Kudos to the Legislature and Governor for setting up a system, managed by the State Department of Administration, to address the ongoing Santee Cooper issues. That was a good step for the accountability that is needed. Time to finish the job.
Accountability means taking risk off its customers’ backs. Not carrying the debt and its costs. Fast. The South Carolina Legislature can do that and get on with other business of the state.
Legislators can look forward, or to the past. Either way, legislators take the state and citizens – and their wallets – with them. Only one direction is responsible: A sale of Santee Cooper.
First, a sale protects consumers. ECC said in April: “Question: When it comes to Santee Cooper, whose debt is it, anyway? Answer: The debt belongs to Santee Cooper, to the customers. The debt was incurred by the decision of Santee Cooper.” $7+ billion in debt for Santee Cooper. Thousands of dollars per customer.
Second, paying off the debt frees-up money to be used wisely. The current debt is in large part paying for past decisions that make no power. See our blog, Attack of the Zombie Debt.
ECC cited a finance expert about corporate debt in general. ECC sees Santee Cooper in this commentary: “There is evidence that a large share of the borrowing that companies are currently doing is not being used to invest in growing their own productive capacity.”
Third, clearing the debt defuses bad finances. “A ticking time bomb” is what we reported about Santee Cooper debt, described in a story in the Coastal Observer. Customers, direct and co-ops, that buy from Santee Cooper, have a lot on the line. (Our blog May 2019 about moving ahead on the debt)
Fourth, clearing the debt helps regain a proper credit rating. ECC noted that the ticking echoes in the ears of financial professionals. “The financial rating agency Fitch lowered the rating of Santee Cooper’s bonds. …a two-step downgrade … the rating went from a ‘negative watch’” to ‘negative.’” (Source – our blog)
Fifth, eliminating the debt through a sale provides new resources following a disastrous streak of decision-making. New financial strength. Different management and policies. New experience across a broader service territory.
But there is a reform plan promised by Santee Cooper. The reform plan was floated by Santee Cooper only after it faced an existential crisis. Even that is vague. Debt is pegged at $7 billion+, yet the plan only talks in millions. The Santee Cooper Business Forecast said it, “…contemplates (our italics) several strategic financial transactions and cost saving initiatives.”
Santee Cooper’s own Code of Ethics says, in part, “As a state-owned utility, the company is held accountable to the citizens of the state and as such, operates under public scrutiny.” No organizational activity should be detrimental to this Code of Ethics. (Our blog about this)