Opinion: Stop Santee Cooper’s bad management

Opinion: Stop Santee Cooper’s bad management

Florence Morning News
September 13, 2019

By Frank Knapp Jr. Guest Columnist

Santee Santee Cooper’s recent fight with S.C. Sen. Hugh K. Leatherman Sr., other legislative leaders and the S.C. Department of Administration regarding the public utility’s “secret negotiations” with two private utilities has come to an end.

Under the threat of a restraining order from the state for violating the legislature’s process for determining its future, the public utility canceled its planned deal.

Unfortunately, we shouldn’t be surprised by this most recent management debacle by Santee Cooper, which S.C. Gov. Henry McMaster has called a “rogue agency.”

In a guest column on Aug. 1, I warned that Santee Cooper’s two new managers — recently hired in an 18-month, $2.5 million contract — had already bucked legislative leaders and that the utility was unfortunately in a position to “subvert the process” legislators had established for determining the agency’s future.

Santee Cooper’s management proved my concerns to be correct.

However, the utility making bad business decisions didn’t start with this new management team.

Santee Cooper has been making bad business decisions for at least the past 12 years.

In early 2007, Santee Cooper announced plans to build a new coal plant on the Great Pee Dee River at a cost of approximately $2 billion.

The agency said that it needed the additional electricity because the nuclear plants it was building with SCE&G wouldn’t be finished until 2016 and 2019. Santee Cooper’s then chief executive officer, Lonnie Carter, said that without the new coal plant, the utility would run short of power by 2013.

We know how this story ended.

For two years the opponents of the new coal plant — environmental groups and the South Carolina Small Business Chamber of Commerce — argued that 1) the plant was too expensive; 2) increased energy demand could be met with energy conservation efforts, alternative energy and the purchase of excess capacity from in-state private utilities; and 3) the plant would contribute to climate change and environmental pollution.

By February 2009, Gov. Mark Sanford came out against the coal plant.

But it wasn’t until August of that year that Santee Cooper’s management and board abandoned the project. Just as the critics insisted, the utility found a better, less expensive way of addressing its energy needs. However, by then it had spent approximately $500 million on planning and equipment for the coal plant.

And, of course, Santee Cooper’s decision to partner with SCE&G to build two nuclear plants in Fairfield County ended in that project being abandoned in July of 2017, but only after Santee Cooper had spent $4 billion in construction costs that must now be paid.

Two very bad and expensive Santee Cooper decisions and one that was just narrowly avoided can be attributed to the utility’s management and board operating with virtually no oversight.

Unlike our state’s two private utilities, Duke Energy and Dominion Carolina (formerly SCE&G) that are regulated by the SC Public Service Commission (PSC), Santee Cooper is technically a state agency and thus is not regulated. This state agency’s management and board make their decisions without any external review, not even by the governor or General Assembly.

During the coal plant fight in 2007, I maintained that Santee Cooper should be regulated by the PSC just like the private utilities. It was essential that the utility have objective oversight from an outside agency and that other interested parties could weigh in on decisions.

Now 12 years later, regulation by the PSC is no longer the best option for solving the problems at Santee Cooper.
Even after the legislature gave Santee Cooper one more chance to show how it could better serve the ratepayers and taxpayers as a state agency instead of being sold to or managed by a private utility, Santee Cooper’s management continues to fit the “rogue agency” billing.

The sale of Santee Cooper will guarantee that the utility will have proper oversight by both the PSC, voting shareholders and the public.

The sale of Santee Cooper is the only way to protect its customers from the obligation of paying off the utility’s $4 billion nuclear debt.

And the sale of Santee Cooper is the only way to end the public utility’s management culture that has resulted in one bad decision after another.

Frank Knapp is the president/chief executive officer of the South Carolina Small Business Chamber of Commerce.