LAST WEEK began with news that Santee Cooper and its nuclear fiasco partner SCE&G had been warned a year and a half ago that they weren’t exercising the basic level of oversight that any rational person would expect a business to provide for the multi-billion-dollar construction project. It ended with news that the problem had been known about for much longer than that.
As The State’s Sammy Fretwell reported, Santee Cooper officials realized more than three years ago that their partner in the now-abandoned nuclear project was either unable or unwilling to provide sufficient “project management expertise” to make sure contractors were getting the job done. But Santee Cooper President Lonnie Carter’s requests for SCE&G parent SCANA Corp. to hire a project management team to do the job the corporation wasn’t doing were met with delays and silence.
It’s reasonable to react to this latest news by getting even more upset with SCANA. But it’s important to remember who works for us and who does not. Government works for us; corporations work for their stockholders. And it seems increasingly clear that at least two governmental entities — first the Legislature and then Santee Cooper — failed us miserably.
On the one hand, it’s good to know that our state-owned utility was trying to keep costs under control. But there is of course that big other hand, a hand that makes Santee Cooper’s behavior look even worse than we had realized.
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In retrospect, it’s hard to dismiss the possibility that SCANA officials were unconcerned about the problems because they knew the more they spent, the more profit they would deliver for their stockholders. That’s thanks to a law the Legislature passed in 2007 that made it much easier for SCANA to bill its customers for work on nuclear reactors, and guaranteed the company could charge a 10.25 percent rate of return — think of it as interest on a loan or profit on an investment — on all money it spent on the project. Even if it never completed the project.
In retrospect, it’s hard to imagine that Santee Cooper officials did not realize that the 2007 law gave its partner a huge incentive not to care how much costs went up.
If that idea didn’t occur to Santee Cooper officials, they were incompetent.
If it did, they had an obligation to do more about it.
Board Chairman Leighton Lord told Mr. Fretwell that if Santee Cooper had raised its concerns publicly, it could have breached contracts. If so, those were contracts that no state agency should have even considered entering into. If so, they are contracts that no state agency should have been allowed to enter into.
Santee Cooper is obliged to serve its ratepayers as well as its owners: all South Carolinians.
As a state agency, Santee Cooper didn’t have to demonstrate prudency before raising rates. But as a state agency, Santee Cooper is obliged to serve its ratepayers as well as its owners: all South Carolinians. Since SCANA’s customers are South Carolinians, it had an obligation to try to contain costs not only for its own ratepayers but for SCANA’s ratepayers.
Santee Cooper was concerned enough about the inadequate oversight to ask SCANA as early as May 2014 to engage outside assistance. State regulatory officials should have known about that. Perhaps not in May 2014 — it was reasonable for Santee Cooper to try to resolve the problem — but certainly long before those regulators found out about those concerns … which apparently only occurred in recent weeks.
Nearly a year ago, Santee Cooper concluded that SCANA’s project management team “does not have the comprehensive skills and depth of experience necessary in engineering, scheduling, project controls and construction” to oversee the project. The state Office of Regulatory Staff and the Public Service Commission should have known this at least by then, as they were deciding whether SCANA’s requests to raise rates and increase the expected project cost were “prudent.”
That 2007 law requires regulators to approve requests to raise rates or increase the budget (or abandon a project) if the utility is acting prudently. And in retrospect, it’s hard to see how SCANA was acting prudently when it repeatedly ignored its partner’s requests for more oversight.
If Santee Cooper had told regulators about SCANA’s foot-dragging, they could have denied budget increases and some of the rate increases that have already cost ratepayers $1.7 billion and continue to cost us more every month.
If Santee Cooper had told regulators about SCANA’s foot-dragging, they could have denied budget increases and some of the rate increases that have already cost ratepayers $1.7 billion and continue to cost us more every month. Who knows whether they can now reverse those decisions? Who knows whether, at this point, they can even find it “imprudent” to walk away from the project?
This is too little too late, but one thing legislators need to do is add some new questions when they screen would-be Santee Cooper board members, assuming we retain our ownership of Santee Cooper and eventually have some new board members: Will you refuse to enter into to any contracts that prevent you from giving state officials the information they need in order to serve the interests of the public? Will you at least inform the governor if you do this, so he can remove you from office?
If you find yourself in a deal with a partner that is squandering billions of dollars that South Carolinians will have to pay for, will you bring that information to state regulators? And if that doesn’t do any good, to state legislators? And, if that doesn’t do any good, to the public? And if not, why in the world we even consider allowing you to serve on this board?
Ms. Scoppe writes editorials and columns for The State. Reach her at firstname.lastname@example.org or (803) 771-8571 or follow her on Twitter or like her on Facebook @CindiScoppe.