Santee Cooper is different from almost every other utility in three big ways:
- It is state-owned
- Its Board of Directors has absolute autonomy over the rates it charges customers and the money the organization spends
- Mismanagement has caused $6 billion in debt to pile up, over half of which is directly related to the failed nuclear plant
These facts define the Santee Cooper dilemma in which South Carolina finds itself.
To fix number 3 – mismanagement and debt – some in the legislature want “reforms” that include some oversight of Santee Cooper’s autonomous board (#2) to put at arm’s length the state’s ownership of a power utility (#1). (After all, isn’t a state supposed to own an electric company?)
“Reform” doesn’t pass the sniff test
The problem is that Santee Cooper’s board still has autonomy. Reforms tinker at the margins – rearrange deck chairs on a sinking ship – because they can’t remove Santee Cooper’s rate making authority.
The Board’s ratemaking authority and autonomy got Santee Cooper into its current mess. Remove that autonomy the whole thing collapses.
The Board can raise rates when it wants with no independent regulatory oversight. That allows Santee Cooper to maintain its bond rating. Ratings depend on the company’s unfettered ability to get cash from customers. The Santee Cooper board only has to vote to get more customer money.
Investors can look the other way if Santee Cooper’s mismanagement creates debt, inefficiency, inability to invest in infrastructure, if the Board can order-up more cash any time it wants. No matter the promises.
If the State is serious about reform, they will remove the Board’s ratemaking ability and put Santee Cooper under the same rate regulatory structure as investor-owned utilities.
Wait! The State won’t do that. Can’t. If Santee Cooper can’t raise rates when it wants, it loses an important bond rating need and maybe ability to borrow. The inability to borrow increases debt and further hamstrings the state-owned utility’s ability to operate, modernize, and keep rates affordable. If the state-owned utility can’t get money from investors, where to turn in a financing crunch?
Santee Cooper customers, it is looking at you.
A professional solution
The real solution removes problems of a freewheeling Board and the debt: Get rid of the first defining factor of Santee Cooper – State ownership.
Selling Santee Cooper gets South Carolina and Santee Cooper’s customers out of the hole they are in. A well-resourced, well-managed buyer, subject to the ratemaking authority of the PSC, can fix the mess.
Look at it like this. If South Carolina did not own a power utility, would it be itching to buy one right now? Doubt it. There would be catcalls in the General Assembly about wasting time and money on something better provided by someone else.
A matter of choices
Owning Santee Cooper is a State choice, not a necessity. One thing that is a necessity is a functioning, well-managed and forward-thinking utility, especially during tough economic times, a global pandemic and an industry undergoing rapid technical transformation.
South Carolina could have that. It happens when the legislature let’s go of owning a utility; let’s go of a fantasy that applying a band aid of toothless “reforms” will solve the problems.
There are better ways to govern Santee Cooper, lead Santee Cooper, and serve customers: Sell Santee Cooper to a responsible company with a solid track record.