The involvement of Florida-based NextEra Energy in negotiations for various South Carolina utility assets has been the proverbial “mystery wrapped in a riddle inside an enigma,” to borrow a quote from the late British prime minister Winston Churchill.
Officially, NextEra has not made an offer for either of the Palmetto State’s two largest regulated utilities – crony capitalist SCANA or government-owned Santee Cooper. State lawmakers have been negotiating offline with the company for several months, but there has been no formal offer – only the outlines of rumored deals (including one which would have involved a hefty taxpayer bailout).
Speculation regarding NextEra’s interest in South Carolina dimmed even further back in May when the company pulled the trigger on the acquisition of Gulf Power and Florida City Gas – a pair of Sunshine State assets it purchased from Atlanta, Georgia-based Southern Company.
Like SCANA and Santee Cooper, Southern is reeling from its exposure to a botched nuclear power project – although its situation doesn’t seem to be nearly as dire as that of its South Carolina counterparts following #NukeGate, a spectacularly failed government intervention in the nuclear power business that has labored to produce a $10 billion hole in the ground.
NextEra spent $6.5 billion on its Florida purchases, leaving it with an estimated $5-7 billion in “excess balance sheet capacity for future growth initiatives,” according to one analyst.
Is that enough cash to make a play in South Carolina?
This week, state lawmakers learned NextEra was “still actively pursuing an $8 billion investment in a regulated utility.” In other words, the company is making it clear it is still interested in playing in the Palmetto State.
The timing on this announcement was not lost on anyone. Not only did it come as lawmakers were hosting their annual wine-and-dine schmooze-fests with corporate lobbyists – including NextEra’s Darrell Scott – it came as the company’s rival, Virginia-based Dominion Energy, was launching a new grassroots offensive in support of its proposed $15 billion bid for SCANA.
Dominion’s deal is popular with the masses because it includes sizable up-front refunds. State lawmakers have been hostile to the proposal, however – embracing an alternative deal that cuts the refunds but – according to them – provides more relief over a longer period of time. We haven’t endorsed either proposal, but we have criticized legislators for not leveling with the public about the risks associated with their plan – namely the likelihood the state will come up on the losing end of a federal lawsuit.
There are also questions as to what sort of influence lawmakers have been exerting on the S.C. Public Service Commission (SCPSC), the ostensibly independent oversight agency whose rate increases subsidized the state’s failed nuclear power experiment in the first place. This socialization of investment risk was initiated by … you guessed it, lawmakers (including several who are now on NextEra’s payroll).
So forgive us for not taking them at their word.
All of this raises a basic question: Are lawmakers attempting to scuttle the Dominion deal because they genuinely want lower rates over the long term? Or are they simply paving the way for an inevitable NextEra offer?
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This news outlet has consistently argued that there is no ideal outcome in this disaster. Due to barely fathomable legislative incompetence, a state-owned asset was placed on the hook for billions of dollars in debt – and a crony capitalist firm was permitted to socialize nearly $2 billion of investment risk.
There are no winners in such a scenario …
Our position all along has been that the state should allow the private sector to generate the best possible solution – i.e. the maximum amount of ratepayer relief that the courts will accept and the markets will bear.
Is that Dominion’s deal? We don’t know – but the proposal is the only deal currently on the table that doesn’t involve rolling the dice in court and risking every penny of available relief. It is also the only proposal on the table that provides retroactive relief (an estimated $1.6 billion of it) and locks in rates on a permanent basis moving forward.
Lawmakers’ deal? It is a temporary rate reduction, and while it did produce sizable one-time savings this month for ratepayers – our guess is energy bills will be rising again in the very near future.
As for NextEra, the company has operated in the shadows from the very beginning of this debate – including its reported affiliation with a scuttled grassroots group that mysteriously appeared (and then disappeared) back in January. Also, its offline negotiations with lawmakers have been shrouded in secrecy – with estimates for its proposed purchase of Santee Cooper ranging from $8 billion to $16 billion.
Frankly, either of those estimates sounds positively ludicrous for an asset that is currently more than $8 billion in debt.
Again, we don’t care who makes the offer … we just want the best deal possible for ratepayers.
As of this writing, we are now more than thirteen months removed from the decision by Santee Cooper to abandon the V.C. Summer nuclear generating station expansion project – a.k.a. the detonation point of #NukeGate – and are no closer to a solution.
Whichever proposal you support, that is unacceptable … and demonstrative of the sort of underlying energy uncertainty that continues to drag down the Palmetto State’s economy.
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