Santee Cooper is the third-largest government-owned power utility in America, behind only Bonneville Power and TVA, both of which are owned by the federal government. But have you ever wondered why we own it? Or, more to the point, why we don’t sell it and invest the proceeds in something important?
Back in the 1980s, I did a study for SCE&G Chairman Virgil Summer to determine how much Santee Cooper was worth, and how much we should offer to buy it. That number was approximately $2.5 billion.
According to its 2014 annual report, Santee Cooper now has approximately $11.2 billion in assets, income of $1.5 billion a year and an A+ credit rating. Debts and other liabilities could probably be passed on in a sale, thus making Santee Cooper worth well more than $10 billion, depending upon who is purchasing it. But a sale isn’t the only option. By taking it public, I believe that South Carolina could obtain as much as $7 billion and still own a controlling 51 percent of the stock.
The timing is perfect to sell, as worldwide investors are desperate for new, solid A+ investments that provide a steady return on their money. A stock sale likely would create a bidding war.
What would the ownership loss of Santee Cooper mean to South Carolina? I believe nothing. Customer rates for SCE&G and Duke are comparable to Santee Cooper’s. And local co-ops would still get their power from Santee Cooper under existing contracts, or else they would get more competitive bids from other utilities. Job losses at Santee Cooper would be minimal, as it runs a very tight operation.
By generating $7 billion, we could avoid borrowing money — whether it’s $500 million to repair the roads, $250 million for education or just about anything else. If we invested the money, it would return a lot more to the state treasury each year than the $20 million Santee Cooper pays today.
Further, the new owners would pay local property taxes, something Santee Cooper does not do. This is one of the big reasons its coverage area has poor schools: They are deprived of the property taxes that privately owned utilities pay to each county they serve. In fact, SCE&G and Duke tend to be the largest taxpayers in the counties where they operate.
Selling stock in Santee Cooper sounds like a no-brainer: South Carolina gets billions of dollars without selling bonds or raising taxes, poor counties get-much needed tax money, rates stay about the same and we could still own 51 percent the company.
But as Virgil Summer warned me years ago, getting South Carolina to sell Santee Cooper is a political land mine. It has lobbyists, paid for by S.C. citizens, who have convinced the politicians that nothing needs to change. So far, they have defeated every effort to sell the company. That needs to change.
Selling bonds and raising taxes while at the same time holding on to vast assets is like taking out a second mortgage to fix our house while we have a stash of gold in a bank vault. It makes no sense.
For the benefit of all South Carolinians, we need to either sell Santee Cooper outright or take it public in a stock sale.
Mr. Byrd, president and CEO of a Chapin utility holding company, has worked with SCANA and other utilities for more than 40 years and is a research partner at Clemson’s CU-ICAR; contact him at email@example.com.