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NukeGate: NextEra’s “Pipeline Play”

A look at what’s behind all the corporate maneuverings …

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Last week this news outlet reported exclusively on the attempted purchase of a subsidiary of embattled crony capitalist utility SCANA by Florida-based NextEra Energy.

According to SCANA officials, the Juno Beach-based conglomerate attempted to buy North Carolina-based PSNC Energy from SCANA for $2 billion.

PSNC Energy provides natural gas service to an estimated 550,000 customers in the Tar Heel State.  As we noted in our original coverage, “business is booming, too, with the company undertaking a massive pipeline project to meet growing demand in central North Carolina.”

NextEra, incidentally, is a co-owner of the company building the pipeline – prompting some to speculate on its “transparent” interest in scuttling a proposed merger between SCANA and Virginia-based Dominion Energy.

The logic goes like this: NextEra wants to own the company that will be using its new North Carolina pipeline.  It does not want to transport gas for a new Dominion subsidiary.  If the Dominion-SCANA merger were to tank, not only would Dominion’s play to own PSNC be blocked – but NextEra could pick up the subsidiary from SCANA for a song.

“Transparent,” indeed.  And pretty clever, to be honest.

The only problem?   NextEra got too cute …

In responding to our report, a source familiar with the negotiations cited NextEra’s botched cloak-and-dagger efforts to undermine the SCANA-Dominion merger.

“Don’t forget that our friends from Juno Beach were outed for funding the Palmetto Energy Coalition,” the source said, referring to a shadowy group that was exposed earlier this year as a front for NextEra.

“I am sure it is too far fetched to believe that NextEra would try to drive SCANA into the dirt with the help of a few friendly legislators so SCANA would be forced to sell its natural gas business cheap and the legislators could be in charge of the remaining South Carolina company,” the source said.  “Too far fetched, I am sure.”

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SCANA is on the block due to its involvement in #NukeGate – a spectacularly failed intervention of state government in the nuclear power business.  For those of you uninitiated (and it seems as though there are quite a few of you#NukeGate refers to the botched construction of a pair of next generation nuclear reactors in Jenkinsville, S.C.

With state lawmakers enabling them, SCANA and state-run utility Santee Cooper blew through $10 billion – including $2 billion collected directly from SCANA ratepayers – on this doomed project, essentially socializing a significant chunk of its investment risk.

Santee Cooper ratepayers have also seen massive rate hikes – and state taxpayers are badly exposed to the government utility’s massive debt.

The reactors were supposed to have been operational in 2016 and 2017, respectively.  They weren’t, though – and the utilities couldn’t afford the estimated $10-16 billion price tag necessary to complete them.  As a result, Santee Cooper pulled the plug on July 31 of last year – killing an estimated 5,600 jobs and throwing the state’s energy future into turmoil.

The collapse of the project – and the revelation that executives at both utilities knew the projects were doomed but raised rates on consumers anyway – has spawned all sorts of fallout.  We are talking about ratepayer lawsuitspolitical intrigueelection-year politickingcriminal investigations and of course a furious debate over how to move forward in the wake of the project’s abandonment.

One – well, two proposals for SCANA have been put forward by Dominion, including a deal that would provide $1.3 billion in rebates to ratepayers.  Not surprisingly, that plan is very popular with ratepayers.

Lawmakers have other ideas, though.  Led by S.C. Senate majority leader Shane Massey, they have thus far rebuffed Dominion’s proposals – although the company’s most recent bid was supported recently by S.C. speaker of the House Jay Lucas.

The problem with legislators’ so-called “solution?”  It faces a very uncertain legal future.  And could drive SCANA into bankruptcy – which would make the sale of PSNC to NextEra even cheaper.

(Click to view)

(Via: High Flyer)

Everything about the NextEra “Pipeline Play” makes sense from the Florida company’s perspective.  We don’t blame them for it, and in fact it would probably have been negligent of them not to pursue such a strategy.

NextEra has shareholders, and its executives are obligated to generate the maximum rate of return for those shareholders – which means getting new assets for as cheap a price as possible.

We get it … business is business.

The question we have is this: How did NextEra get lawmakers – and in particular, Massey – to carry their water? 

Massey’s elevated involvement in this debate has raised eyebrows in recent weeks, although it remains to be seen the extent to which his caucus organization is being backed by the Florida company – if at all.

We have heard several figures bandied about, but as of this writing we have been unable to confirm the amount.

In a recent piece, though, we noted that NextEra’s Palmetto State lobbyist – Darrell Scott – was recently appointed to the board of the crony capitalist S.C. Chamber of Commerce, an organization which used a subsidiary to engage in a competitive S.C. Senate race in the Midlands region of the state.

Previously, Massey had attempted (without success) to use caucus funds to support his candidate of choice in that election.

Whatever is motivating Massey, this news outlet remains leery of legislative involvement in this process – if for no other reason than legislative meddling is what landed our state in this $10 billion hole in the first place.  As we have stated from the beginning of this process, we favor “a reasonable settlement that maximizes ratepayer relief, within the confines of what the courts will accept and the markets will bear.”

Absent that, we urged lawmakers to simply bite the bullet and repeal the rate increases South Carolinians are still paying on this botched project – a gauntlet they were unwilling to pick up.

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