Santee Cooper doesn’t think it should have to pay $15 million so the state can hire high-powered consultants to facilitate the agency’s possible sale.
In a series of letters over the past month, the state-owned power company’s outgoing CEO, Jim Brogdon, balked at a demand for the money from the state’s most powerful lawmaker, Senate Finance Committee Chairman Hugh Leatherman.
In a July 5 letter, Brogdon challenged the Florence Republican’s authority to make the money grab since the General Assembly’s written plan to field offers for Santee Cooper didn’t explicitly include the $15 million, nor was the money mentioned in the weeks-long debate over that plan at the State House.
Santee Cooper will fork over the money only if the entire General Assembly — not just Leatherman — requires it, Brogdon wrote. And any money the agency must pay will subtract from the $17 million Santee Cooper already gives to the state each year, Brogdon wrote.
Brogdon’s letter marks a rare instance in which anyone in state government bucks Leatherman, whose Senate position gives him a powerful grip on state spending.
The agency’s defiance also could delay the state’s process of fielding, negotiating and evaluating offers to purchase or take over the management of Santee Cooper, which is on the state’s chopping block after the Moncks Corner-based utility wasted $4 billion building a nuclear power plant that was never finished.
Co-ops weigh in
The state Department of Administration is on a tight timeline to field those offers and bring back the best ones to the General Assembly for a vote next year.
The agency says it needs $20 million to hire the financial and legal experts necessary to review those offers, but lawmakers set aside just $5 million in next year’s budget for that purpose. So Leatherman wrote to Santee Cooper leaders on June 21 that the state-owned utility would be expected to cover the difference.
Meanwhile, Santee Cooper’s largest customer — the 20 electric co-ops that buy three-fifths of its power and distribute it to customers in all 46 S.C. counties — sided with Leatherman in their own letter to the Department of Administration. The co-ops, who have sued Santee Cooper over its nuclear costs and want to pursue a Santee Cooper sale, called the $15 million request “reasonable and necessary” for a multibillion-dollar transaction.
In 19 of the past 20 cases where U.S. utilities were purchased over the past six years, both the buyer and seller hired investment banks to consult them, the co-ops wrote. The exception was Berkshire Hathaway’s 2013 purchase of Nevada-based NV Energy. Berkshire Hathaway, owned by billionaire Warren Buffet, already had in-house expertise qualified to consult on that sale, the co-ops wrote.
The co-ops pay roughly 70 percent of Santee Cooper’s costs, and they are comfortable with their $10 million share of the bill, wrote Robert Hochstetler, CEO of Central Electric Cooperative, which buys power on behalf of the 20 co-ops.
“We realize that experienced and qualified investment bankers are expensive, but we are convinced they are necessary for a successful process that will produce the best result for the State,” Hochstetler wrote.
Battle lines drawn
In his June 21 letter, Leatherman noted the General Assembly’s plan to study Santee Cooper’s sale, H. 4287, includes language that requires Santee Cooper to “provide any and all resources necessary to assist in the process for competitive bids and management proposals, as well as the evaluation of the bids and management proposals received by the department.”
That wording clearly encompasses money to hire consultants, Leatherman told The State.
“I’m absolutely committed to making sure (Department of Administration Director) Marcia Adams has the money she needs,” Leatherman said. “She will not spend any more money than necessary to do a thorough job, a thorough vetting (of the bids).”
Brogdon disagrees about the language.
“There is a substantial difference of opinion among members of the Legislature whether the above-cited language of H. 4287 was ever intended to require cash payments from Santee Cooper,” he wrote in a letter to Adams.
Santee Cooper’s board is legally required to act in the best interest of Santee Cooper’s customers and finances, Brogdon wrote. It can’t spend $15 million for a purpose that has nothing to do with its mission of serving power and water to customers, he said.
“Taking such an action could lead to litigation from customers, increased scrutiny from credit rating agencies, and engender criticism from public and private stakeholders,” Brogdon wrote.