When Santee Cooper’s board hired CEO Mark Bonsall in June, there was no doubt about the retired Arizona public power executive’s mission: to lead a top-to-bottom reform of the agency in order to convince state lawmakers it doesn’t need to be offloaded to a private power company.
Two months later, Bonsall and the chief deputy he brought from Arizona, Charlie Duckworth, have unveiled an ambitious business plan they say will be a better deal for the utility’s customers and for its longevity.
First, they promise they can freeze the utility’s electric rates for another five years.
The new plan also calls for debt-saddled Santee Cooper to save money by shedding employees and by closing coal plants, moving from costly coal-fired generation to cleaner energy options such as solar, natural gas, and purchasing existing power generated elsewhere.
The rate freeze comes as welcome news to Santee Cooper ratepayers who have heard for months their power bills will have to rise at least another 7% over the next four decades so the utility can pay off $4 billion in construction debt for a nuclear power plant that was never finished.
But the plan’s larger impact likely will be how it affects Santee Cooper’s possible sale.
The General Assembly voted in May to entertain offers for Santee Cooper, emphasizing their desire for an outcome that best helps Santee Cooper ratepayers and S.C. taxpayers after the nuclear fiasco.
Bonsall’s plan, if Santee Cooper can pull it off, undercuts potential buyers by adopting some of the ideas those firms pitched in previous offers for the 85-year-old utility.
It also sends a public message that Santee Cooper isn’t going down without a fight — even as it has been accused of taking steps to undermine the sale exploration process.
“We’ve heard the critics who have chastised us for not doing anything for the past few years,” Santee Cooper spokeswoman Mollie Gore said. “We have a new CEO and new deputy CEO who came in with a clear mandate to get busy, and they have.”
On the block
The Moncks Corner-based utility is on the chopping block only after a series of calamitous business decisions left its power customers with a $4 billion tab for the unfinished V.C. Summer Nuclear Station expansion project in Fairfield County.
Since the project’s July 2017 abandonment, Republican Gov. Henry McMaster has pushed the General Assembly to sell Santee Cooper as a means of offloading the utility’s debt and ensuring customers aren’t made to pay thousands of dollars more on their power bills for V.C. Summer.
But the General Assembly has been hesitant about privatizing the agency, which also operates a pair of water systems and owns and manages lakes Marion and Moultrie.
The utility serves some 2 million South Carolinians in all 46 counties.
Lawmakers briefly explored offers to sell Santee Cooper earlier this year, allowing firms to submit anonymous, non-binding bids that were reviewed by Virginia-based consultant ICF.
ICF reported that four parties offered to buy all of Santee Cooper, and three of them promised to ensure the utility’s customers pay no more for V.C. Summer.
The top bidders pitched plans that included purchasing and writing down Santee Cooper’s nuclear debt, reducing the utility’s reliance on coal, moving toward more natural gas and solar power and importing cheaper power from elsewhere.
At the time, Santee Cooper pushed back on that report, noting that ICF had not thoroughly vetted the offers to ensure the interested companies can follow through on their plans.
Now, lawmakers are exploring Santee Cooper’s sale in earnest. They have told the state Department of Administration to negotiate with confidential bidders and bring the best offers to the General Assembly to consider.
That will include a proposal to purchase Santee Cooper, a proposal to manage the utility but keep it state-owned and a proposal submitted by Santee Cooper detailing how it would reform itself if allowed to remain independent.
‘What we were desperately looking for’
But even as the the utility’s fate awaits yet-to-be-decided negotiations, one thing is for sure: Santee Cooper wants to remain state-owned. Its employees, retirees and their friends have mobilized, creating social media groups, printing stickers and traveling to the State House to plead with lawmakers to save the utility.
Bonsall’s new business plan is another means to that end.
The plan starts with a five-year rate freeze, in addition to the existing two-year freeze that ends this year. That keeps Santee Cooper’s power bills for direct-serve residential customers at about $117.63 a month, the lowest among major utilities in South Carolina.
Other parts of the plan are further-looking. Bonsall plans to sell some $425 million in leftover parts and equipment from the failed V.C. Summer project, pay down about $900 million in nuclear debt early and save costs by reducing the utility’s workforce and shuttering one of its two coals plants.
The plan stresses replacing that coal-fired power with natural gas and renewable energy and entering “strategic alliances” with neighboring utilities to save costs by buying power in bulk, among other things. It would nearly cut Santee Cooper’s carbon emissions in half from 2005 levels.
“It was what we were desperately looking for,” Santee Cooper board chairman Dan Ray told The State shortly after the plan was approved. “A seasoned utility executive that has had this experience and been through this kind of transformational change, that’s what we needed at the helm to work with us and to guide us through this process. Absolutely, Mark Bonsall and Charlie Duckworth were the right team for Santee Cooper to hire to lead us through this effort.”
Sending a message
The plan’s public unveiling is also something of a shot across the bow to potential buyers who are preparing bids for Santee Cooper, due in November.
Santee Cooper was supposed to submit to the Administration Department a business forecast that includes its future rate projections, but no major changes to its operations, as a baseline for comparison with offers to purchase or takeover the utility.
Santee Cooper was then supposed to submit its own, better “reform” plan confidentially to the Administration Department in November.
But Bonsall surprised the department by sharing long-term plans — such as shutting down the Winyah coal plant near Georgetown by 2027 — publicly to The State newspaper and during a board meeting earlier this month.
“Admin was not aware of all the components of the baseline plan and was surprised by Santee Cooper’s public announcement of the plan prior to and during Santee Cooper’s Board meeting on Sept. 9, 2019,” department spokeswoman Kelly Coakley wrote in response to questions from The State. “Admin is in the process of assessing the baseline plan for reasonableness and, if necessary, will have changes made to it for the purpose of using it as a tool in the process.”
Bonsall’s plan effectively moves the goal posts for potential Santee Cooper buyers. Before its release, those firms were bidding against a Santee Cooper that expected to raise rates 7%, relied heavily on coal and was miles behind other utilities on solar.
Now, those bidders are competing against Santee Cooper’s new, publicly touted business plan.
Amid scrutiny earlier this month, Bonsall penned a Sept. 3 letter defending his approach to the sale process.
“There is value there, and we will find it. To the extent we do, Santee Cooper, an asset of the state of South Carolina, grows in value,” Bonsall wrote to Senate Finance Committee Chairman Hugh Leatherman, R-Florence. “It should thus command a higher price, and that means that state of South Carolina and its citizens realize the benefits of these efforts should you decide to sell, as opposed to a third party who might buy ‘on the cheap.’”
South Carolina’s electric co-ops, who together buy three-fifths of Santee Cooper’s electricity and are pushing for the utility’s sale or restructuring, demurred when asked if the agency’s actions have been appropriate.
“That determination must be made by the Department of Administration and others,” the co-ops wrote in a statement. “What we know is that participants who deviate from the rules endanger the Department’s effort to get ratepayers the best relief they can get and wastes the millions of dollars taxpayers and ratepayers have invested in the search for the right answers to these difficult questions. Undermining the fairness of the Department’s process is the most damaging thing a participant can do.”