How to sell a utility: Santee Cooper’s largest customer says lawmakers have work to do

Santee Cooper’s largest customer is pushing lawmakers to begin talks to sell the state-owned power company.

An association of South Carolina’s 20 electric cooperatives, which serve 1.5 million S.C. residents in all 46 counties, has asked legislators to form a special committee to accept and evaluate offers for the maligned utility.

“Our ratepayers deserve the very best deal that they can get, and I don’t know how we can expect to achieve that result without seeing what the market will offer,” Mike Couick, chief executive of the Electric Cooperatives of South Carolina, wrote in a Dec. 15 letter to every member of the General Assembly.

Santee Cooper has been on the state’s chopping block since the Moncks Corner-based utility, along with Cayce-based SCE&G, in July abandoned the $9 billion V.C. Summer nuclear expansion project in Fairfield County.

S.C. Gov. Henry McMaster has pushed for Santee Cooper’s sale as a means to repay the utility’s customers who have been charged higher power bills for the project. Four out-of-state utilities and a handful of other suitors have shown interest in purchasing some or all of Santee Cooper’s assets, including its power plants, transmission lines and long-term contract with the cooperatives.

The state’s electric cooperatives have not stood in McMaster’s way, an important development because their long-term contract to purchase Santee Cooper’s electricity gives them veto power over any sale.

The cooperatives who distribute Santee Cooper’s power to rural South Carolina are not all convinced selling Santee Cooper is the right approach.

But they also are not fighting the idea, as they did in the mid-2000s when then-Gov. Mark Sanford wanted South Carolina out of the power business.

‘Hell-bent on building it’

The cooperatives’ openness to the utility’s sale comes in part because of frustration with Santee Cooper management over the past decade, some cooperative leaders told The State newspaper this week.

Cooperatives, who pay 70 percent of Santee Cooper’s capital costs, say they were dragged kicking and screaming into an effort to build a coal-fired plant in Florence County.

Facing a growing demand for energy, cooperatives wanted to purchase Charlotte-based Duke Energy’s surplus. But Santee Cooper moved forward with the coal plant in the face of the Great Recession and Obama-era carbon regulations.

The utility abandoned construction in 2009 after spending $250 million.

“Santee Cooper was hell-bent on building it,” said Bob Paulling, chief executive of Mid-Carolina Electric Cooperative, which serves power customers in five Midlands counties.

Cooperative leaders say they also wanted Santee Cooper to own a smaller share in the Summer construction project. The utility insisted on owning a 45-percent stake in the two new reactors, up from the 33-percent stake they owned in the existing Summer plant, Couick said.

Cooperatives’ concerns were met with a “dismissive attitude” by Santee Cooper management, said Keith Avery, chief executive of Newberry Electric Cooperative.

Ultimately, SCE&G agreed to purchase 5 percent of Santee Cooper’s ownership stake once the reactors were completed.

A Santee Cooper spokeswoman countered Wednesday that the utility values cooperatives “tremendously.”

“We’ve served them for decades, and we look forward to continuing to serve them for decades,” Santee Cooper spokeswoman Mollie Gore said.

‘A golden opportunity’

House leadership said it has and will continue to advocate for Santee Cooper’s customers.

“We value the co-ops’ thoughts because they are an integral partner in this process,” added House Speaker Jay Lucas, R-Darlington, on Wednesday.

Some cooperatives say a sale, which needs the General Assembly’s approval, could offer them a better working partner.

“We’ve got a golden opportunity to renegotiate this whole thing and get a good deal for our customers,” Paulling said.

Ahead of lawmakers’ return to Columbia on Jan. 9, the cooperatives want a special legislative committee to take the lead on those negotiations.

That group of lawmakers should identify which Santee Cooper assets are for sale and which are off limits, hire a third-party consultant to help judge and negotiate offers, and then recommend a course of action to the General Assembly, Couick wrote in his Dec. 15 letter.

That third-party consultant could cost millions of dollars – a cost lawmakers have bristled at in early talks of selling the state’s utility. But Avery of Newberry Electric called that cost “pennies” when considering a deal potentially worth tens of billions of dollars.

“Those folks don’t come cheap, but those folks are good at what they do,” Avery said. “I’m concern we’re worried about pennies, and we’re missing the big dollars.”

Any negotiations should focus on how other companies can improve service and lower bills for customers, and Santee Cooper should be allowed to counter any offers, cooperative leaders say.

“It is impossible to know the answer to that question without testing the market,” Couick wrote.

This story was originally published December 20, 2017 at 3:31 PM with the headline "How to sell a utility: Santee Cooper’s largest customer says lawmakers have work to do."