Gov. Henry McMaster slams Santee Cooper for its nuclear fiasco and its lobbying scandal.
A day before state regulators approved Dominion Energy’s bid to buy SCANA Corp., representatives from at least six firms gathered in a secret meeting in North Charleston to discuss a possible solution to the other half of South Carolina’s $9 billion nuclear construction fiasco.
The gathering revolved around the possible sale of Santee Cooper, the state-owned utility that racked up more than $4 billion in debt before abandoning a joint effort with SCANA to expand a nuclear power plant in Fairfield County.
ICF International — a Virginia-based firm hired by the General Assembly — hosted the invitation-only meeting as part of a hurried, ongoing effort to solicit and study bids from some of the largest names in the utility industry.
There to ask questions about Santee Cooper’s assets and operations — and to scout out the competition — were two dozen legal and financial experts representing Charlotte-based Duke Energy, Florida-based NextEra Energy, Virginia-based Dominion, Greenville-based Pacolet Milliken Enterprises, New York-based LS Power and South Carolina’s electric cooperatives — who together buy three-fifths of Santee Cooper’s electricity.
SCANA’s chapter of the V.C. Summer Nuclear Station debacle is winding down with the Cayce-based company’s impending sale to Dominion. But 17 months after the project’s collapse, the buzz surrounding Santee Cooper’s future is only now ramping up.
This summer, S.C. lawmakers slashed the nuclear-bloated electric rates for customers of SCANA’s electric subsidiary, SCE&G. That $22-a-month rate cut was made permanent by state regulators earlier this month.
Now, the nearly 2 million S.C. residents who get their power from Santee Cooper — either directly or through one of the state’s 20 electric co-ops — are wondering whether they will get a rate cut, too. That will be one of the biggest questions facing the General Assembly when it reconvenes in Columbia in January.
The electric customers that Santee Cooper directly serves now are paying about $5 a month for the nuclear project in the form of higher power rates. Those bills will rise by another $13 a month over the next four decades.
Gov. Henry McMaster has pushed lawmakers to sell Santee Cooper since a month after the project failed in July 2017, saying that is the only way to pay off the utility’s $4 billion nuclear debt and shield its customers from rate hikes.
But some lawmakers are skeptical of offloading a state-owned utility whose electric rates remain relatively low, especially if it means endangering the jobs of roughly 1,625 Santee Cooper employees.
Host of questions
A committee of lawmakers and the governor met a handful of times this fall to study the idea of selling Santee Cooper. Ultimately, they hired ICF, a consulting firm, to begin soliciting and vetting offers for the utility. Those offers are due in mid-January, and ICF is set to report back to the legislative committee in late February.
From there, lawmakers will have only a few months — barring a special session — left in the legislative year to accept an offer they like, if any. The companies involved could offer to buy the entire utility, or bits and pieces of it.
The potential bidders have reason to be interested.
Duke already serves 760,000 electric customers in South Carolina’s Upstate and Pee Dee regions, and could save money through economies of scale by acquiring Santee Cooper.
Dominion has said it has no interest in buying Santee Cooper but has offered to manage the state-owned power company.
NextEra has eyed Santee Cooper for months and, in behind-the-scenes talks, has floated a $15.9 billion offer for the utility to state lawmakers.
Pacolet Milliken is a family-owned investment company that owns a pair of regulated utilities — Lockhart Power and NiAmerica.
LS Power, based in New York, owns a host of power plants across the country and is selling one of them — a natural gas-fired plant in Calhoun County — to SCE&G for $180 million.
Finally, the co-ops, which buy 60 percent of Santee Cooper’s electricity, have shown interest in buying a chunk of the utility’s service territory if Santee Cooper is disbanded. The co-ops also have a contractual right to veto any sale of Santee Cooper that they don’t like.
Making an offer
Already, the companies in the running have been granted access to a secure data room full of confidential details of Santee Cooper’s finances and operations. The potential buyers also have been submitting technical questions about Santee Cooper to ICF as they kick the tires on the state-owned utility.
The bidders have a host of questions to answer.
How would any company buying Santee Cooper pay off its $8 billion in bonds, including more than $1 billion in early repayment fees?
How would an investor-owned, for-profit utility take over a tax-exempt, state-owned power company and keep its electric rates low, especially if lawmakers don’t want the acquiring firm to huge cuts in Santee Cooper’s employees?
But perhaps the biggest question is out of bidders’ control: Will the General Assembly sell Santee Cooper, even if it gets a credible offer?
Potential bidders are concerned about the bidding process, sources tell The State.
One source told The State that the short time line to submit bids — ICF was hired in October, and bids are due in January — could lead to offers that are not fully fleshed out.
Others point to ICF’s handling of the Dec. 13 meeting in North Charleston in which the potential bidders were encouraged to ask questions while all the would-be acquirers were in the same room. Businesses prefer privacy when making such deals, sources said. In a small concession to that, most of the technocrats in the room wore name tags with only their first names.
The presentation on Santee Cooper’s assets and operations, and a question-and-answer period were scheduled to last all day. But with each of the bidders hesitant to ask a question that could tip their hands, the event wrapped up about lunchtime instead, sources said.
ICF declined to comment through a public relations agency.
State Rep. Murrell Smith, the Sumter Republican who co-chairs the Legislature’s Santee Cooper sale study committee, told The State in a recent interview he is confident in the timeline set for the process.
ICF told Smith’s committee there would be enough time for “meaningful and thorough bids,” particularly since potential buyers have known for more than a year that Santee Cooper could be on the auction block, he said.
Those bids are due Jan. 14.