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The State
April 4, 2020
By Frank Knapp Jr.
The South Carolina Legislature will go into session Wednesday to make plans to meet later this year to address specific legislation.
One major and controversial issue that demands legislative attention is the future of Santee Cooper, the state’s public utility. Should it be sold to an investor-owned utility? Or should it be allowed to reform itself and remain a state agency?
The state has already spent more than $15 million to study this issue.
It has already taken proposals from private-sector utilities and Santee Cooper, and most legislators have said that doing nothing on the issue this year is not an option.
But while the coronavirus pandemic has thrown the legislative process into disarray, the Santee Cooper financial crisis, brought on by $4 billion of construction debt for the nuclear power project it abandoned in 2017, is not going away. In fact, the coronavirus pandemic is only going to make Santee Cooper’s fiscal problems even worse.
We are no longer in a “business as usual” economy; we’re in a recession, and all of the economic forecasts and plans made even earlier this year are now invalid.
Small businesses across our state are closing either temporarily or for good. Large and small manufacturers in South Carolina are cutting back production — if not suspending it outright. It is clear that the commercial demand for energy has dropped significantly, and that it will continue to decrease for an unknown amount of time.
The end result will be less revenue for all energy utilities.
Yes, the residential electric customers will continue to be energy consumers. But with unemployment in South Carolina jumping dramatically many utility users who have lost their jobs will not be able to pay their electric bills for at least the next few months. Meanwhile, because utilities will not be disconnecting service for nonpayment of bills during this crisis, the energy costs to utilities will continue to remain high — and those delinquent bills might never be paid.
Once again the end result will be less revenue for energy utilities.
Earlier this year Santee Cooper gave the Legislature a reform plan in which the utility promised to immediately cut rates about 8%, invest in solar energy in order to close a coal plant and pay off nearly 70% of its $6.8 billion debt — all while reducing its employee head count by merely 10% to save money.
However, the financial landscape upon which Santee Cooper based its rosy reform plan is now shattered.
The reality is that Santee Cooper’s revenue, as that for all utilities, will shrink because of lower demand from the commercial sector and because of nonpayments from the residential sector. But unlike investor-owned utilities like Dominion Energy and Duke Energy — which both have deep financial resources and can look to shareholders for cash — Santee Cooper is totally dependent on its customers to pay for its operating costs and massive debt.
The odds of Santee Cooper actually being able to implement its reform plan were already low; in reviewing the utility’s reform plan the SC Department of Administration said that “Santee Cooper does not have a history of effecting the kinds of changes contemplated by the Reform Plan, so its ability to achieve the benefits of the Reform Plan remain unclear.”
Now, thanks to our current recession, it is clear that Santee Cooper’s reform plan will never be implemented. And it is also clear that selling Santee Cooper to a financially solid investor-owned utility is the only option that can deliver reduced rates and immediately remove all of the utility’s debt from the backs of the ratepayers.
Any legislators who are crossing their fingers and hoping that Santee Cooper can deliver on its promises are being naïve at best; they are not serving the best interests of ratepayers and taxpayers. And the Legislature will only make things worse if it does not make a decision on Santee Cooper
Frank Knapp Jr. is CEO of the South Carolina Small Business Chamber of Commerce.
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