FOR NEARLY a month, we’ve fixated on SCE&G: how it raised our electricity rates nine times in as many years, charging us $1.4 billion for nuclear reactors that will never generate the first watt of power, and how it wants to charge us up to $4.9 billion more — with more interest than you can imagine.
But while SCE&G was the senior partner in the failed attempt to build two new nuclear reactors at the V.C. Summer facility in Fairfield County, it wasn’t in this alone. Parent company SCANA announced on July 31 that it was abandoning the project in part because Santee Cooper had bailed out. That suggests that SCANA might never have gotten in without its junior partner.
A week ago, when Sen. Nikki Setzler opened the first legislative hearing on what he called the biggest business failure ever in South Carolina, he signaled that the discussion was about to be broadened.
“We want to make it clear,” he said at the outset, “that although the major coverage has been about what transpired with South Carolina Electric and Gas relative to their decision to abandon the project, that it is not just about South Carolina Electric and Gas. It’s about Santee Cooper, which is South Carolina’s largest power producer, and is state-owned.”
That “largest power producer” part is important. More important is “state-owned.”
State-owned is what gives Santee Cooper special obligations that SCE&G doesn’t have. State-owned also is what gave Santee Cooper special privileges — most notably the ability to embark on the $10 billion project and stay in as it ballooned to $20 billion without convincing anyone except its unaccountable, part-time, politically appointed board that it should do so.
The primary duty of investor-owned SCE&G is to make money for its stockholders. Not to make cheap electricity for its customers. Not even to keep costs under control. As I explained in a recent column, the 2007 S.C. Base Load Review Act actually encouraged the company to let costs rise out of control, because that increases its profits.
By contrast, the primary duty of state-owned Santee Cooper is to serve the public. When Santee Cooper ran up $4 billion in debt, there was no winner, because there are no stockholders looking for a profit. Well, unless you think of ratepayers and taxpayers as stockholders. But they’re the ones who will be stuck paying off that debt.
So while it might turn out to be legally “prudent” for an investor-owned utility to keep plowing money into a failing project, it’s hard to see how it was prudent for a state-owned utility to do the same. In fact, I wonder if Santee Cooper could have passed the prudency test that SCE&G had to pass in order to even start the project.
It seems appropriate that Santee Cooper CEO Lonnie Carter retired on Friday. But that doesn’t even begin to address the problems with the way the utility operates.
The board insists it didn’t force Mr. Carter out, so it can’t take credit for his departure. In fact, despite Chairman Leighton Lord’s recitation of all the time the board spent in secret meetings mulling over the disintegrating project, we’ve seen little to suggest that it did much of anything besides approving whatever Mr. Carter asked of it.
And Mr. Carter seemed happy to let SCANA make the decisions, which you might expect given the bureaucratic inclination to stay out of the limelight and out of trouble.
This isn’t a knock on bureaucrats, many of whom do a great job doing the jobs they’re supposed to do. But those jobs aren’t supposed to include deciding whether to pull the plug on a $10 billion project that is morphing into a $20 billion project at the same time that the need for the project is diminishing.
I’m not sure any government officials should be making such decisions, but if any should, it would be governors, in consultation with legislatures.
Whether the state should own an electric utility might be a moot question at this point. Given all the debt Santee Cooper has piled up, I’d be surprised if we were able to unload it without enormous costs, at least to the ratepayers and potentially to all taxpayers.
That makes it essential to fix the governance problems, to ensure that our state-owned utility is actually serving the interests of the public.
With no regulatory oversight, South Carolina’s highest-paid state bureaucrat merely had to convince that compliant board of directors to go along with his decisions, which should strike everyone as imprudent.
This problem dates to 1934, when the Legislature created Santee Cooper and did not subject it to regulatory oversight. It was compounded by a 2005 law that stripped governors of the authority to remove their Santee Cooper appointees unless they could prove that board members broke the law or committed one of a small list of offenses.
Making lousy decisions is not on that list.
It should be.
And the board’s decisions — lousy or not — should be subject to review by not only the governor but also state utility regulators.
A utility that is big enough to blow $4 billion that it will eventually recoup from ratepayers is big enough to be regulated by someone other than its part-time, politically appointed board.
Even if we make that board accountable to the governor.
Ms. Scoppe writes editorials and columns for The State. Reach her at email@example.com or (803) 771-8571 or follow her on Twitter or like her on Facebook @CindiScoppe.