The state-owned utility wasted another $250 million on an ill-advised and since-abandoned effort to build a coal-fired power plant and entered into a decades-long gypsum contract that has saddled it with millions of dollars in annual costs to supply the mineral to a private company.
Along the way, Santee Cooper has attracted a host of lawsuits from customers and lenders and all but ruined its relationship with its largest customer.
Those pricey missteps over the past 15 years have several top legislators looking to sell the power provider.
With its fate hanging in the balance, Santee Cooper executives came to the Statehouse last week to atone for those mistakes and offer a plan for a new future.
The utility’s bid to stave off a sale hinges on a crucial task: convincing state leaders to trust it again.
“Effectively, we had a leadership failure,” Santee Cooper board chairman Dan Ray said at a S.C. Senate hearing on Tuesday of the V.C. Summer nuclear project debacle. “That leadership failure was at the CEO and the board level. … We’ve learned a lot of lessons from that and we’ve been humbled by it.”
Not everyone is sold, even after a change in the utility's leadership.
Gov. Henry McMaster remains skeptical the utility is capable of pulling off its proposed reform plan, including lowering rates.
"I don't see how an entity that has failed to perform in the past and has accumulated about $7 billion in debt aside from the settlement, how do they dig themselves out of that hole?" McMaster said last week. "I don't see any way that they can do it."
Santee Cooper's recent mistakes are central to the monthslong debate at the S.C. Statehouse over whether to sell Santee Cooper to Florida-based NextEra Energy or keep it state owned, allowing the troubled utility’s new management to turn the operation around.
The 86-year-old utility has submitted a plan to lawmakers to save ratepayers some $2.3 billion over the next 20 years, in part by replacing coal-fired generation with gas and renewable energy and reducing employment by about 10 percent through retirements and attrition.
Santee Cooper also has reached a tentative agreement to settle a class-action ratepayer lawsuit that threatened to bankrupt the utility.
But lawmakers want more. In a series of hearings last week, top legislators made clear they won’t allow Santee Cooper to remain state owned without a significant restructuring of the utility’s leadership and what they called new “guardrails” to prevent a similar management breakdown.
They tossed around a series of ideas submitted by Santee Cooper, including requiring new oversight of the utility and a more qualified, independent board of directors.
“V.C. Summer gave us a reason to look under the hood, but when we looked under the hood, the problems were more extensive than just V.C. Summer,” said Senate Majority Leader Shane Massey, R-Edgefield. “ An effective reform plan is going to have to address” those other problems.
Lawmakers stressed they want to pass those proposed reforms into state law if they choose to keep Santee Cooper. They openly worried the utility might revert to business as usual without binding changes.
“There’s no longer any trust that they will implement those changes themselves,” said House budget committee chairman Murrell Smith, R-Sumter.
'I can do it'
Santee Cooper leaders were candid last week about the mistakes that have led them to this crucible.
Under questioning from senators, Ray explained that for years Santee Cooper’s board didn’t effectively oversee the utility’s management and seldom questioned the judgment or recommendations of then-CEO Lonnie Carter.
“Mr. Carter ran the show, start to finish,” Ray said.
That’s unacceptable, Massey said, before asking Ray to suggest how lawmakers can fix a utility that serves 2 million South Carolinains.
“We’re not talking about some county level recreation board,” Massey said. “We’re talking about Santee Cooper.”
Ray said Santee Cooper’s board members have learned their lesson. But the utility itself made several suggestions aimed at transforming the board from a group of politically appointed "yes" men to an effective regulatory body.
That includes limiting board members to two seven-year terms and requiring future board members to meet the same expertise qualifications as members of the Public Service Commission that approves rates for South Carolina’s investor-owned utilities.
Santee Cooper also proposed empowering the board to hire its own expert consultants to vet the power projects and rate hikes suggested by the utility’s executives.
And Santee Cooper suggested creating a more open process for approving rates and power plant projects, including public hearings that give ratepayers, environmental groups and the state’s utility watchdog — the Office of Regulatory Staff — a chance to provide input or even challenge proposals.
Santee Cooper also would be more open to more regular oversight and monitoring by state watchdogs or another state agency, new CEO Mark Bonsall told lawmakers.
Bonsall and Ray emphasized that only a few of Santee Cooper’s remaining 1,650 employees had anything to do with the abandoned work to add two reactors at V.C. Summer. They said the utility is full of employees who want to right the ship.
A survey of Santee Cooper employees a year before the nuclear plant failed found just half had a favorable view of senior management's leadership.
“We have uniquely a complete and full alignment between the board, management and employees behind this reform plan,” Bonsall said. “I encourage you to let me get this done. I can do it.”
Santee Cooper stopped short of agreeing to having its rates overseen by the state's utility regulator, the PSC. That could violate bond covenants that require Santee Cooper to have autonomy to set its own rates.
State Sen. Hugh Leatherman, a Florence Republican who leads the Senate Finance Committee that is reviewing the offers for Santee Cooper, asked the utility to come back to Columbia next week with more detailed governance plans.
“I’m just an old country boy trying to get by,” Leatherman said. “Back on the farm, we say we don’t buy pigs in pokes.”
The state’s 20 electric cooperatives, who collectively purchase 60 percent of Santee Cooper’s power, have sued the Moncks Corner-based utility over the V.C. Summer project’s failure and pushed state lawmakers to consider selling it.
The co-ops want wholesale changes at Santee Cooper. They pushed for legislation that enables more oversight of the agency and provides more flexibility for its customers.
“We’re dealing with more than two nuclear units that failed,” said Mike Couick, CEO of the Electric Cooperatives of South Carolina. “We’re dealing with the future.”
Adam Benson contributed to this report.