Santee Cooper has reached a tentative legal settlement that could secure cash refunds for customers of the state-run utility and hold off a potential sale of the power provider, The Post and Courier has learned.
A proposed $520 million settlement — reached early Thursday morning after two days of marathon negotiations — would reimburse the ratepayers of Santee Cooper and South Carolina’s 20 electric cooperatives for the money they poured into the failed V.C. Summer nuclear project in Fairfield County.
And, in return, Santee Cooper could be freed from the class-action ratepayer lawsuit that threatens to bankrupt the 86-year-old power and water utility.
The potential settlement could boost Santee Cooper’s prospects in the South Carolina Legislature, where the future of the state-run utility hangs in the balance. Santee Cooper finds itself on the state’s auction block because it wasted $4 billion on the nuclear reactors before canceling the project in July 2017.
State lawmakers are currently debating whether to keep Santee Cooper under state ownership, sell it to Florida-based NextEra Energy or hire another company to manage its operations for the state.
NextEra, one of the largest power companies in the country, has already reached its own, $541 million proposed settlement with attorneys representing Santee Cooper customers. Until now, NextEra could boast about its unique ability to resolve the lawsuit that threatens Santee Cooper’s viability.
“We thought that was a very risky piece of litigation,” James Robo, NextEra's CEO, told state lawmakers during a hearing Wednesday. “And we are the only plan that settles that litigation as part of our proposal. So we think that is very important.”
That calculus changed this week, according to multiple sources who confirmed details of the preliminary agreement to The Post and Courier. They said they could not speak publicly because the judge presiding over the case, former S.C. Supreme Court Chief Justice Jean Toal, has instructed attorneys to not discuss the negotiations.
Dominion declined to comment, citing that instruction. So did Gibson Solomons III, the ratepayer attorney designated to handle media questions.
Soon after The Post and Courier's initial report, Santee Cooper confirmed it has reached a tentative agreement to settle the lawsuit. But spokeswoman Mollie Gore would not discuss the terms of the agreement, saying they are confidential.
The proposal would include up to $520 million to refund Santee Cooper’s customers most of what they have already been charged for the V.C. Summer project — minus any legal fees associated with the case, sources said.
It also requires Santee Cooper to lower its rates and freeze them for the next several years, sources said.
But Santee Cooper won’t be the only one paying for the settlement.
Virginia-based Dominion Energy would contribute $320 million of the total $520 million under the proposed settlement, sources said.
Dominion is the new owner of S.C. Electric & Gas, which was Santee Cooper’s partner on the failed V.C. Summer project. Dominion was also a defendant in the ongoing ratepayer lawsuit. Settling the lawsuit eliminates a large legal liability for the company and allows it to move past V.C. Summer.
Dominion’s involvement is made even more complicated by its involvement in the ongoing debate in the South Carolina Legislature. Dominion’s executives submitted their own bid, offering to manage Santee Cooper's operations for the state.
For its part, NextEra believes its bid still provides more value to customers than Santee Cooper's proposal. The company is kicking in another $400 million on top of the money it agreed to pay to settle the class action lawsuit. It's also privatizing Santee Cooper's bond debt.
“NextEra Energy remains very interested in investing in South Carolina, and we are confident our proposal to buy Santee Cooper will result in the greatest value and certainty for Santee Cooper customers and the state," said Debra Larsson, a NextEra spokeswoman.
The $520 million in Santee Cooper's new settlement likely would be distributed in checks to customers, similar to the refund checks SCE&G customers received last year when ratepayers received a $146 million cash settlement with that utility. The same ratepayer attorneys who settled that case are involved in this proposed settlement with Santee Cooper and Dominion.
The legal settlement still could fall apart, sources involved in the negotiations stressed. Though attorneys on all sides have agreed to an outline of terms, those points must be drafted into binding legal documents and formally approved by clients on all sides.
That means the boards of Santee Cooper and Dominion Energy must sign off on the deal. So will the state’s 20 electric cooperatives, who together buy 60 percent of Santee Cooper’s power and are on the hook to pay billions of dollars for the unfinished nuclear project.
Toal publicly encouraged lawyers in the case to reach a settlement before the lawsuit goes to trial in April. She must also approve the proposed agreement. Any party could still opt out, sending all sides back to the drawing board.
Lawmakers have long been hesitant to sell Santee Cooper and have expressed concerns about NextEra's bid to privatize the utility, including its plans to cut some 700 of Santee Cooper's 1,675 employees. Finalizing the proposed settlement would provide another boost to Santee Cooper's efforts to remain state-owned.
The settlement likely won't be Santee Cooper's silver bullet.
Even if Santee Cooper can stave off a sale, top lawmakers will seek changes at the public utility.
Lawmakers have said Santee Cooper needs a culture reset after it did not sound alarms about its failing nuclear project, saddled ratepayers with billions of dollars in debt and lobbied against its own sale.
The utility also caught flak for helping to fund bonuses for SCE&G executives leading the V.C. Summer project and creating costly retirement plans for its own leaders.
Lawmakers could work to restructure Santee Cooper’s board and management or put the utility under the oversight of state utility regulators. Right now, Santee Cooper’s politically appointed board sets its electric rates — not the Public Service Commission that governs other utilities.
“We have inherent constitutional authority to restructure Santee Cooper,” said House budget committee chairman Murrell Smith, a Sumter Republican whose committee is reviewing the Santee Cooper bids. “At a minimum, that’s what I intend to move forward with.”
A spokesman for Republican Gov. Henry McMaster, who has endorsed NextEra's offer to Santee Cooper, declined to weigh in on news of the settlement, saying there are still too many outstanding questions.