Commentary: The business and ratepayer case for selling Santee Cooper

The Post and Courier

By Frank Knapp Jr.

Mar 4, 2020

Sell or not sell Santee Cooper, the state’s public utility? The state Legislature is debating that question now.

Can Santee Cooper reform itself, or should it be sold to NextEra, a Florida-based Fortune 200 energy company?

NextEra has given the Legislature a detailed plan to spend nearly $9.5 billion to acquire Santee Cooper and all its assets. But some have lamented that the state will get little of that money and local property tax revenue will not go up.

NextEra would spend almost $8 billion to remove all of Santee Cooper’s nuclear and other debt. The 2 million direct and electric cooperative customers would never have to pay this debt; nor would the taxpayers should Santee Cooper be forced into bankruptcy.

NextEra would give $1 billion to customers to cover past rate hikes for Santee Cooper’s failed nuclear construction project with SCE&G in Fairfield County.

Finally, NextEra would lower electric rates for customers. NextEra would achieve this through the rebates, elimination of debt payments, replacing expensive coal generation with gas and solar, new technology and staff reductions.

The latter is projected to be 700 positions eliminated by 2025 primarily through attrition, retirements, not filling existing vacancies and employee buyout incentives. This net loss of positions is similar to what occurred when Dominion Energy acquired SCE&G’s parent company, SCANA.

To do all this, NextEra must pay the same amount of local property taxes that Santee Cooper pays for existing property — no more, no less. But it would pay millions more on new assets.

Santee Cooper customers could recover $520 million of their nuclear rate overpayments if the utility settles a lawsuit — far short of NextEra’s nearly $1 billion offer.

Santee Cooper projects rate reductions that would be 10% higher in the first four years of reform compared to NextEra’s. Then Santee Cooper projects rates slightly lower than NextEra’s over the next 16 years.

Unlike NextEra, the ability and conviction of Santee Cooper to achieve its reduced rates is highly questionable.

“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.” That was the conclusion of the state agency and professional experts that evaluated all the proposals for Santee Cooper.

And then there is Santee Cooper’s management.

The reason the state would get relatively little of the $9.5 billion NextEra is putting up to buy Santee Cooper is because of the mismanagement and even possible fraud of the agency’s previous executives.

If not for Santee Cooper management’s fiscal blunders, the state would have received much of the $9.5 billion offered and probably gotten more for the sale. NextEra is offering to buy the financially distressed Santee Cooper of today, not 15 years ago.

New Santee Cooper management has not shown improvement. It actively opposed the legislative review of selling the utility and obstructed the professional process to review proposals.

The bottom line is that Santee Cooper’s plan doesn’t protect ratepayers from debt repayment or provide customers total recovery of past rate increases for the nuclear project. And Santee Cooper simply can’t be trusted to implement its proposed reforms to reduce rates.

The best business decision for ratepayers and taxpayers is obvious. Sell Santee Cooper.

Frank Knapp Jr. is the president and CEO of the South Carolina Small Business Chamber of Commerce.

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