The government of South Carolina can lift the $9 billion debt anvil off Santee Cooper customers and the citizens. And now it may be taking action. On March 20 Senator Harvey Peeler filed a bill to allow the Governor to sell Santee Cooper. As this blog posts the bill is being considered in the Finance Committee.
That is a start. A good start. Now – follow through! The Senate can be decisive and swift on this decision, or … not.
Recall, at the beginning of February, the report – Evaluation of Responses to the Request for Expressions of Interest and Indicative Offers for Santee Cooper – described buyers interested in Santee Cooper, ridding customers of the huge debt anvil over their heads. That report was delivered to the SC General Assembly and Governor.
Here’s a review of the report about a sale of Santee Cooper. The reasoning is clear.
“Three of the four proposals provided for full defeasance of the existing Santee Cooper debt,” said the report. “All four represent promising approaches from organizations with the credibility to function as owners of a utility of Santee Cooper’s size and complexity.”
Action must be taken by the SC Senate to move this ahead. That action can happen now or millions of dollars of increased debt from now as debt grows.
Perhaps you may not have read the report from the consultant. Below are key takeaways from ICF’s review about organizations that expressed an interest in Santee Cooper:
- Strong Market Interest – A total of 10 distinct parties submitted 15 proposals. Most parties were shown to be technical and financially capable of managing large utility assets and most possess southeastern US power market experience.
- Diversity of Options – ICF received a wide range of proposal types (full acquisition, partial acquisition, and alternative management) and approaches to enhancing utility outcomes within each type of proposal, offering many creative ways to achieve key objectives including cost savings and customer rate relief.
- Beneficial Rates at Reasonable Prices – Three critical economic objectives were met among the four full acquisition proposers (passing threshold criteria): (i) all offered purchase prices that fully pay off or provide for defeasance of Santee Cooper’s debt, (ii) all project decreases in customer rates relative to ICF’s BAU rates, and (iii) three of the four make no request to recover the costs of the abandoned Summer 2 and 3 nuclear power plants.
- Significant, but Not Complete Progress towards Potential Implementation of a Sale – The overall effort to address concerns of Central was advanced by the EOI process, as several potential barriers (e.g., availability of customer rate reductions and the write-off of Summer 2 and 3 costs) were reduced. However, no full purchase proposals met both the full defeasance of debt threshold and fully resolved the potential challenges with the termination and “opt-out” provisions in the Central Agreement.
- Tradeoffs between Local Impacts and Customer Benefits will Exist – All full acquisition proposers approached local economic development seriously, but they often differed in their utility headquarters, overall staffing level, and other economic development plans. When reviewing these plans, it is important to weigh possible tradeoffs between customer electricity rates and impacts to various stakeholders in the State.
- Significant Generation Cost Savings Potential – There was a consistent view among most Participants, based on their review of data room materials in relation to their industry experience and operational metrics, that sizable cost savings can be achieved within Santee Cooper’s generation portfolio and, further, that the largest source of those possible savings are the substitution of natural gas generation for coal generation.
- Further Review and Due Diligence – EOI responses pointed to areas where the great variation in Participant approaches and the complexity of underlying issues warrant special attention during further review and due diligence of offers: of the timing, location, and extent of generation retirements and new investments; transmission service availability and upgrades; distribution system hardening; management priorities in day-to-day utility operations; the location of staff; in-state taxes and other payments; and relationships to regulatory bodies.
These are succinct takeaways considering the billions in debt. A heavy lift of analysis has been done for the State. The consultant said there is a way to relieve citizens of the debt problem. The report points the way.
Check, check, and check. Very good.
Will the next step be taken on this bill? Advice: Be decisive and swift to sell.