Guest Commentary: Navigating utility crisis is key to SC's energy future

 

Two years ago, South Carolina received the worst financial news in its history.

Santee Cooper and its partner SCE&G were abandoning construction of two nuclear reactors in Fairfield County, leaving the utilities $4 billion and $5 billion in debt, respectively.

For most of the following two years the two utilities battled their critics who opposed ratepayers being made to pay any of the nuclear debt. Most believe the nuclear debacle resulted from the utilities’ poor management decisions, public deceit and possible criminal behavior.

The crisis with SCE&G was largely resolved this past December when the state approved the sale of the utility’s parent company, SCANA, to Dominion Energy of Virginia. This purchase relieved ratepayers of about $2.7 billion of the utility’s nuclear debt.

A few months ago, the Legislature made a good business decision to solicit private-sector bids for the purchase or management of Santee Cooper. This process would enable the Legislature to see how future rate hikes to pay the nuclear debt could be reduced or even eliminated under new ownership or management.

The Legislature also gave Santee Cooper executives the opportunity to say how they would reform the state agency to improve its operations to avoid being sold or managed.

This last option is the least likely scenario to eliminate all the nuclear debt from Santee Cooper ratepayers. The direct customers have already had their rates increased by 5% to start paying the nuclear debt and an additional 7% rate hike is scheduled to be phased in starting in 2021. The state’s 20 electric cooperatives that purchase most of their power from the utility will also be paying more due to the nuclear debt if a solution can’t be found. However, while the Legislature has given Santee Cooper the opportunity to remake itself and be given another chance, the utility’s recent actions only reinforce the need for third-party intervention.

In June, Santee Cooper was informed by the state Senate that the law required it to fund the cost of the professional help in soliciting and reviewing proposals to purchase or manage the utility. Santee Cooper initially defied the legislative instruction, enabling it to delay the time-sensitive process by three weeks before relenting. Then in July, the utility’s Board of Directors voted to hire not one but two new executives for the next 18 months at a cost of at least $2.5 million. These retired Arizona utility executives are charged by the board with turning around the ineffectively managed Santee Cooper and restoring relationships with the Legislature and the state’s electric cooperatives.

But right out of the box the new CEO criticized the legislative decision to explore selling Santee Cooper, calling it a “sub-optimal and uninformed solution.” The public utility that Gov. Henry McMaster once called a “rogue agency” apparently is not changing its stripes.

Unfortunately, the utility has another opportunity to subvert the process of resolving this issue. Given Santee Cooper’s willingness to ignore legislative intent, the utility might be planning to defy the law’s clear instruction for the utility to provide access to the information that other utilities need to provide proposals for purchasing or managing the utility.

However, if all goes well and the Legislature can decide by next May how to resolve the Santee Cooper crisis, then we can start focusing on other important questions about the state’s energy future.

Should all coal plants be closed as fast as possible, or are they essential for diversity in energy production?

Are more natural gas plants needed if coal goes away? If so, do we need more gas pipelines in the state?

Should our utilities rely on more solar energy, and should they purchase it from others or build it themselves?

Should the state actively pursue battery storage manufacturers as part of our economic development?

Should the state require our utilities to purchase electricity on the open market if it is less expensive than what they produce?

Should the state move to total utility deregulation, allowing consumers to purchase energy from competing companies?

Does the state need to improve its electrical grid to enable more out-of-state electricity to be available to our utilities and consumers?

If the state can successfully resolve the Santee Cooper crisis in the next six to 10 months, we will have the opportunity to answer these important questions.

And if we answer them correctly, South Carolina can have a bright energy future.

 

(Frank Knapp Jr. is president and CEO of the South Carolina Small Business Chamber of Commerce.)

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