Mike Couick
You may have read about SCE&G customers wanting refunds of the money they paid toward construction of two abandoned nuclear generating units.
Electric cooperative members want their money back, too, but that’s harder to accomplish. The cooperatives, together, are a super customer of Santee Cooper. Co-ops purchase about 60 percent of the energy—the kilowatt-hours—that Santee Cooper produces. But, unlike you at your home, the co-ops don’t pay a simple rate per kilowatt-hour of energy. In fact, our contract requires that we pay about 70 percent of Santee Cooper’s costs of building those nuclear units.
Roughly $8.9 billion has been spent on the two unfinished nuclear units. Santee Cooper owns 45 percent of the project. Since co-ops pay 70 percent of Santee Cooper’s construction costs, co-ops are obligated to pay about $2.7 billion for assets that will be unproductive.
SCE&G customers may seek refunds from the company’s stockholders, but Santee Cooper doesn’t have stockholders. While it’s an asset of the State of South Carolina, it receives money from only two groups of people: its ratepayers and its bondholders. Ratepayers are the people who buy electricity from Santee Cooper, either directly or indirectly. That group includes cooperatives. It’s important to shift the burden of these unproductive plants away from ratepayers as much as possible.
Bondholders are people who bought bonds that provide financial capital for Santee Cooper to use. Bondholders—many of whom are South Carolina citizens—could be a source to lighten the load on ratepayers. To get bondholders to take less than what they’re contractually owed could hurt the state’s credit reputation. It is a risky proposition, and it is hard to quantify how much benefit is on the other side of that risk.
We hope there’s a better way.
If electric cooperatives get the S.C. General Assembly to help, we may be able to get you value for your $2.7 billion investment in the failed project without the risk of defaulting on bonds.
The first part of this plan involves a payment made to Santee Cooper by the parent company of the bankrupt contractor for the nuclear units. Because co-ops have been responsible for 70 percent of Santee Cooper’s construction costs, co-op members are due their share of the payment. The legislature can help by establishing rules governing how co-op members benefit from this payment.
The second part of this plan involves a significant transformation of state-owned Santee Cooper. This transformation could take several forms. How to transform it is not an easy decision to make.
Some politicians have floated the idea of selling Santee Cooper. That’s a decision only the legislature can make. And, for now, electric cooperatives, collectively, do not have a position on whether “to sell or not to sell” Santee Cooper. In fact, there are several choices available to legislators. They could sell the utility outright, sell some of the assets, or keep Santee Cooper and reorganize it.
The best—and maybe the only—way to know how best to transform Santee Cooper is to test the market. To get a helpful test, the legislature will need to set up a formal process. They’re going to have to decide what might be sold. Then, they’ll have to take serious proposals, examine the terms and see what’s best for consumers. That’s where we are now. Without transformation of Santee Cooper, either through a sale or reorganization, its cost of power could get out of sync with other power providers, making it harder for co-op members to make ends meet and for cooperatives to facilitate economic development.
We’re asking legislators to pull together a formal process to force shoppers to get serious and put their best offers on the table. Let’s see what’s best for consumers—today and in the future—related to rates.
Until there is good information on which to make a decision, co-ops won’t have a position on selling or not selling Santee Cooper. But, co-ops do have this position: Our job is to get our members the very best deal we can get going forward. We owe you nothing less.