COLUMBIA — NextEra Energy has submitted a multibillion-dollar offer for Santee Cooper that would pay off the state-owned utility’s massive debts and refund its electric customers the money they already paid for the failed V.C. Summer nuclear project.
The Florida-based power giant’s plan would cut more than 40 percent of Santee Cooper’s workforce — some 700 employees. But, critically, it provides up to $615 million in cash payments to the state government and would resolve a class-action ratepayer lawsuit that threatens to bankrupt the state-run electric and water utility.
But in order to seal the deal, NextEra must overcome a competing offer by Santee Cooper itself.
Santee Cooper's new executive team submitted a bid that features lower electric rates than NextEra offered over the next 20 years. Santee Cooper’s proposal, however, doesn’t resolve the consequential ratepayer lawsuit that is headed for trial in April and could prevent the utility from charging its customers for the nuclear project.
Virginia-based Dominion Energy also entered an offer to take over Santee Cooper’s management but leave the utility under state ownership. That proposal is unlikely to gain traction because state officials couldn’t even estimate how it would impact customers' power bills. Some lawmakers are already wary of Dominion after the company's takeover of S.C. Electric & Gas — Santee Cooper's partner on the failed V.C. Summer venture — last year.
The newly released bids will reignite a three-year political debate over the fate of Santee Cooper. The utility’s future has been in doubt since Santee Cooper officials decided in July 2017 to abandon the $9 billion V.C. Summer nuclear project in Fairfield County after years of budget overruns and construction delays.
The House and Senate’s budget committees each must pick their preferred bid within the next month. The decision will then rest with all 170 state lawmakers in the General Assembly. The debate could last into the summer or beyond.
Lawmakers will hold a series of hearings to weigh the costs and benefits of each offer.
Though NextEra's proposal offers slightly higher rates in the long term, it provides money to settle a major lawsuit brought by ratepayers who have been charged $670 million for the failed V.C. Summer project. The Santee Cooper offer features lower rates over the next 20 years but no certainty as the utility heads to court in April.
Republican Gov. Henry McMaster, who has called for Santee Cooper’s sale since shortly after the nuclear project collapsed, made his choice clear shortly after the offers were unveiled Tuesday.
“Ratepayers will either continue paying for reactors never built or they’ll get back what they’ve already paid," McMaster said, endorsing the NextEra deal."The politics of indecision are unacceptable. The General Assembly must act now, must act quickly on this issue.”
S.C. House Speaker Jay Lucas, R-Hartsville, said he hasn’t made a decision, but he quickly set up a series of House committee hearings to analyze the bids over the next month.
Senate Finance Committee Chairman Hugh Leatherman, R-Florence, said he also hadn’t made up his mind.
Santee Cooper's strongest defender in the Legislature, GOP Sen. Larry Grooms of Bonneau, said, "I think we spent $20 million ... to say what I was saying last year — if we sell Santee Cooper, rates will be higher."
Cost and benefits
The V.C. Summer project’s sudden collapse landed Santee Cooper in trouble with state lawmakers and saddled the utility with more than $4 billion in bond debt. It owned 45 percent of the unfinished reactors, which it partnered on with Cayce-based SCE&G.
Santee Cooper has already charged its direct customers and the members of South Carolina's 20 electric cooperatives roughly $670 million for the abandoned nuclear project. Santee Cooper's nuclear-related debt now stands at $3.6 billion.
Lawmakers have said they want to shield ratepayers from paying billions of dollars for power plants that will never produce electricity. One option that emerged was to sell Santee Cooper to a bidder who agrees to pay off the V.C. Summer construction debt.
State leaders spent the past two years trying to figure out the best way to explore potential interest in Santee Cooper. But Tuesday offered their first look at the legally-binding offers for the utility.
The highly-anticipated bids were whittled down from a larger field of bids and then presented to the Legislature following a two-month review by a team of consultants hired to advise the S.C. General Assembly. State officials reached out to 55 companies and received interest or bids from 10 businesses.
Some state lawmakers have questioned if the state should sell the Moncks Corner-based utility, citing concerns about a new owner raising rates and laying off employees.
NextEra's offer lends those lawmakers ammunition.
The company would cut 705 of Santee Cooper’s 1,675 jobs by 2025. Santee Cooper’s bid, by contract, would keep at least 1,500 employees on staff through 2028.
NextEra’s also cannot beat Santee Cooper's newly proposed electric rates in the coming years. Santee Cooper customers would pay roughly $161 million more under NextEra’s ownership, according to state officials.
That’s, in part, because Santee Cooper enjoys tax-free status and a low cost of debt. It pays a roughly 4 percent interest rate on most of its bonds.
NextEra’s bid shows just how costly it is to privatize a public utility, like Santee Cooper.
NextEra would need to cover $5.3 billion in additional costs in order to privatize the 86-year-old public utility. That includes $1 billion to pay off Santee Cooper’s bond debt early, $1.7 billion in additional taxes, $1.9 billion for higher borrowing costs and $325 million to cover Santee Cooper’s pension obligations.
That made it more difficult for NextEra to offer a better deal to state lawmakers and Santee Cooper’s ratepayers. It did try, however.
According to state officials, NextEra revised its plan late in the process, sweetening the deal with nearly $1 billion in extra benefits.
It will be up to lawmakers to decide if that is enough.
Reforming Santee Cooper
Even if Santee Cooper wins its battle for survival, there will still be changes coming to the state-run utility.
Santee Cooper's proposal features an effort to limit the impact of its nuclear debt on customers' power bills. Santee Cooper’s executive team found an additional $2.3 billion in savings than it didn’t have in its forecasts last year.
Santee Cooper's bid also includes proposals to shift how it is governed and regulated in South Carolina.
Those reforms could require term limits for Santee Cooper's 12 board members, which are appointed by the governor and confirmed by the Senate.
It could mandate more transparency, including public hearings on pricing and future power projects.
And it might enable the utility regulators on the S.C. Public Service Commission to scrutinize Santee Cooper's energy plans, like they do for investor-owned utilities in South Carolina.
All of those tweaks would require new laws to be passed by the Legislature, but Santee Cooper offered the changes in order to show lawmakers they are willing to adjust.
The Department of Administration, the state agency that handled the bids, openly criticized Santee Cooper for offering the reforms only after lawmakers opened the search for potential buyers.
“It is unfortunate that, despite its well-publicized missteps, Santee Cooper waited to develop and present a path to recovery and improvement until confronted with the prospect of a sale," the report said.
A Santee Cooper spokeswoman said the utility is reviewing the 111-page report and looks forward to the next steps in the process.
Seanna Adcox and Thad Moore contributed to this story.