If the state of South Carolina wants to sell Santee Cooper, it needs to ensure the state-owned utility keeps its biggest customer.
Together, South Carolina’s 20 small, member-owned electric cooperatives are Santee Cooper’s biggest customers, buying around 60 percent of the utility’s power and distributing it to their 1.5 million members statewide.
State legislators sat down Wednesday with representatives of those co-ops, taking their temperature on Santee Cooper’s possible sale, which the co-ops could torpedo.
If state-owned Santee Cooper is sold — as some state leaders have said they want, including Gov. Henry McMaster, R-Richland — its contract with the co-ops allows them to terminate a 40-year-long contract to buy power from the utility. The co-ops then could buy power from another source, depriving the new owner of Santee Cooper of most of its business.
Lawmakers on Wednesday asked officials with Central Electric Power Cooperative, the organization that buys power from Santee Cooper and transmits its to the 20 co-ops on their behalf, how likely that was to happen.
“Any (Santee Cooper) purchaser who looks at that contract (with the co-ops) would have to think, ‘What happens to that contract?’ ” Central general counsel John Tiencken told legislators looking at Santee Cooper’s potential sale.
But Central signaled to lawmakers that the co-ops would treat Santee Cooper’s sale as more of an opportunity to renegotiate their power-buying deal than an excuse to walk away from it.
While the co-ops want to protect their rates and terms, “We’re not easy to supply,” Tiencken said. “We’re one of Duke’s largest customers. We’re Santee Cooper’s by far,” he said. “Where could we go to get that kind of power that makes sense for our members?”
The contract between the co-ops and Santee Cooper expires in 2058.
However, relations between Santee Cooper and the state’s 20 electric cooperatives are frayed.
In February, the co-ops sued the state-owned utility trying to force it to stop charging the co-ops’ 1.5 million members for two abandoned Fairfield County nuclear reactors.
When the lawsuit was filed, The State reported the co-ops are on the contractual hook to pay about $2.8 billion of Santee Cooper’s $4 billion in nuclear-related debt. Santee Cooper jointly funded construction of the two unfinished reactors along with Cayce-based SCANA, the parent company of SCE&G.
When that project was abandoned, SCANA agreed to be acquired by a larger utility, Virginia-based Dominion Energy. Meanwhile, McMaster said the state should sell Santee Cooper to cover the cost of its nuclear debt.
Santee Cooper has argued that, without the co-ops’ continuing nuclear-related payments, the state-owned utility “eventually would be unable to maintain its ongoing operations.”
Lawmakers on Wednesday worried that might be the case.
“Would you decide a bankrupt Santee Cooper is in the best interest of the state?” asked state Rep. Russell Ott, D-Calhoun.
Frank Ellerbe, another attorney representing Central, said bondholders on the V.C. Summer nuclear project would “take a haircut,” losing money if Santee Cooper declared bankruptcy. But, he argued, Santee Cooper could survive a restructuring, emerging unburdened by its nuclear debts.
“One possibility would be a restructured Santee Cooper that would be charging lower rates,” he said.
However, state Rep. Murrell Smith, R-Sumter, worried litigation between Santee Cooper and the co-ops could take years, and lessen the utility’s value to potential acquirers, which reportedly include Florida-based NextEra Energy.
Tiencken replied Central already has held confidential discussions that could lead to a resolution of the nuclear-rate issue.
“We know of plans out there that would take care of all contingencies,” he said. “(But) it has to be proved that it can or can’t be done.”
After the hearing, Smith said he took that response to mean the co-ops already have been contacted by potential buyers of Santee Cooper about how to resolve the nuclear-rate issue if the state-owned utility is sold.
Central executives did not elaborate on those discussions Wednesday.
Combined, S.C. co-op customers have paid about $400 million of the failed nuclear project’s cost. That equals about 4-5 percent of their monthly power bill, depending on which co-op they get their electricity from.