Why Santee Cooper is on the chopping block
A special legislative committee studying whether to sell Santee Cooper was divided Wednesday over how to move forward with a handful of offers to buy the debt-laden, state-owned utility.
The committee’s S.C. House members and Republican Gov. Henry McMaster pushed to hire an outside consultant to study further the bids and, ultimately, negotiate with would-be acquirers to bring the panel a “best-and-final” offer to buy the utility.
But the committee’s outnumbered state senators want a more deliberate approach, asking that a consultant — at least for now — be hired only to further review the bids the state already has received.
The hour-long debate provided more evidence that selling the 84-year-old utility will be a heavy lift for the GOP-controlled General Assembly, which has plenty of skeptical legislators. The sales idea is being considered after Santee Cooper racked up $4 billion in debt trying to build two unfinished nuclear reactors, debt that could cost its customers more than $6,000 a household in higher rates over the next four decades.
In the end, the committee voted 5-4 — with McMaster and the House prevailing — to authorize its co-chairmen to hire an outside consultant to evaluate the bids and negotiate with the would-be acquirers.
“We need an offer for this committee, at the end of the day, to be able to accomplish what the General Assembly tasked us to do,” said state Rep. Russell Ott, D-Calhoun. “We need the best offer that Santee Cooper can get, and we need professional help to be able to accomplish that.”
However, the Senate still can back out of paying its half of the consultant’s fee if senators are concerned the sales process is moving too fast.
The committee’s co-chairmen, Republican state Rep. Murrell Smith of Sumter and GOP state Sen. Paul Campbell of Charleston, said they would work together as they move forward with a consultant.
South Carolina has received 15 bids to buy part or all of Santee Cooper from power companies, investment firms and other parties.
The offers include four credible bids to buy the entire utility. Three of those offers would pay off Santee Cooper’s $4 billion in debt for the failed V.C. Summer nuclear expansion project, potentially saving its customers thousands of dollars.
Those bids were evaluated by the Virginia-based ICF consulting firm and summarized in a report to lawmakers.
The offers heartened House members and the governor. But senators are skeptical that a for-profit utility could buy the not-for-profit Santee Cooper and keep its electric rates low in the long run.
In written comments to the committee, Santee Cooper itself also poured cold water on ICF’s assessment the bidders could lower the utility’s electric rates by up to 14 percent.
Santee Cooper said:
▪ ICF didn’t consider that Santee Cooper itself could make some of the same cost-saving changes the bidders proposed, such as moving away from the utility’s reliance on coal-fired power plants
▪ Some of the bidders plan to lower Santee Cooper’s rates by making its power supply more reliant on natural gas, a move that could leave customers vulnerable to volatile fuel prices and lower service reliability
▪ Some of the bidders would lower rates by importing more electricity and natural gas into the state than South Carolina’s transmission lines can handle. Bidders might need to spend huge sums to upgrade those transmission lines, canceling out expected rate cuts.
“We have four bids that were completely evaluated, and some of them were basing their rates on importing power across multiple states into a system” that can’t handle it, said Senate Transportation Committee chairman Larry Grooms, a Berkeley Republican whose district includes Santee Cooper’s headquarters. “I don’t know how you can negotiate a sale and be able to rival Santee Cooper’s rates under those impossible conditions.”
The committee agreed Wednesday that a consultant — possibly ICF — should be hired to further review the non-binding offers to buy Santee Cooper and address their concerns. But senators didn’t want to go further than that.
“I’m not prepared to make that decision today until we have the additional information … and we have confidence in the process,” said state Sen. Brad Hutto, D-Orangeburg.
But the senators on the committee were outnumbered.
House members said the consulting firm needs to be able to negotiate with bidders to bring back a binding offer so the committee can do its duty — recommend whether the full General Assembly should sell Santee Cooper.
“We could have 100 meetings and still not know every single fact,” McMaster said. “This is an important process, and we need to get moving. … We’ve got to eliminate as much uncertainty as possible.”