Santee Cooper’s largest customer will sue to stop charges for failed nuclear project

South Carolina’s electric co-ops will sue Santee Cooper in a bid to keep the state-owned utility from charging their 1.5 million customers more for the failed V.C. Summer nuclear construction project.

The co-ops, Santee Cooper’s largest customer, made the decision Friday at a board meeting of the Central Electric Power Cooperative.

Central, which is run by the co-ops, is on the contractual hook to pay about $2.8 billion of Santee Cooper’s $4 billion in nuclear-related debt. Central, which buys electricity from Santee Cooper and then distributes it to the state’s 20 co-ops, says it shouldn’t have to pay more for two reactors that won’t be finished.

Central, which pays 70 percent of Santee Cooper’s construction costs, also wants 70 percent of the $831 million settlement that the state-owned utility received after the nuclear project’s lead contractor, Westinghouse, declared bankruptcy last March.

“We took this action because it’s the right thing to do to protect both our member-cooperatives and their consumer-members,” Central Chief Executive Rob Hochstetler said in a news release.

Hochstetler said Central will file its action as cross-claim in an existing lawsuit against both Central and Santee Cooper.

If it succeeds, the claim could leave Santee Cooper without its primary means of paying off its $4 billion in nuclear debt, run up as the SCE&G-led V.C. Summer project chugged through years of cost overruns and construction delays.

Spokesperson Mollie Gore said Santee Cooper is aware of the co-ops’ decision but will withhold comment until the suit is filed.

Republican state Sen. Larry Grooms, whose Berkeley district includes Santee Cooper’s headquarters, called the lawsuit disappointing.

“What this means for our state is that one of the best partnerships that we have — between Santee Cooper and the co-ops — is now fractured,” he said. “That fractured partnership is disappointing. When the co-ops and Santee Cooper work together, they have been able to achieve reliable, low-cost electricity for ... ratepayers in our state.

“We will now see that entire arrangement in jeopardy because of the lawsuit.”

State Sen. Nikki Setzler, D-Lexington, said the lawsuit shows how bad the nuclear debacle is.

“It is so critically important what comes out of this because it affects the ratepayers, it affects the employees, it affects economic development and the future of South Carolina,” said Setzler, who co-chairs the Senate panel investigating the nuclear debacle.

Not ‘used and useful’

The suit is just the latest in a series of dizzying developments tearing apart South Carolina’s energy infrastructure.

Both SCE&G’s parent, SCANA, and Santee Cooper are up for sale, in part to cover their V.C. Summer-related debts. Shareholders and angry customers are suing. Legislators have moved to sack utility regulators and force lower electric rates. SCANA is threatening bankruptcy unless it can continue to charge higher rates. Economic developers are worried no company will move to the state — or create a job in it — unless they know who they will buy electricity from and at what cost, and, now, Santee Cooper’s largest customer is threatening its electric supplier.

Central buys about 60 percent of Moncks Corner-based Santee Cooper’s power and distributes it to South Carolina’s 20 electric cooperatives, thanks to a contract that expires in 2058. That contract serves some 1.5 million co-op customers in all 46 S.C. counties.

In a news release, Central argues Santee Cooper can’t continue to charge its customers for the nuclear project because the unfinished reactors aren’t legally “used and useful.”

Central also argues Santee Cooper breached its long-term contract by raising its electric rates for a product that Santee Cooper won’t provide — the electricity the nuclear reactors were supposed to generate.

Mike Couick, president of an association that represents the 20 co-ops, said the lawsuit does not change the co-ops’ hope that S.C. legislators seriously will consider selling Santee Cooper. The co-ops themselves are thinking about making an offer.

“We’re anxious to work with the General Assembly and all other involved parties to minimize the impact on consumers and Santee Cooper’s employees,” Couick said in a statement.

Couick added, “We believe, as a matter of law, that we were required to raise certain issues within the context of this litigation that has been brought. It’s essential that we not waive any claim that we have on behalf of our individual members.”

State Rep. Micah Caskey, R-Lexington, said he is glad to hear the co-ops are taking steps to protect ratepayers but the lawsuit raises several questions.

“Why didn’t they take this step in 2013? Why has it taken eight months to do it now?” he said. “I look forward to seeing the ultimate complaint that is filed.”

‘This issue affects the entire state’

Gov. Henry McMaster and other elected leaders want to sell state-owned Santee Cooper, saying it is the only way to ensure customers of the the 84-year-old utility aren’t left paying off its $4 billion in nuclear debt.

Spokesman Brian Symmes said the Richland Republican hopes the co-ops’ lawsuit causes the Legislature to consider selling Santee Cooper so disputes can be resolved as part of a broader transaction rather than through litigation.

“Gov. McMaster continues to believe that both SCANA’s and Santee Cooper’s customers deserve immediate rate relief and should not be forced to pay for a debacle in which they played no part,” Symmes said Friday. “In the case of Santee Cooper, a sale is the only feasible solution offered so far that will pay off the nuclear debt and provide long-overdue relief to customers and long-term stability for the state and for Santee Cooper’s employees.”

Santee Cooper directly provides electricity to about 177,000 S.C. customers along South Carolina’s Grand Strand. Those customers are paying about $5 a month – or 4.5 percent of their power bills – toward the nuclear project, which was abandoned last July.

Co-op customers pay a similar percentage, though it varies from co-op to co-op. Combined, those co-op customers have paid about $400 million for the failed project.

What the lawsuit means for Santee Cooper is unclear, Setzler said, adding it only “magnifies” the issues the General Assembly already faces.

“It shows just how complicated, how deep and wide this issue affects the entire state.”

This story was originally published February 23, 2018 at 2:59 PM with the headline "Santee Cooper’s largest customer will sue to stop charges for failed nuclear project."