GOVERNMENT UTILITY TO BE SOLD?
South Carolina governor Henry McMaster sent a letter to the chairman of the board of government-run utility Santee Cooper this week, instructing him to provide “any and all relevant information requested by interested parties” related to the possible sale of the state-owned energy provider.
McMaster’s letter reinforces speculation that the troubled utility might be unloaded in the aftermath of #NukeGate – the decision by Santee Cooper to abandon a multi-billion dollar nuclear power plant under construction in Jenkinsville, S.C.
Santee Cooper’s decision to pull the plug on the V.C. Summer plant two-and-a-half weeks ago killed an estimated 5,600 jobs, squandered billions of dollars in investment (including more than $2 billion raised through rate increases on consumers), threw the state’s energy future into chaos, cost Santee Cooper its credit rating and prompted a class action lawsuit against SCANA, the private sector utility that had been partnering with Santee Cooper on the project.
It has also unleashed fresh political hell on politicians like McMaster and S.C. State Senate president Hugh Leatherman, who have been forced to scramble for cover in the aftermath of the fallout (see here, here and here).
Leatherman is particularly vulnerable considering his chamber unanimously approved legislation over a decade ago that authorized rate hikes on consumers to fund the construction of these reactors – which are now unlikely to produce so much as a watt of energy.
No wonder the aging liberal legislative leader is trying to act like the cock of the walk in response to this scandal … albeit to no avail.
Santee Cooper – which owned a 45 percent stake in the V.C. Summer plan – announced on July 31 that it was pulling out of the project. Eight days earlier, though, it unveiled proposed rate increases on consumers with the stated intention of subsidizing the nuclear facility.
Talk about a head fake …
Now McMaster is seeking a suitor for the utility – or at the very least a buyer willing to take over its 45 percent share of the V.C. Summer project.
“Although this process may be challenging, it is not nearly as difficult as the situation facing South Carolina workers and ratepayers,” McMaster wrote in his letter to Leighton Lord.
That’s for sure … although as we’ve previously pointed out McMaster is heavily conflicted on this issue.
Anyway, here’s his letter …
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Will McMaster be able to find a buyer? He claims in his letter to have “heard from a number of entities that either have expressed an interest in purchasing Santee Cooper, in whole or in part, or have inquired regarding Santee Cooper’s ownership interest in V.C. Summer.”
If that’s true, those entities better have some deep pockets.
As of this writing, Santee Cooper is carrying an estimated $7.7 billion in debt. And that’s before we even consider the investment necessary to complete the V.C. Summer project – which could amount to another $4-5 billion depending on which estimate you believe.
Does that sound like a good buy to you?
Also, let’s not forget the impact a sale would have on Santee Cooper’s ability to borrow money. As a government agency, the utility benefits from municipal bonds – enabling it to issue debt at below market rates.
Assuming the utility were sold to a private sector provider, those competitive advantages would vanish – leading some to label the purchase of the utility as “non-economic.”
Don’t get us wrong: We believe Santee Cooper should be unloaded as soon as possible.
As we’ve been saying for years, government has no business running a power company.
Our concern? That South Carolina’s government has made such a mess of its power company no one is going to want to purchase it.
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