Four months ago, as the coronavirus pandemic was just beginning to shut down the South Carolina judicial system, former S.C. chief justice Jean Toal summoned attorneys to a “near-deserted” Richland county courtroom. There, she handed down a controversial settlement ruling in a case involving the Palmetto State’s spectacularly failed government-run utility, Santee Cooper.
What was in this deal?
As we noted at the time, the $520 million agreement is ostensibly intended to benefit ratepayers of the beleaguered government bureaucracy – one of two utilities responsible for the notorious NukeGate debacle of 2017.
Incentivized by state lawmakers, Santee Cooper and its crony capitalist partner SCANA spent $10 billion on the construction of two next-generation nuclear reactors at the V.C. Summer nuclear generating station in Jenkinsville, S.C.
In addition to billions of dollars in government debt racked up during the construction of these reactors, more than $2 billion of the private sector investment risk was socialized by lawmakers via the now-notorious 2007 “Base Load Review Act.”
Despite this massive cash outlay, the project was never finished – and Santee Cooper and SCANA couldn’t afford the estimated $10-16 billion price tag necessary to complete it. On July 31, 2017 Santee Cooper pulled the plug on the reactors. Shortly thereafter, though, it was revealed executives at both utilities knew the project was doomed for years and didn’t tell the public.
That debt is unaddressed by the Toal settlement – which received final approval this week. Of course that didn’t stop the former chief justice from patting herself on the back.
“We managed to take an extremely complex set of circumstances and form a settlement that I have been told many times represents something quite astounding and unique,” Toal said in the courtroom on Monday.
Astoundingly unfair … and uniquely damaging to Santee Cooper ratepayers, in our view.
Seriously … $200 million of this settlement (which is intended to benefit the ratepayers of Santee Cooper) is being paid for by Santee Cooper.
How exactly does that work?
Because that sounds like robbing Peter to pay … well, Peter.
There is some speculation the utility will seek to pass this cost onto the S.C. Insurance Reserve Fund (SCIRF) – a.k.a. Palmetto State taxpayers. In that case, it would amount to a $200 million tax hike – which would be equally unacceptable from our perspective.
And even if Santee Cooper’s 2.2 million current and former residential, commercial and industrial customers were getting every penny of this payout (lawyers are getting at least $78 million off the top) … we are still talking about less than $200 per ratepayer.
Is that a fair return after a decade of inflated bills?
However you shuffle these deck chairs, Santee Cooper remains in an untenable position regarding its debt load. And while this agreement ostensibly freezes rates for four years, as we previously noted there are plenty of ways the utility can evade that requirement.
We pointed out back in January there was no way Santee Cooper was going to be able to keep its word on this “rate freeze,” citing the “growing likelihood of looming rate hikes” in 2020.
Amid the coronavirus downturn – which has hit Santee Cooper’s coastal (tourism) service area especially hard – the utility’s financial situation has grown even more desperate.
According to reporter Avery Wilks of The (Charleston, S.C.) Post and Courier, there is also a political component to consider … as the settlement agreement “greatly diminishes the chance Santee Cooper could be sold by lawmakers.”
We wonder if Wilks has been paying attention to recent headlines which have left Santee Cooper’s plan to “reform” itself in absolute tatters … because if not, he really should bring himself up to speed.
Momentum to offload this utility seems to be waxing … not waning.
As far as we are concerned, this settlement is nothing more than another fleecing … and another excuse for the same politicians who plunged the state into the NukeGate mess to continue their self-serving mismanagement.
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