Charleston Post and Courier
March 10, 2018
BY FRANK KNAPP JR.
When Santee Cooper was created 84 years ago to generate electricity for rural South Carolina, making good business decisions was a priority.
Over the years, the public utility facilitated economic development in the state. Santee Cooper earned a very good reputation with the help of the 20 electric cooperatives that purchase most of their energy needs from the utility.
All of this good reputation is now gone due to bad business decisions Santee Cooper began making over a decade ago and is still making today.
In 2007, the utility proposed building a coal-fired power plant at a cost of well over a billion dollars. Santee Cooper insisted that it absolutely needed the additional capacity while it waited on the completion of the nuclear plants it intended to build with SCE&G.
My organization and others objected strongly to the new coal plant, arguing that there were less expensive and less polluting alternatives such as buying excess power from other private utilities when it was needed. In this way, no long-term capital costs would be incurred.
But Santee Cooper would not be swayed and began purchasing equipment and doing the engineering work for about two years while opponents kept up the pressure. It was this experience that alerted many to the fact that Santee Cooper answered to no oversight authority. Bad business decisions could be made without the need to justify them.
So, in 2008 I and others began calling for the utility to be regulated by the S.C. Public Service Commission just as private utilities. The idea generated no legislative interest until today.
Finally, in 2009 the utility admitted that the critics of the new coal plant were correct. Santee Cooper allowed the electric cooperatives to purchase some power from other sources and scrapped the coal plant but not until spending about $250 million. The equipment it bought for the project is still warehoused to the tune of $13 million a year paid for by its customers.
Then there was Santee Cooper’s decision to own 45 percent of the now abandoned nuclear plants in Fairfield County. This bad business decision committed the utility to investing billions of dollars into a construction project it did not control. So, every time SCE&G got approval from the Public Service Commission for additional costs, Santee Cooper customers added more to their debt with no say in the decision.
But this wasn’t the most egregious business decision concerning the nuclear project.
Thanks to great investigative reporting by The Post and Courier, we now know that Santee Cooper was complicit in hiding information about construction problems with the nuclear project.
As early as 2013, just one year after construction on the nuclear plants started, Santee Cooper and SCE&G knew about cost overruns and schedule delays. Three years later the utilities kept hidden from regulators the now infamous Bechtel Report that documented the serious construction problems they faced in completing the project.
Had the Public Service Commission known what Santee Cooper knew in 2013 and in 2016, the utility’s customers might not have had their rates increased and be on the hook for a $4 billion debt.
There have been other bad business decisions along the way. One goes back to possibly the 1970s and involved the creation of a golden parachute retirement program for Santee Cooper’s executives. That is why today Santee Cooper’s recently retired CEO, a state employee, will be paid about $800,000 a year in total compensation
Obviously, Santee Cooper can’t correct all the bad business decisions it made over the years, but there is one that they can correct and need to do so quickly.
The Mount Holly aluminum plant in Goose Creek employs 300 well-paid workers. The company was forced to lay off 300 employees two years ago and says the plant will not be viable going forward because of a crisis that only Santee Cooper can solve.
Currently the plant gets 25 percent of its electricity needs from Santee Cooper, is allowed to purchase the rest of its power needs from the open market at half the cost of Santee’s power, and pays the utility $16 million a year toward fixed costs.
The company says it has made an offer that would make the utility whole without having to raise rates on other customers. It also promised to return its workforce to 600. Santee Cooper has rejected the offer.
This is an easy bad business decision to correct and by doing so would enable up to $1 billion to continue to go into the local economy as well as not require Santee Cooper customers to replace the extra $16 million Mount Holly now pays.
State legislation has been introduced to remove all the Santee Cooper Board members. Whether they go or stay, the board should make at least one good business decision.
Frank Knapp Jr. is the president and CEO of the South Carolina Small Business Chamber of Commerce.
https://www.postandcourier.com/opinion/commentary/what-brought-down-santee-cooper/article_920e95b2-23c8-11e8-b5d7-3ba3f8cd7749.html