Exclusive: Energy deal may kill coal plant plan

Proposal for $2.2 billion facility in Pee Dee has been controversial

By SAMMY FRETWELL and JOHN MONK - sfretwell@thestate.com, jmonk@thestate.com

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South Carolina’s electric cooperatives are negotiating to buy power from Duke Energy in a move that could be the death knell for a planned coal-burning power plant near Florence.

The plant, proposed by state-owned Santee Cooper, has drawn waves of opposition over its potentially negative environmental impact and $2.2 billion cost. But Santee Cooper and supporters have long maintained the plant would provide much-needed power and jobs to economically depressed eastern South Carolina.

Now, the Central Electric Power Cooperative — a major customer of Santee Cooper — is talking with the North Carolina-based Duke about buying energy for five of its 20 member companies, said Dukes Scott, director of the S.C. Office of Regulatory Staff.

About Santee Cooper

The S.C. Public Service Authority is most often called Santee Cooper, for the two rivers dammed to form Lakes Marion and Moultrie.
WHAT IT IS: South Carolina’s largest energy producer. It’s state-owned.
REPUTATION: Known for cheap, dependable power. Prides itself on being a leader in economic development.
EMPLOYEES: About 1,800
OFFICES: Moncks Corner
CUSTOMERS: About 2 million, including Charleston Air Force Base, 31 large industrial facilities and 20 electric cooperatives and their 625,000 customers in 46 counties. Also provides water to 137,000 customers in Berkeley and Dorchester counties, the town of Santee.
ANNUAL REVENUES: $1 billion-plus
TAXES PAID: Pays no state or local taxes but does pay about $15 million to the state each year under a fee-in-lieu-of-taxes arrangement. Also pays almost $1.7 million in state fees annually — more than almost any other industry — for air pollution released.
OWNS: Four large, coal-fired plants. Planning a nuclear plant north of Columbia and a coal-fired plant in Florence County. Invests billions in sophisticated computers, giant furnaces, pollution-control devices. Owns 1,273 rail cars that transport coal; leases 676 others. A car can carry 116 tons of coal.
SWITCHING TO COAL: Founded in 1934 to generate electricity from water. Built its first coal plant in 1966 in Conway.
SOURCE: Santee Cooper; state Department of Health and Environmental Control
Why South Carolina owns a utility
Santee Cooper’s history is the stuff of legend.
In the 1930s, with a pledge of federal money, powerful S.C. leaders got the General Assembly to pass a law creating a state-owned utility. The goal? To provide electricity to impoverished south-central South Carolina.
Other utilities sued, arguing Santee Cooper was illegal. They didn’t want competition.
In 1938, the U.S. Supreme Court upheld Santee Cooper’s legality. In 1939, more than 1,000 people were moved to make way for the creation of two enormous lakes, Marion and Moultrie, from vast swamplands. At the time, it was the largest earth-moving project in history.
Electricity flowed in 1942, fueling defense industries and Charleston bases key to winning World War II.
SOURCE: Santee Cooper; state Department of Health and Environmental Control; USC historian Walter Edgar’s book "History of Santee Cooper, 1934-1984"

If the cooperatives complete a deal with Duke, it could eliminate the need for the power station Santee Cooper has proposed along the Great Pee Dee River, said Scott and three sources familiar with the negotiations.

Any deal between Duke Energy and the cooperatives would need approval from the Santee Cooper board of directors as well as from the North Carolina Public Utilities Commission, since Duke is headquartered in Charlotte.

“Five co-ops (in the) Upstate and Duke are trying to get a contract for those five co-ops to buy some power from Duke,’’ said Scott, who said his staff has discussed the plan with Duke Energy and the cooperatives. “A major part of the co-ops’ efforts to achieve this contract was motivated by a desire to remove the Pee Dee coal plant.’’

Electric cooperatives are motivated to buy from Duke because they believe it will be cheaper than helping pay for a new coal plant in Florence County, energy experts said Thursday.

Scott said his agency supports the sale because it would keep retail costs down for customers. His agency looks at customer interests in rate cases and other utility matters for investor-owned utilities, which include Duke but not the state-owned Santee Cooper.

Duke Energy spokeswoman Paige Sheehan declined comment Thursday, but Santee Cooper spokeswoman Laura Varn said her utility’s board will discuss its agreement with Central Electric at a meeting Monday. The board also will hear a staff report it requested that reviews Santee Cooper’s future energy needs, she said.

Santee Cooper has said it needs at least one additional 660-megawatt power plant to meet future demands. It has picked a site near Pamplico and Kingsburg in Florence County. The utility now supplies much of its power to electric cooperatives, which pass the energy along to customers in rural and suburban areas.

Duke Energy, the Carolinas’ largest power company, is discussing the sale of more than 1,000 megawatts to South Carolina electric cooperatives, Scott said.

Ann Timberlake, director of the Conservation Voters of South Carolina, said cooperatives are doing the right thing in discussing a purchase of energy from Duke.

“This is very exciting news and confirms some things we’ve been hearing for a while,’’ Timberlake said. “It’s hard for them to justify to their customers the risky investment in coal if there is a viable option.’’

It’s unclear what energy source Duke would use to supply power to the cooperatives, but the company has two nuclear plants near Charlotte and is building a coal-fired plant nearby.

In many states, plans to build coal-fired power stations have been scrapped because of the environmental consequences associated with burning fossil fuels. Buying from Duke would allow South Carolina to avoid the problems of dealing with potentially harmful air pollution from the proposed Pee Dee plant.

Environmentalists have waged a steady campaign against the plant during the past two years and have challenged state permits for the plant in court.

For the past year, Santee Cooper’s board has been discussing its contract with Central Electric to supply power to cooperatives, Varn said. But Varn said the discussions have occurred behind closed doors and she was not privy to details.

Officials with Central Electric Cooperative, which represents the state’s 20 individual cooperatives, declined comment Thursday.

Bob Paulling, director of the Tri-County Electric Cooperative in St. Matthews, cautioned that the Duke power sale has a number of hurdles to clear.

“A lot of things could derail it fairly easily,’’ he said. “It’s legitimate negotiating going on, but nothing is finalized.’’

Reach Fretwell at (803) 771-8537. Reach Monk at (803) 771-8344.

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