THE ONLY way it makes sense to sell state-owned Santee Cooper is if we can unload its $8 billion in debts and have enough money left over to make up for the higher rates that a private utility will charge for electricity.
I’m not a financial genius, so I have no idea where the sweet spot is; there are people who do that sort of thing, and if someone haven’t already been tasked to do it, there’s some political malpractice going on in our state government.
But I do know this: The only way we can even dream of hitting the break-even point is if Santee Cooper owns a federal license to build a nuclear reactor or two.
It’s absurd to think anyone would restart work anytime soon on the two unfinished reactors that Santee Cooper and SCE&G walked away from this summer. But a strong case can be made that someone will want to do that in a decade or two, when the energy markets shift again, as they inevitably will. That means the licenses could become quite valuable, either by themselves or along with Santee Cooper. That possibility is the only thing that can transform Gov. Henry McMaster’s quest to sell Santee Cooper from a libertarian fantasy into an idea to be taken seriously.
Which brings us to the offer by SCE&G parent SCANA to give Santee Cooper its 55 percent share of the reactors and the operating licenses, in return for Santee Cooper giving up its right to sue SCANA over the project.
Santee Cooper General Counsel Mike Baxley rejected the offer in a Dec. 4 letter, citing three main concerns: Santee Cooper doesn’t want to give up potential legal claims against SCANA, it doesn’t want to be responsible for the entire cost of maintaining the abandoned reactors, projected at around $15 million a year, and it feels rushed, since the utilities’ management didn’t discuss the offer until Nov. 30, and SCANA wants an answer by Friday.
The first concern might be valid, but it’s hard to know unless we know what if any sort of claims Santee Cooper anticipates.
The quick deadline shouldn’t be a problem; if it is, it reflects some more political malpractice, on the part of Santee Cooper, or the governor, or utility regulators, or legislators, or all of the above.
SCANA has a deadline of Friday to tell the Nuclear Regulatory Commission whether it is giving up the licenses, and it wants to do that and abandon the plants to help it qualify for a $2 billion federal tax credit. Utility regulators and other insiders have known this was the plan from the moment SCANA started talking about seeking that tax credit, almost immediately after its July 31 decision to abandon the project. Someone should have been looking into the value of the plants and negotiating how the state could hold onto those licenses.
As for the maintenance cost, some perspective is in order. Yes, $15 million a year is a lot of money, but Santee Cooper spent $4 billion on two reactors that will be worth precisely nothing if the license is abandoned and the plants left to rot. Maintaining the plants for a year would cost one third of 1 percent of what the utility has spent so far. The state would always have the option of deciding six months or a couple of years from now that the licenses and site are worthless, and walk away. If the licenses are surrendered, there’s no getting them back.
Since SCANA wants to abandon the plants and the licenses, it’s unrealistic to think it’s going to pay for any maintenance costs unless doing so is part of an agreement it reaches with the Legislature over how much of its own debts will be covered by ratepayers. And if such an agreement is to be reached, it can be reached after the state has secured those licenses.
Assuming that any agreement with SCANA is contingent on the Nuclear Regulatory Commission allowing Santee Cooper to take ownership of the licenses, this seems like a modest price to pay for the possibility that the $4 billion investment could someday be worth … something.
Of course, one problem throughout this project is that Santee Cooper’s focus seems to have been on what’s best for Santee Cooper. In that, it’s no different from SCANA. But Santee Cooper is a state agency; its focus is supposed to be on what’s best for South Carolina.
And yes, I know that many state agencies focus more on what’s best for them than what’s best for the rest of us. But most state agencies have to answer to someone — usually the governor — who can either change the focus or else face the political consequences of not changing it. Santee Cooper answers to no one. The governor appoints its directors but can’t fire them unless they commit a crime or behave so irresponsibly as to rise to the level of misconduct, misfeasance or malfeasance. That’s one thing that has to change. (Gov. McMaster says Santee Cooper Board Chairman Leighton Lord has done just that and is trying to get rid of him, but despite how irresponsible that entire agency has been, I suspect the governor will have a difficult fight on his hands if Mr. Lord doesn’t agree to step down.)
Now, it’s possible that Santee Cooper’s response to SCANA’s offer is part of a smart negotiation to get some wiggle room on the ability to sue. If so, good for Santee Cooper. Up until at least July, it was all too willing to let SCANA set the terms of … everything.
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.