SC senators adopt Santee Cooper reform plan, but where do they stand on a sale?

Lawmakers would have more say over how much debt Santee Cooper takes on under a reform plan approved by the Senate on Thursday. But that plan does not have a process to consider offers for the state-owned utility with $6.8 billion in debt.

The reform package, which was approved in a 44-1 vote, includes oversight on how Santee Cooper sets its rates, who sits on the utility’s board, the length of their terms and oversight on whether the state-owned utility takes on more debt.

The package will have to go to the House for its consideration.

Reform of the state-owned agency, which directly or indirectly serves 2 million people in the state, has been something lawmakers have sought since the electric utility abandoned a plan to build two nuclear reactors at the V.C. Summer Nuclear Station leaving billions in debt ratepayers will have to pay for even though the project never produced any electricity.

The day before the vote, Gov. Henry McMaster formally nominated former U.S. attorney and state Rep. Peter McCoy to be the chairman of the Santee Cooper board. After the V.C. Summer failure, McCoy chaired a House committed that investigated what went wrong with the project.

The Senate’s reform package has one key difference from the House package passed earlier this year.

House members included a provision to create a 6-person panel to consider offers for all or parts of Santee Cooper as they come in for a period of 10 years. Any offer the committee sees as worthwhile can then be brought forward to the full General Assembly.

Despite having received a letter from NextEra saying it’s willing to discuss an updated offer, an attempt in the Senate to add a provision for a committee to consider offers failed in a 36-8 vote. NextEra submitted an offer to buy the utility last year, which lawmakers rejected.

“I was surprised by that number,” said Senate Majority Leader Shane Massey, R-Edgefield, who supports exploring a sale of the utility. “I think it sent a pretty strong message to me. ... That 36-8 vote though seemed to show that there wasn’t a whole lot of interest in continuing negotiations.”

The agency has $6.8 billion in debt, and a sale potentially could wipe that out.

“I think we have an obligation to talk to all parties, not just the people in Juno (Beach),” said state Sen. Marlon Kimpson, D-Charleston, referring to Florida-based NextEra. “We ought to entertain offers from somebody who has ability to write a check.”

State Sen. Luke Rankin, R-Horry, said nothing in this agreement would preclude a sale from taking place in the future.

A handful of senators including Massey and State Sen. Luke Rankin, R-Horry, worked into the evening Wednesday and Thursday morning to finalize language for the reform package.

The reform plan includes provisions for more oversight of Santee Cooper’s ratemaking, energy generation plans and board.

The reform plan, if it becomes law, would give, for the first time ever, some oversight authority of Santee Cooper to two public entities that act as watchdogs and regulate investor owned or privately owned utilities.

The reform plan adopted by the Senate proposes giving the Office of Regulatory Staff, which represents the public’s interest in utility rate cases, oversight of rates and allowing an appeal of those rates to be made to the state Supreme Court. The Public Service Commission, which regulates utilities’ rates on customers, would have to approve Santee Cooper’s long-term energy generation plans.

Under the bill, Santee Cooper would have to notify customers and have public hearings for people to comment on rates. The ORS will be able to look at the books and cross examine similar to how it looks at rates for investor owned utilities when they bring rate increases to the Public Service Commission for approval. The board does have final approval.

Massey said he doesn’t like allowing the board to have final say over rates, but it keeps the utility from seeing downgrade in its credit rating, which could lead to higher interest rates when it borrows money and “cause problems with Wall Street.”

Senators also gave want more oversight on how much debt the utility takes on. The Joint Bond Review Committee, which includes lawmakers from both chambers and oversees issuance of state debt and approves state construction projects, would be able to approve or reject or modify bond proposals.

This follows last year when Santee Cooper refinanced debt, but added $100 million to what it owed without giving lawmakers a heads up. The agency was taking advantage of low interest rates, but the move upset key lawmakers.

Also under the reform plan, the 12 board positions would shift to 4-year terms, and any board member appointed before 2018 would not be allowed to be reappointed. The 2018 cutoff would affect all but one board member. This would remove every board member who served during the V.C. Summer project. Three members of the board would be replaced each year over the next four years.

“Every appointee will come up during every gubernatorial term, so that they’re going to get more frequent review,” Massey said.

The agency head salary commission also would have to approve employment contracts lasting at least five years and contract extensions. When the utility’s previous CEO, Lonnie Carter stepped down, he received retirement benefits valued at $800,000.

“They would never approve something like that, and probably even something much smaller they wouldn’t approve something along those lines,” Massey said.

Senators also pushed back against correspondence they received overnight encouraging to vote against the reform package.

“I had to invest in South Carolina and invest in the folks who sent me here,” said state Sen. Vernon Stephens, D-Orangeburg. “That investment would be reforming Santee Cooper, because Santee Cooper has done a good thing for the folks here in South Carolina.”

Senators also viewed reforming the state agency as a way to add value to the utility.

“If I vote no today, I’m missing a chance to make an asset better,” said state Sen. Shane Martin, R-Spartanburg.

Even with this proposed reform package, Santee Cooper still has work to do to improve its standing with lawmakers.

“I still think Santee Cooper is a dumpster fire. I’m still very concerned about the culture at Santee Cooper, and I think it could fall apart at any time,” Massey said. “However, we have provided sufficient accountability and oversight to prevent that as best we can.”