Santee Cooper CEO Mark Bonsall sent a letter to the General Assembly in late January announcing Santee Cooper will be in debt until 2055. Although likely not his intent the letter clearly highlights the choice confronting legislators:
Pay off the debt now with a sale.
Pass on the debt to the next two generations of South Carolinians to pay.
While CEO Bonsall seems easy-going about passing the buck to the next generation, he is also optimistic that however slowly, the debt is being paid down (even though the same day as the letter went to legislators, he was quietly informing the Board of Directors that Santee Cooper may need to borrow another $100 million before year end. Ahem. Check the image from the presentation).
If you give the company the benefit of the doubt about a plan to pay down the debt by mid-century, you also have to assume that everything goes right for Santee Cooper to 2055; that the utility’s plans and forecasts won’t run into problems. Consider that. 34 years. There have been no economic disruptions since 1987, right?
This is the same Santee Cooper that repeatedly reported things were just fine with the V.C. Summer nuclear plant. The plant was never finished, but landed Santee Cooper with $4 billion in debt that its direct served and co-op customers will have to pay.
Let’s be clear: If everything goes the way Santee Cooper thinks it will go, and nothing goes wrong, it means someone born today will have their own children in high school by the time the debt is paid. That is Santee Cooper’s best-case scenario.
The problem with Santee Cooper is that its mismanaging culture is so deep that nothing ever goes according to plan. Even the best run utilities face unforeseen circumstances, and the best can manage to rise above it. Poorly managed ones end up billions in debt spanning generations.
Legislators have a second choice, an investor-owned utility selected as “utility of the year” by a respected industry publication, a utility leading the way in energy transformation across the country and that sees a future helping make South Carolina brighter. It can pay off the debt now, all of it, and not 34 years from now. That means that the high school student of 2055 has a better chance of living in a South Carolina that generates energy from cleaner sources and distributes it through a modernized grid capable of supporting booming industry and economy.
The letter also reflected on the differences in public power and investor-owned utility financing. Public power and investor-owned utility finances are different. The University of California’s Energy Institute at Haas discussed it. “Paying profits to shareholders is also held up as a problem because IOUs must earn higher revenues to make those payments. Well maybe, but non-profit utilities also face a cost of raising capital. They just do it all through selling bonds, and paying interest on them, rather than also selling equity and paying returns to shareholders.”
Relative, as they say. Meeting the rigorous financial examination of investors and federal agencies shows the expertise of a company to manage debt, and assets, too. Such a disciplined regimen would do good things for Santee Cooper.
We can thank CEO Bonsall for the clarity of his letter: The debt can be handled today and give the next generation of South Carolinians something better. Or we can leave them to pay for mistakes. As a grandfather I know the right decision to make.