“Pixie dust” actually can eliminate Santee Cooper’s $4 billion nuclear debt

SC used it to make about half of SCE&G debt disappear with a sale

Blog by Frank Knapp Jr., President & CEO

March 9, 2021

Back in 2018, I intervened in the SC Public Service Commission (PSC) docket that was to decide what to do with the old SCE&G.  SCANA, the owner of the investor-owned utility, wanted to sell to Dominion Energy of Virginia saying to do otherwise would bankrupt SCE&G because of its $5 billion debt from the nuclear construction debacle at the V.C. Summer Plant in Fairfield County.

The other parties in the docket, including me, wanted the best deal for SCE&G customers.

I, as President/CEO of the South Carolina Small Business Chamber of Commerce, had argued since the day the nuclear project was abandoned on July 31, 2017 that SCE&G ratepayers should not have to pay any of the nuclear debt.  They should have every penny they had already paid into the project returned.  And they should have rates immediately cut by 18%–the cumulative rate hikes given for the project.

While we didn’t get everything we wanted, the PSC did give the okay to Dominion Energy to buy SCANA with the condition that it cut customer rates immediately by 15% and absorb (defease) $2.3 billion of the nuclear debt.  A separate lawsuit took care of returning back-payments for the project to the customers.

So, what happened to that $2.3 billion in nuclear debt Dominion promised to defease?

I honestly don’t know what Dominion did with that debt.

All ratepayers and I care about is that the $2.3 billion debt has been totally removed from the customers’ responsibility.  The PSC and the SC Office of Regulatory Staff are making sure that customers never have to pay either the principle or interest on that debt.

So, it is a mystery to me why there are people today who don’t think that the same defeasement of debt can’t happen with a sale of Santee Cooper.  The state-owned utility ran up $4 billion in debt for the same failed nuclear project that ended SCE&G.

One prominent SC journalist apparently even believes that Dominion is charging ratepayers for the $2.3 billion defeased debt.  She writes, “Dominion Energy is charging us every penny of SCE&G’s V.C. Summer debt—and then some.”

If the facts of a legal, contractual obligation and two state agencies guaranteeing compliance with the defeasement deal mean nothing to this journalist, then it’s no wonder she also doesn’t believe that Santee Cooper’s $4 billion in nuclear debt can be eliminated with a sale to an investor-owned utility.

She writes that making that $4 billion debt go away as a condition of a sale isn’t “logical.  “The only way it makes sense is with a liberal sprinkling of pixie dust, if then.”

Well, that “pixie dust” worked with the sale of SCE&G/SCANA to Dominion.

Apparently, the South Carolina legislature and the SC Department of Administration (DOA) also believe that the “pixie dust” will also work with a sale of Santee Cooper.

In 2019, the SC legislature passed Act 95 which directed DOA to accept sealed bids to purchase Santee Cooper.  The instructions in Section B5 of the Act were that the DOA must “require that the bidder’s projected ratebase for all of Santee Cooper’s retail customers exclude any portion of debt attributed to V.C. Summer nuclear units 2 and 3 that is not considered to be used and useful, as determined by the professional services experts and the Office of Regulatory Staff”.

After the experts reviewed the four bids received, DOA selected NextEra, a Fortune 200 energy giant, to be the company to buy Santee Cooper if that is the option the legislature wanted to pursue.

According to the DOA report, NextEra proposed to exclude all portions of debt associated with V.C. Summer from rates to be charged to Santee Cooper customers.

The defeasement of almost half of SCE&G’s debt and doing the same with all of Santee Cooper’s nuclear debt is not actually mysterious.  Dominion and NextEra are giant corporations with shareholders.  They play the long-game and have the financial chops to absorb the debt of whatever investment they buy.

However, if the supports of Santee Cooper want to call such debt defeasement as “pixie dust”, that is just fine.

The bottom line for Santee Cooper customers is that the “pixie dust” works and will save them billions.

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