What’s going on with Santee Cooper?

UPDATE as of 5/7/21: This week, the House voted to keep the option to explore selling Santee Cooper in H.3194, while adopting some of the Senate’s “reform” measures, including those that would increase lawmakers’ power over the utility. The Senate version of the bill does not contain the option of selling Santee Cooper. Because of the disagreements between the House and Senate versions, the bill now heads to conference committee, where a group of six lawmakers will work to reach a compromise on the legislation. That final version is expected to be presented to lawmakers sometime in June.

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With just two weeks left in the regular legislative session, one thing is becoming clear on the issue of energy in South Carolina: the Legislature is not serious about selling Santee Cooper. This, of course, is important as the utility cannot be sold without lawmakers’ approval.

Here’s a quick review of the current situation.

In January, the House passed a bill (H.3194) that would give a legislative committee the authority to negotiate and consider bids to purchase Santee Cooper. The committee would have total control over this process, and would get to decide which offer to bring back to the House and Senate for a vote. If both chambers agreed to the deal, it would be sent to the governor for final approval.

The bill, however, would also make numerous adjustments to Santee Cooper in the meantime, some of which clearly designed to increase lawmakers’ power over the utility. These include requiring the entire General Assembly to confirm board members instead of the Senate, and letting lawmakers pick two non-voting members to sit on the board – who would be entitled to attend board meetings and executive sessions. Other “reforms” include requiring board members to have a bachelor’s degree and giving more public notice before rate hikes.

After months of sitting on the bill, the Senate removed the section to explore selling Santee Cooper, passing it (and almost another bill, S.464) as strictly a reform bill.

H.3194 now heads to the House, and will likely end up in conference committee if lawmakers cannot come to an agreement by May 13 (the last regular day of session).
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.Will these changes make a difference?

The Senate versions of each bill would have legislative committees provide “fiscal accountability” over Santee Cooper, and would require the Joint Bond Review Committee (comprised of lawmakers) to approve new bonds issued by the utility.

It’s worth noting, however, that lawmakers already control much of South Carolina’s energy system. The Legislature elects members to the Public Service Commission (PSC), which sets electric rates for private utilities. The committee in charge of evaluating PSC commissioners is also controlled by lawmakers (which gave commissioners glowing reviews as they were approving rate hikes for the failed V.C. Summer nuclear project).

Given their track record on energy in South Carolina, it’s difficult to believe that granting lawmakers more control over Santee Cooper will have a positive impact on ratepayers.

Lawmakers’ proposals also fail to address another major issue: Santee Cooper is subject to a strict legal covenant that guarantees the state will not restrict its ability to set sufficient electric rates. It further promises that Santee Cooper must charge what it needs in order to a) pay its expenses, b) operate its facilities, and c) pay its debt.

In other words, these changes are limited to controlling future debts, and are powerless to reduce the billions already owed by Santee Cooper. The only meaningful way to address this issue, of course, is to sell Santee Cooper to an owner with the financial resources to minimize the debt impact on ratepayers.

By removing the option to sell Santee Cooper, Senators aren’t just rejecting offers in the short-term, they are ensuring that future offers will never be considered. Both bills, as they stand, would shut down the entire possibility of a sale.
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Why Santee Cooper is useful to lawmakers

It’s no secret that Santee Cooper serves as an economic development tool for lawmakers. Its mission, according to state law, includes supporting job attraction and retention, and has in recent years offered millions in grants and loans, purchased land used by companies, and is a current member of the Coordinating Council for Economic Development.

These bills would increase lawmakers’ power over Santee Cooper, not just as an energy provider, but as an instrument to shape South Carolina’s business landscape. This is further illustrated by the House version of H.3194, which would make the head the S.C. Department of Commerce a quasi-member of the Santee Cooper board.

These factors raise questions about whether economic development comes at the cost of smaller customers, as money and resources are poured into attracting jobs instead paying down debt or keeping electric rates lower.

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Ultimately speaking, state government should not be in the business of producing power, and privatizing Santee Cooper is a necessary step towards deregulating the energy system. Yet lawmakers seem intent on bringing the utility further under state control, and many of the reforms proposed would do nothing but bolster the legislative monopoly over South Carolina’s power.

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