South Carolina legislators have been debating the sale of Santee Cooper, the state’s public power utility, for more than a year. This is understandable. It is a complicated problem.
But ultimately, lawmakers must protect the state’s citizens and the utility’s customers. Before authorizing any sale of Santee Cooper, they must examine closely the pros and cons, as well as the promises and motivations of the private entities that want to buy it.
It is, of course, the right of the owners of every public power utility to sell. But as the CEO and the board chair of the national trade association representing public power utilities, we urge the Legislature to recall why Santee Cooper was formed in the first place, and what could be lost by selling it.
In the late 19th and early 20th centuries, investor-owned utilities lit up big cities but often left smaller towns and rural areas in the dark because the return on investment was not there. So small- and medium-size communities created their own not-for-profit electric utilities, owned by local governments. Today, more than 2,000 public power utilities provide affordable and reliable electric service to 49 million Americans in 49 states.
In South Carolina, they thought even bigger. In 1934, the state formed Santee Cooper (the South Carolina Public Service Authority) to serve such communities throughout the state. Santee Cooper brought light, jobs and economic development opportunities that have helped power the state’s vibrant commerce and industry. It now serves over 2 million South Carolina customers at wholesale or retail. Its rates are well below national averages. It is locally owned and locally controlled.
Any private, for-profit entity taking over Santee Cooper would have to take on Santee Cooper’s debt. Those obligations will not just disappear. The buyer will have to pay them off somehow, and Santee Cooper’s customers will likely have to fund that eventually. Executives from two well-known private utilities, Southern Company and Dominion, recently told the Legislature so. And given that private utilities also must generate profits for their shareholders (unlike Santee Cooper), it is hard to see how overall rates for Santee Cooper’s customers would go down in the long run. Decision-making, however, could move out of state.
Nor should the Legislature assume that a for-profit entity can operate Santee Cooper’s assets and provide services more cheaply and efficiently than Santee Cooper can just because that buyer is for-profit. History teaches that good (and bad) decisions can be made by both private, for-profit utilities and public power utilities.
Some of the purchase proposals the Legislature is considering call for imports of power from outside the state or increased use of natural gas-fired generation to reduce costs. But are there sufficient transmission lines and gas pipelines coming into the state to support these plans? If not, how much would they cost to build, and how difficult would it be to get the needed environmental and other approvals to construct them? Who would pay for this new infrastructure? How would this impact reliability of service, rates, and fuel security issues for current Santee Cooper customers?
The temptation is strong to wrap up a quick sale so the Legislature can move on. That is human nature. But taking the easy path now could create new problems later. Before authorizing a sale, the Legislature should dispassionately consider all the pros and cons and the possible consequences. Santee Cooper has been part of the fabric of the state for 85 years. Think hard before throwing that away.
Sue Kelly is the president and CEO of the American Public Power Association. Coleman Smoak is chairman of the APPA board and general manager of the Piedmont Municipal Power Agency.