protect the utilities customers against rising costs associated with the remaining debt.
Santee Cooper in total has about $6.9 billion of debt, including the $3.6 billion associated with the nuclear project. The utility has 189,780 retail customers, and also provides electricity to 20 electric cooperatives, 13 cities, and more than 25 large industrial customers. In all, Santee Cooper directly or indirectly serves 2 million people in South Carolina.
Santee Cooper also has been working to pay off its debt, recently reaching an agreement with Westinghouse, the former lead contractor on the nuclear construction project, on how to divide equipment at the site.
Santee Cooper also has its own reform plan, put together under new leadership. President and CEO Mark Bonsall, a retired public power executive from Arizona, took the helm in July and already has announced efforts to lower debt and more toward more sustainable power sources.
Reporter John Monk contributed.
Bookmarks