SC judge gives 1st approval to $520 million settlement deal with Santee Cooper

Courts around South Carolina are at a near standstill as the state takes precautions to slow the spread of the novel coronavirus, but a judge gave preliminary approval Tuesday to a $520 million deal that would settle a ratepayer class action lawsuit against Santee Cooper, the state-owned electric utility.

The preliminary approval in the near-deserted Richland County courthouse by special state Judge Jean Toal sets the stage for final approval of what was described in Tuesday’s court hearing in superlatives — the largest cash settlement in one of the most complex lawsuits in South Carolina history.

Unsaid was another superlative — that this settlement arose out of what could be the biggest business scandal in South Carolina history — the epic $9 billion failure by two once-respected electric utilities, SCANA and Santee Cooper, to build two nuclear reactors at the V.C. Summer site in Fairfield County. The Securities and Exchange Commission has pending civil fraud charges against two former SCANA top executives.

Preliminary approval of the settlement took place shortly before 11 a.m. after a hearing in a courthouse in downtown Columbia where entry had been restricted due to the coronavirus emergency.

The money will go to compensate some 2.2 million current and former Santee Cooper monthly rate payers — residential, commercial and industrial — who were charged extra each month to pay for the costly V.C. Summer nuclear project.

If the parties had not settled, the case would have gone to a jury trial on April 20. Toal set that date to force a settlement, if one could be had.

The lawsuit had alleged numerous instances of gross mismanagement and unnecessary and possibly unlawful rate hikes for years to Santee Cooper customers of up to $4.7 billion. Under the proposed final settlement, no one will admit any fault in the matter.

The firm trial date “woke everybody up” to the necessity for a settlement, plaintiffs’ lawyer Ed Westbrook told Toal.

While the $520 million settlement assures that plaintiffs will get some money and insulates Santee Cooper against a far larger jury verdict, the lack of a jury trial also means that the public will not hear witnesses testifying about the alleged mismanagement by Santee Cooper and others that led to the V.C. Summer nuclear fiasco.

But lawyers on both sides clearly wanted to find a way to avoid not only a trial but the resultant expensive appeals after a trial.

“If this proposed settlement is not approved, this case would require... additional years of litigation,” plaintiffs’ lawyers Jay Ward told Toal during the hearing.

Toal, a former S.C. Supreme Court chief justice, said that lawyers agreed that even if a trial were to be held, there would be approximately four years of expensive appeals that would prevent any quick final resolution of the matter.

Lawyers said they had taken more than 40 depositions in the case, reviewed millions of pages of documents and hired numerous experts to bolster their cases.

Toal also said that she planned to hold a public hearing on the “fairness of the amount sought” by plaintiffs’ lawyers, who have not yet been compensated yet, will receive.

Lawyers could receive up to 15% of the 520 million, or $78 million to divide up. The amount paid to every lawyer will be made public, said Toal, a former S.C. Supreme Court chief justice assigned to this case..

The judge indicated she would look favorably upon any reasonable request by plaintiffs’ lawyers as to how much they were due.

“I don’t know of any lawyers on any side who have worked any harder than ... the lawyers who have been in this case,” Toal said, “This (the settlement) is quite a remarkable accomplishment in one of the most complex pieces of litigation in my 50-plus years in practice that I’ve ever seen.”

The proposed settlement is “by far the largest settlement or potential verdict of its type in this state,” Toal told approximately 20 lawyers in the courtroom.

The final preliminary settlement was agreed upon in mid-February after two days of intense negotiations capped by a 16-hour marathon day.

A final approval settlement hearing is scheduled for July 20.

In July 2017, after spending billions on the project, Santee Cooper — which had a 45% share in the project — and SCANA abruptly announced their nuclear construction project had failed and they were abandoning it.

Under the preliminary agreement, Dominion — a Virginia-based energy giant that acquired SCANA last year — will pay $320 million in cash or marketable securities and Santee Cooper will pay $200 million in three annual installments in amounts of $65 million, $65 million and $70 million.

According to court records, other parts of the preliminary agreement include:

▪ Santee Cooper agrees to a rate freeze when the settlement is finalized for four years with several exceptions, including a cyber security attack or a hurricane.

▪ Santee Cooper agrees not to try to recover refunded amounts to customers it will pay out as part of the settlement.

▪ Dominion Energy, which acquired SCANA last year, agrees not to charge its 700,000-plus customers in South Carolina for any money it puts up to settle the class action lawsuit.

▪ Toal or another judge will monitor the final agreement and be available to hear any complaints that arise.

Over the years, Santee Cooper increased its electricity rates five times to pay for construction and other costs associated with the doomed nuclear project. In all, Santee Cooper spent some $4.7 billion on the failed project.

The nuclear project’s failure spawned more than 20 lawsuits and left both Santee Cooper and SCANA facing massive debts. Dominion acquired SCE&G, a once-financially healthy investor-owned utility and one of the state’s biggest corporations.

The state Legislature is now trying to decide whether to sell Santee Cooper, reform itself or sell it off to NextEra Energy, a giant multi-state utility from Florida that wants to buy the state agency.

The proposed settlement, if finalized, will do much to bring stability to the choices facing the Legislature, Toal said.

Other possible outcomes of this lawsuit would have “bound the state, bound the hands of participants in various ways,” Toal said. But now, if the settlement goes through, the Legislature and the governor can work out Santee Cooper’s future with “no interference” from uncertainty surrounding the state agency’s uncertain legal status, she said.

Lawmakers seem inclined currently to avoid selling but to bring serious reforms to Santee Cooper, reforms that that would modernize the agency and allow more oversight into its conduct.

This story was originally published March 17, 2020 at 11:10 AM.