By Lindsay Street, Statehouse correspondent | South Carolina may see its state-owned utility pass into private hands after its role in a failed multi-billion project, but lawmakers say it won’t happen quickly or below-market value.
A bill was prefiled in the Senate Wednesday to determine the value of Santee Cooper — one of several new bills aimed at the two utilities responsible for spending $9 billion on two nuclear reactors that are unfinished at V.C. Summer plant in Jenkinsville. The legislation comes less than two months after Gov. Henry McMaster expressed interest in privatizing Santee Cooper.
But senators say the bill is not a signal that they’re on board with selling the utility just yet.
“I have not heard of a lot of people pushing for the sale of Santee Cooper,” said Sen. Nikki Setzler, D-Lexington. Setzler served on a special committee asking what went wrong in the joint venture between Santee Cooper and SCE&G. “Even restructuring Santee Cooper, which is at a minimum the General Assembly will do — then you got to know what the value is and what makes it up in order to make a reasonable determination on how to restructure it.”
McMaster’s officer declined a Monday request for comment on this story. In multiple media reports in October, however, McMaster was shopping Santee Cooper to private entities.
The last time Santee Cooper was valued under proposed privatization was in the early 2000s under Gov. Mark Sanford. The end result was that the General Assembly passed legislation saying the legislature had sole authority to sell the utility.
In 2006, a year after surviving that threat to privatize, Santee Cooper embarked on the ambitious project to bring two new nuclear reactors online. The state utility owns a 45 percent stake in the project with private partner South Carolina Electric & Gas. It was Santee Cooper that finally pulled the plug July 31 on the project after years of it searching for another buyer for its stake.
About Santee Cooper
Santee Cooper is one of a score of state-owned utilities around the nation. The utility doesn’t just generate and sell power. The company employs 1,750 people who provide a range of jobs from linemen to mosquito abatement and everything in between.
Santee Cooper was created in 1934 in an effort to bring electricity to rural parts of the state during a time when utility providers had little economic incentive to bring service, said Mollie Gore, manager of corporate communication at Santee Cooper. The first generating station, the Jefferies hydroelectric station, began generating electricity in 1942.
The utility has 180,000 retail customers, many of whom are in Horry and Berkeley counties. It’s largest customer is Central Electric Power Cooperative, which consists of 20 cooperatives in the state. With power sales in all 46 counties, Santee Cooper is the state’s largest electricity provider and one of the largest electricity generators, Gore said.
The utility also provides water to communities in Berkeley and Dorchester counties, manages thousands of acres of land and two lakes, and works as an arm for economic development in the state.
Santee Cooper as economic developer
In the 1990s, Santee Cooper developed Mount Holly, which eventually landed a database for Internet search giant Google. When Volvo sought to locate in the United States, it was Santee Cooper that purchased the giant tract known as Camp Hall and carved off a portion for the automaker. The rest of the site is being sold for similar support industries.
The utility also offers economic development loans and grants, doling out $110 million since 2010.
“(State-owned utilities) can be a really powerful tool to implement policy,” said Sue Kelly, CEO of American Public Power Association (APPA), which represents public utilities, including state-owned ones.
Gore said being a public utility that is responsible directly to ratepayers allows Santee Cooper to be more innovative in achieving its mission.
“It let’s us strategically plan approaches in a lot of ways that are very innovative,” Gore said. She pointed to a new coal ash pond project that the utility is working on to remove coal ash waste from water.
When asked if that held true on the recent nuclear project, Gore responded: “It wasn’t a gamble at the time. It was the clear decision.”
The decision was made as President Barack Obama, an outspoken opponent of coal, was elected and natural gas was four-times more expensive than it is now, Gore said. It also was prior to the Great Recession and when Santee Cooper forecasted a surge in demand — something it never quite saw with the economic downturn and energy-saving initiatives, she said.
But some say Santee Cooper, insulated from market pressures because of being an arm of the state government, acted irresponsibly. As for its private partner, blame for its behavior has rested at the feet of a 2007 law that allowed it to raise rates for unfinished projects. That law is also facing lawmakers’ ire in the coming session.
About privatization
The APPA’s Kelly said privatizing efforts for public entities have a big question ahead of them: What should be done with outstanding bonds? Santee Cooper took out $4 billion in bond debt tied to the V.C. Summer project, bringing its total debt to more than $8 billion, which is about the amount of the state’s general tax revenues for one fiscal year
Rising power rates will be another question, Kelly said. Santee Cooper touts having rates at 30 percent below market value.
“It is really important to have utilities in the mix that are owned by their customers and that do not have a profit motive because they can serve as a valuable check and balance on the other business model, and that was one of the reasons they were founded,” Kelly said.
The utility is in Republican Sen. Larry Grooms’ backyard. In a text message to Statehouse Report, he said he opposes privatization, as it could mean the loss of jobs and threaten economic development.
“Santee Cooper has proven itself to be one of our state’s greatest assets,” Grooms said. “In addition to providing low-cost, reliable electricity for over 2 million South Carolinians, this agency is the economic (engine) responsible for attracting high-quality, high-paying industries like Nucor, BP, Google and Volvo to our area … I’ll be waiting in the Senate to kill such a foolhardy proposal should one ever make it that far.”
S.C. Sen. Tom Davis, R-Beaufort, said he opposes a “fire sale” of the utility but favors eventual privatization of Santee Cooper.
“Yes, we should go about doing it but it’s going to take a while to figure out how we can do it,” Davis said. He added he doubted privatization would lead to higher rates.
One of the more recent privatization of a public utility happened in Vero Beach, Fla. The city-owned electric utility sold for $185 million to Florida Power and Light in October. The move is expected to save ratepayers there up to $20 per month.
Part of any sale would be Santee Cooper’s customer base, including Central.
About 60 percent of Santee Cooper’s power sales go toward electric cooperatives in the state. Already, the coops have amended their agreements with the utility so that future projects will not be paid for by them prior to completion, said Lou Green, executive vice president communications at the Electric Cooperatives of South Carolina.
“We don’t have a position,” Green said of a sale. “We are not wringing our hands about that because we know with humility that the electric cooperative business, which represents a million and half South Carolinians, 750,000 accounts, is a lot of business.”
He said that puts the cooperatives in a powerful bargaining position.
Green said he would caution the legislature to look at what entities are willing to pay, not just an appraisal of assets. He likened it to home buying where an appraised value may not rise to the market value.
State law prohibits Santee Cooper from advocating for its privatization, Gore said. When asked if the entity is bending the ear of lawmakers to remain public, Gore repeatedly cited that governing law.
“The legislature will choose our path forward … We are cooperating fully with the legislative process,” Gore said. “Any independent, objective analysis will determine Santee Cooper’s value to South Carolina as a public power utility.”
- Have a comment? Send to: feedback@statehousereport.com.
We Can Do Better, South Carolina!