Legislators raise questions about firm that helped vet Santee Cooper’s bidders
Legislators are raising questions about a firm that helped vet offers to buy or manage state-owned Santee Cooper — a day after a report was published outlining options available to lawmakers as they decide the public utility’s fate.
On Wednesday, state Sen. Luke Rankin, R- Horry, told fellow lawmakers of concerns that the firm hired by the Department of Administration to help evaluate proposals to buy or manage Santee Cooper had a contingency agreement in place that would result in the firm getting paid more in the event Santee Cooper is sold.
Rankin, an attorney, appointed a committee of senators to look into the process “as we ask legitimate questions about this process, so we can ensure what we are being recommended is as objective and free from contingency as possible,” he said.
Meanwhile, a Department of Administration spokesperson said late Wednesday that the pay arrangement questioned by senators was lawful and represented pay for the work the firm would do if the utility is sold.
Still, the questions by lawmakers could throw a wrench into their plans to debate whether to sell the state-owned utility, hire a company to manage it or leave it as is. That process officially began this week with the receipt of the report, months in the making, that evaluated bids.
The report — compiled by the state with help from outside consultants — also evaluated Santee Cooper’s plan to reform itself, including how, if allowed to continue operating as is, it would pay down debt associated with a failed nuclear construction project that led to $4 billion in losses for the utility.
According to a Dec. 17 letter to Rankin obtained by The State, state Sen. Stephen Goldfinch, R-Georgetown, requested a special committee to explore one of the consultants hired by the state’s Department of Administration to weigh company bids for Santee Cooper.
“The troubling questions of objectivity and competence” must be addressed “and they need to be addressed quickly,” Goldfinch, who also is an attorney, wrote in the letter.
Back in August, the state agency agreed to pay a Los Angeles-based law firm — Gibson, Dunn and Crutcher — up to $6 million in fees for legal help with the bids and possible transaction.
The State reported at the time that the contract between the state and the firm said that as an act of good faith, the firm will defer 10% of its total fees until lawmakers decide what to do with Santee Cooper. Gibson, Dunn and Crutcher will accept that amount only if lawmakers decide to sell the utility.
According to Goldfinch, that deferment of payment — until the state sells the utility — is a contingency fee explicitly prohibited in state law that sets the rules for evaluating bids to buy or manage Santee Cooper.
Gibson Dunn declined to comment.
In a statement to The State late Wednesday, the Department of Administration said the 10% fee deferral is not an incentive to recommend a sale of the utility. It instead is an estimate how much it would cost to complete the additional work that would be required if the General Assembly chooses to sell Santee Cooper.
“This fee structure did not violate the terms of the Joint Resolution,” DOA spokeswoman Kelly Coakley said in an email. Regardless, as this issue was brought up in August and had the potential to be misinterpreted and result in a disruption of the process, beginning with their first invoice and subsequent invoices, Gibson, Dunn and Crutcher LLP, has billed (the DOA) the full cost for all legal fees and Administration has paid the full cost for all legal fees.”
Goldfinch raised his objections in a letter to Rankin, asking that a special committee be created to explore the issue.
“Gibson Dunn stands to receive an additional six hundred thousand dollars if Santee Cooper is sold,” Goldfinch wrote. “This contingency fee agreement calls into substantial question any analysis and opinion by the firm regarding the management or reform proposals. It is shocking to the conscience that the Department would enter into an agreement that, on its face, renders questionable the work to be performed by Gibson Dunn and for which it is to be paid six million dollars.”
Rankin said he ultimately decided to wait until the Department of Administration released its report on Santee Cooper to set up a committee of senators to look into the process.
“I did not act on this letter, this request, because I did not want to taint the process, or be accused of tainting the process in anyway whatsoever,” Rankin said.
The disclosure of the contingency fee raised concerns among other senators Wednesday, too.
“If you’re a consultant and you’re being paid to evaluate something, you may paint a much rosier picture of a sale if you would end up making hundreds of thousands or millions of dollars because of the sale,” said state Sen. Larry Grooms, R-Berkeley, who is an advocate for the Moncks Corner-based Santee Cooper, which is in his district. “If there’s no profit motive you get paid to provide information, then you stand a better chance of providing accurate numbers,” Grooms added.
State Sen. Tom Davis, R-Beaufort, who has said he doesn’t believe the state should own an electric utility, said he still needs to continue reviewing the materials presented by Rankin.
“Certainly Sen. Goldfinch on its surface seems to raise a good point,” Davis said. “I want to make sure and look at it and understand what the contract says and ask (state Department of Administration Director) Marcia Adams tomorrow what it says, but I think it raises a legitimate point and we’ll look into it.”
However, state Sen. Hugh Leatherman, R-Florence, who chairs the Senate Finance Committee which will make a recommendation on how to move forward with Santee Cooper, said he has no concerns over the process used by Department of Administration.
“I’ve worked with people over there for many many years,” Leatherman said. “(They are) good people, they look out for the taxpayers for the state of South Carolina, and I don’t look behind people’s actions if they’re doing what they need to be doing.”
Adams is expected to brief House and Senate finance committee leaders Thursday.
Santee Cooper generates about $1.9 billion in revenue each year and serves, directly or indirectly, about 2 million customers in the state.
NextEra, a Florida-based utility giant, was picked by the state agency to buy Santee Cooper and Dominion Energy, another energy giant with now South Carolina presence, which chosen to manage but keep Santee Cooper largely intact.
Santee Cooper submitted its own plan seeking to reform itself. It pledged, in part, to reduce its workforce from the current 1,675 workers to 1,514 by 2028, but doing so not through layoffs, but through retraining employees, attrition and retirements.
This story was originally published February 12, 2020 at 2:43 PM.
