Within the next few weeks, the first major battle in an ongoing energy war in South Carolina is likely to be decided …
We are referring, of course, to a highly-anticipated decision from the embattled S.C. Public Service Commission (SCPSC) related to Virginia-based Dominion Energy’s $15 billion bid to purchase Cayce, S.C.-based SCANA.
Dominion has given state regulators several variants of its proposal to choose from – including one version which would reduce long-term energy rates to a level below that envisioned by state lawmakers (whose crony capitalist meddling is what landed SCANA and government-owned utility Santee Cooper on the block in the first place).
State lawmakers socialized billions of dollars in investment risk over the last decade related to #NukeGate – the construction of two next generation, pressurized water reactors at the V.C. Summer nuclear generating station in Jenkinsville, S.C. These reactors were supposed to have been operational in 2016 and 2017, respectively, at a cost of $9.8 billion. They weren’t, though …
The money was spent, but the project wasn’t finished – and the two utilities couldn’t afford the estimated $10-16 billion price tag necessary to complete it. On July 31, 2017 Santee Cooper finally pulled the plug on the boondoggle – killing an estimated 5,600 jobs in the process.
Just eight days before it bailed on the project, though, Santee Cooper announced massive rate increases on customers tied to “costs associated with nuclear construction and other system improvements.” Also, after the project collapsed Santee Cooper gave its former leader a multimillion-dollar, taxpayer-subsidized golden parachute – even though documents released last summer revealed its executives (and SCANA’s leaders) knew years ago that the project was doomed.
Not surprisingly, there is an ongoing criminal investigation into this command economic debacle … one that we suspect will end poorly for any number of people associated with this command economic catastrophe.
In the meantime, furious negotiations have been underway pertaining to the uncertain future of these two utilities. And while there appears to be clarity on SCANA’s horizon – there can be no doubt this is a multi-front war.
And those waging it are playing for keeps …
First thing’s first, though: The immediate future.
Positive legislative reception to Dominion’s latest proposals for SCANA – along with the recently announced settlement of a customer lawsuit – bodes well for the successful completion of the company’s proposed merger (which has cleared six of seven required hurdles). Of course there is a catch: Any deal approved by the SCPSC would probably not include ratepayer rebates, per the insistence of state lawmakers and regulators.
That creates a serious public relations challenge for Dominion – which touted the rebates as the key selling point for its proposal.
Assuming the deal goes through, though, the battle will shift back to Santee Cooper – which has an incredibly bleak fiscal outlook as well as considerable exposure to the looming criminal investigation.
Not surprisingly, the future of Santee Cooper is nowhere near as clear as that of SCANA.
There are currently no offers on the table to purchase the chronically mismanaged entity, nor for that matter does there appear to be a willingness on the part of state lawmakers to sell it. For more than a year, South Carolinians have heard governor Henry McMaster talk incessantly about selling Santee Cooper, but so far there has been no indication anyone wants to buy it.
One so-called “serious” offer made the rounds back in March – but this secretive proposal would have involved a massive taxpayer-funded bailout. Assuming a credible private sector offer were to emerge, lawmakers would have to agree to it. Sources tell us fiscally liberal state senator Larry Grooms has vowed to block the sale of the utility via a filibuster, and several of his colleagues tell us he has the votes to make good on that vow.
“In other words, this would-be transaction is currently lacking an interested buyer and seller,” we noted earlier this month.
(Click to view)
(Via: Santee Cooper)
Another option? A yet-to-be-detailed “management agreement” in which Dominion has offered to operate Santee Cooper within its utility network – assuming the SCANA deal goes through. Such an agreement would allow the state to retain ownership of the asset, but turn over its management to the private sector. This sort of arrangement is similar to the landlord-tenant arrangement that reformers like state senator Tom Davis have long advocated for the Palmetto State’s government-run port system – which is also a model in anti-competitiveness.
Davis, however, is not sold on the idea of a management agreement for Santee Cooper.
Naturally, this news site favors selling this asset outright. In fact we called on state leaders to do so over a decade ago, when such a move would have netted billions for taxpayers. They refused to listen, though, choosing instead to try and leverage Santee Cooper for so-called “economic development” schemes – which have failed miserably.
Next they chose to plunge the state headfirst into the #NukeGate debacle – which is the main reason we believe allowing the state to retain an ownership interest in this particular asset is a colossally bad idea.
While we do not prefer a management agreement in this situation, though, it may wind up being the only option on the table. And while we would rather see Santee Cooper unloaded completely, this news outlet has – like Davis – previously supported similar proposals intended to maximize the value of our state’s woefully underutilized and undeveloped port infrastructure assets.
This week, several groups injected themselves into this debate – putting down markers for the fight to come. The S.C. Club for Growth – a limited government advocacy organization – launched the website SellSanteeCooper.com in an effort to push the sale of the utility as opposed to the appointment of a manager.
“Scandals, high rates, and golden parachutes,” the website noted. “Santee Cooper and Electric Cooperative customers are sick and tired and paying too much for state government’s failure. And now, the legislature is proposing bringing in a ‘manager’ for this broken utility as an alternative to selling!”
According to the Club, “a management company wouldn’t solve the issue of Santee Cooper’s massive debt and get South Carolina OUT of the power business.”
Meanwhile the Palmetto Promise Institute, a think tank founded by former U.S. senator Jim DeMint, is preparing the release of a report intended to tout the virtues of “energy choice” in South Carolina.
These themes were sounded by the aforementioned senator Davis in an opinion editorial published on this news site earlier this week.
“We don’t have just a Santee Cooper problem in South Carolina; we have an electricity monopoly problem,” Davis wrote. “It is up to the public to insist that their elected representatives empower consumers rather than a handful of politically connected utilities.”
(Click to view)
Which brings us to our final point: The immediate future of these utilities is only the beginning of this war.
Once questions related to the future ownership/ management of SCANA and Santee Cooper have been addressed vis-à-vis the resolution of #NukeGate, an even bigger and broader battle is expected to unfold over the nature and composition of the state’s energy marketplace itself.
That is the real battle … and it is one that will be fought from year-to-year, decade-to-decade.
A big part of that battle will involve “deregulation” – the industry term for replacing regulated monopolies with more competitive markets in an attempt to ostensibly lower prices and improve energy efficiency. And part of that fight will obviously include the ongoing battle over solar power and its future within the Palmetto State’s energy mix.
Stay tuned … a major energy battle in South Carolina may be drawing to a close, but the bigger war is only beginning to be waged.
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