State-owned utility has too much power, is building more capacity

05/12/2013 12:00 AM

05/11/2013 7:46 PM

Wanted: A buyer for a roughly 10 percent, $1 billion stake in two nuclear plants now under construction in South Carolina.

State-owned utility Santee Cooper has been hawking a stake in the plants, being built jointly with S.C. Electric & Gas at Fairfield County’s V.C. Summer Nuclear Station, for four years.

So far, Santee Cooper has had no takers.

This was not supposed to happen.

Just six years ago, utility planners were telling S.C. lawmakers that the state could run out of power if they didn’t build more power plants. The year was 2007, and the housing market was expanding rapidly and retirees were predicted to settle in the South Carolina sunshine in droves.

Then, less than a year later, a crippling recession struck, slowing population and industrial growth.

The demand for Santee Cooper’s power will drop even more this year, when its largest customers – the state’s electric cooperatives – begin buying a quarter of the power that they need from North Carolina-based Duke Energy. That shift was devised four years ago to avoid the necessity of building a new, controversial coal-powered power plant in the Pee Dee.

End result?

Santee Cooper has too much power and, thanks to its ownership in Summer’s two new reactors, is building more. And S.C. customers are paying for it.

The state-owned utility has a 45 percent stake in the $10 billion nuclear plants being built in Jenkinsville, which should start providing power in 2017 and 2018. Cayce-based SCE&G holds a 55 percent stake.

So far, Duke appears to be Santee Cooper’s best hope of cutting its Summer stake.

“We are talking to other utilities. We are talking to Duke,” said Mollie Gore, Santee Cooper communications director. “We’d like to get down to about 20-25 percent of ownership (of two new reactors).”

Santee Cooper has signed letters of intent to negotiate with a handful of utilities in Florida, Ohio and Mississippi to buy part or all of its stake in the new Summer reactors over the past few years. All of those possible deals fell through, and a deal with Duke has not been finalized.

“We continue to explore the option of buying up to a 10 percent stake in the expansion of V.C. Summer from Santee Cooper,” said Ryan Mosier, Duke Energy’s S.C. spokesman. “We believe regional cooperation is important in the development of large nuclear plants moving forward.”

‘Best, long-term ... option’

Duke Power’s negotiations with Santee Cooper have not slowed the North Carolina-based utility’s plans to build two new reactors of its own at its Lee Nuclear Station in Cherokee County. The utility expects to have a combined construction and operating license for the two new reactors in roughly two years, Mosier said.

While critics question the need for the new nuclear power plants, utility officials defend them.

“Nuclear power continues to be the best, long-term base load generation option for customers and plays a critical role in reducing carbon emissions and increasing the fuel diversity,” Duke’s Mosier said. “Our company stands behind the need for nuclear energy being part of our future energy mix. Nuclear energy has served our customers well for more than 40 years.”

SCE&G officials also have touted nuclear as a vital part of the Cayce-based company’s energy mix moving forward, saying the Jenkinsville plants are necessary to serve customers into the future.

Environmentalists, conservationists and some utility officials had hoped the excess power capacity now available in South Carolina might slow Duke Energy’s plans to build additional reactors in the Upstate.

A “together forward” approach could delay the time frame for Duke’s Cherokee County nuclear plants, according to Mike Couick, president and chief executive of the Electric Cooperatives of South Carolina.

“The co-op’s point all along has been – let’s only build one (nuclear power) unit at a time, and let’s build it together. Let’s have Duke (involved) in Jenkinsville for the next two units, and then if there needs to be more nuclear generation, then everybody go to Lee together, in Cherokee County, and that way you don’t have too much reserves.”

Predicting future long-term energy needs is difficult, Couick added.

Prior to 2008, the power needs of S.C. electric co-ops were projected to grow at approximately 5.2 percent a year for 10 years, he said.

“Once the economic slump hit, they (growth rates) went flat, and they’ve essentially remained flat. That’s not unique in the utility world. Most utilities are finding that ... there’s a new paradigm for how people use energy. They’re finding that’s a place they can go cut.”

Another factor that has eroded growth projections has been the increased use of alternative energy, such as solar panels on homes and businesses, Couick said.

“This situation illustrates the fact we are not doing a very good job with energy policy and planning in South Carolina,” said Hamilton Davis, the Coastal Conservation League’s energy director.

Having S.C. ratepayers pay the costs of building new reactors in Jenkinsville and then selling off a portion of that power production to utilities in other states is not the right way to move forward with a $10 billion investment, Davis said.

‘We want more nuclear’

Santee Cooper, created in 1934 by the Legislature to provide low-cost energy and water to S.C. residents and businesses, still sees merit in part ownership of the Summer nuclear reactors, even with its existing excess capacity, spokeswoman Gore said.

The economy is beginning to rebound, and South Carolina’s population and industry again will grow. “We know that the state is continuing to grow,” Gore said.

The utility also wants to diversify its power sources as it closes coal- and oil-powered generating plants.

“We want more nuclear,” Gore said. “It is virtually emission-free (emitting no greenhouse gases), and long-term, it has low operating costs.”

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