Florence Morning News
February 21, 2020
BY FRANK KNAPP JR. Guest Columnist
Almost one year ago in an opinion piece in this newspaper, I argued for the SC legislature to make a relatively quick decision on the future of Santee Cooper, the state’s public utility serving about 2 million customers either directly or through electric cooperatives.
At that time Santee Cooper had run up a $4 billion debt on the failed nuclear project in Fairfield County, a project it and SCE&G abandoned in July of 2017. Santee Cooper also had over $4 billion in other debt. The utility’s rates had increased by 5% to pay toward the nuclear debt and the plan was to start increasing rates again in 2021 for that purpose.
I made the argument back then that the best business decision the legislature could make was to relatively quickly sell Santee Cooper to one of the four private utilities offering to buy the state agency.
The SC Small Business Chamber of Commerce supported such a sale “if it will result in removing the $4 billion of nuclear debt and possibly another $4 billion of other debt of the utility.” We specifically didn’t want customers to pay for any of the nuclear debt and if other debt could also be taken off the ratepayer’s back, even better.
We also wanted to see Santee Cooper’s electric rates lowered, which would require significant conversion from expensive coal-generated electricity to less-costly natural gas and solar.
Today the legislature has three options for the future of Santee Cooper presented to it by the SC Department of Administration (DOA) after seven months of accepting and rigorously evaluating proposals.
The legislature can agree to allow Santee Cooper to reform itself and remain a state agency, take Dominion Energy’s proposal to be responsible for managing the utility with some of their own personnel, or sell Santee Cooper to NextEra Energy, a Fortune 200 energy company.
Of the three options the legislature is considering, one totally fails to address any of our objectives.
Dominion only proposes to give Santee Cooper better management. However, according to the DOA report, Dominion’s management plan has an “absence of specific proposed cost-saving measures.” It has no “benchmarks or performance criteria.” Dominion does say that it will create “a committee to evaluate possible cost-saving measures.” Santee Cooper would remain a state agency.
NextEra’s proposal addresses all of our chamber’s objectives.
Not only does NextEra offer to absorb all of Santee Copper’s remaining $3.6 billion nuclear debt to take that obligation off the backs of the ratepayers, the company will remove all of Santee Cooper’s current $6.8 billion debt from ratepayer responsibility.
In addition, NextEra will give ratepayers nearly $1 billion in refunds or rate credits to help address past nuclear rate hikes.
NextEra proposes to close Santee Cooper’s Winyah coal plant by 2023 but it has no plan to close the other coal plant in Georgetown County, Cross, in the next 20 years.
Regarding electric rates, NextEra would lower rates an average of 18% during the first four years compared to Santee Coopers’ 2019 budget. For the next 16 years, rates would be about 5% lower than projected by Santee Cooper last year.
Santee Cooper put forth its own Reform Plan in hopes of convincing the legislature to keep it as a state agency.
Regarding its coal plants, Santee Cooper also proposes to close its Winyah plant but to do so by 2027, taking four years longer than NextEra. There is no plan to close the Cross plant in the next 20 years.
Unlike NextEra, Santee Cooper’s Reform Plan would not eliminate ratepayer responsibility for paying the nuclear debt but instead “proposes a combination of operational changes and cost-cutting actions” to accelerate paying off that debt. The rest of the utility’s other debt would still have to be paid by the customers.
Santee Cooper does claim that its newly proposed cost saving measures will also reduce electric rates over the next 20 years compared to the utility’s own projection just last year.
The agency’s supporters will surely point out that the Reform Plan shows that Santee Cooper customers, despite continuing to pay for all the nuclear debt, will pay 0.8% less in rates over 20 years compared to NextEra’s plan.
Santee Cooper ratepayers should be very suspicious of this projection.
First, the agency identified $2.3 billion in cost savings only after the legislature held a gun to its head threatening to sell the utility. This puts the seriousness about implementing the proposal in question.
Second, there is little confidence that Santee Cooper, with or without management from Dominion, can implement the reforms. As the DOA report says, “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.”
Third, Santee Cooper’s new management, installed in July of last year, intentionally failed to cooperate with the DOA. At a recent hearing, the DOA team said that Santee Cooper delayed the DOA efforts to meet the time frame set up by the legislature in countless ways. The utility was not a willing participant in the process, according to the DOA. One of Santee Cooper’s actions probably discouraged some potential buyers and other actions delayed the final report by two months. The intent of Santee Cooper’s current management to implement proposed reform can be seriously questioned.
Fourth, Santee Cooper’s 20-year Reform Plan would still leave over $2 billion of its current debt for customers to pay whereas NextEra would wipe all of that debt away from ratepayer responsibility.
Essentially, Santee Cooper’s proposed reforms and projected rates are mythical, put on paper in an attempt to save the state agency.
The NextEra proposal successfully addresses the objectives of our chamber and offers the best and most reliable way forward for Santee Cooper ratepayers and the state.
Frank Knapp is the president and CEO of the South Carolina Small Business Chamber of Commerce.
https://www.scnow.com/opinion/columns/guest-column-best-decision-on-santee-cooper-s-future-is/article_aa435cfa-0a41-59d5-ae0d-2ac70f3375c0.html