One of the first lessons taught to students of business is to buy low and sell high. But that lesson seems to go out the window whenever state legislators start talking about Santee Cooper, the state-owned utility with a $4 billion debt thanks to a failed investment with SCE&G to build nuclear reactors in Fairfield County.
State lawmakers, some grumbling Santee Cooper is an economic dinosaur with a bleak future, appear to be rushing pell-mell toward selling the utility at a bargain-basement price as private companies dump money into advertising, lobbying and who knows what else to acquire its assets.
For generations, Santee Cooper has been a pet protected by legislators, who got great perks like hunting trips, from the utility. Now it is facing political wrath after the nuclear debacle from legislators who may not have benefited as much as past colleagues.
It’s a Statehouse drama that blends the worst of politics, the utility’s institutional arrogance, bad corporate decision-making, the search for a scapegoat, misinformation and too many myths to digest in one sitting. Example: Many people think all S.C. taxpayers will have to foot Santee Cooper’s debt if it remains as it is. Not true, according to state law, which specifically limits debts to ratepayers to pay off bonds.
James Y. Kerr, chief legal officer of the Southern Company, told members of the S.C. Senate Judiciary Committee on April 2 that issues related to Santee Cooper were extremely complex and difficult to settle in a political environment. Southern, a regional power company, is a private utility that has expressed an interest in managing, not buying, Santee Cooper.
Selling the utility would cause rates to go up, Kerr testified, referring to a 40-page February report by ICF on outside interest and offers for Santee Cooper.
“It makes clear on its face that if you were to privatize Santee Cooper or sell it to a company like ours, an investor-owned utility, rates will go up, by roughly $280 million or 15 percent higher than the business-as-usual case,” Kerr said. He added that keeping Santee Cooper as an asset and having it managed and run better was an option that had benefits, such as allowing the state to keep a valuable asset.
“What the ICF report makes clear is really the net benefit to the customers of Santee Cooper in terms of keeping rates lower really are to be found in running it different -- running it more operationally efficient, and that is both just the business itself, the non-fuel operations and maintenance costs of the business, but also with some interconnected utility such as Southern, possibly SCANA, possibly Duke. There’s an opportunity to, by contract, not sell the company, but frankly dispatch Santee’s system as part of a much bigger system.”
The state’s electric cooperatives, which buy a majority of the power generated by Santee Cooper, have filed a lawsuit to protect its ratepayers, as outlined in a February article for members: “The status quo at Santee Cooper is unacceptable, and co-op members deserve the best price that can be obtained for power, whether that’s through a transformed Santee Cooper or another party purchasing part or all of it.”
Santee Cooper says its rates are now competitive nationally, regionally and statewide, offering the lowest rates in the state. It says rates won’t go up much in the future -- and will go up less than privately-owned utilities already here. And it says it can manage its nuclear debt.
The General Assembly needs to go into a timeout and slow down on Santee Cooper. Is selling Santee Cooper the best business decision for the state at this point? Is selling the utility a smart use of state assets over time when they may become more valuable?
“I want more facts so the best decision can be made,” one state senator told us. “It is too early to vote without full facts.”
At some point, it may be in South Carolina’s best interest to divest itself of Santee Cooper. But for now, there are too many questions to rush into a sale. Lawmakers need to take their time and debate without the shrill emotion that’s on display anytime the subject comes up.