Santee Cooper releases reform plan, 2020 budget details

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Correction: A previous version of this story misattributed a quote to a representative of Gibson, Dunn and Crutcher. The quote has been properly attributed to Moelis and Co. managing director John Colella. The Columbia Regional Business Report regrets the error.

Santee Cooper officials released details about its 2020 budget, which include a plan to restructure the company, one day after S.C. legislators learned more about the state Department of Administration report recommending options for the future of the state-owned utility from consultants who authored the document.

Before the report was released, Santee Cooper could not provide much information regarding its 2020 budget and associated terms of the reform plan because of privacy restrictions required by Act 95, which authorized the Department of Administration to evaluate possible options for the future of the utility.

Santee Cooper had been saddled with $8 billion in debt, half of it related to the failed V.C. Summer nuclear project it co-owned, until bond sales late last year began to chip away at that total. S.C. Gov. Henry McMaster has been pushing for the utility’s sale, and earlier this week, the Department of Administration recommended a sale bid submitted by Florida-based NextEra Energy, along with a management plan proposed by Dominion Energy.

Any sale would have to be approved by the General Assembly, which could also choose to support Santee Cooper’s reform plan and keep the utility in state hands.

In presenting that plan at Friday’s board of directors meeting, Santee Cooper CEO Mark Bonsall, appointed in July 2019, said the restructuring plan includes proposals to address debt and pricing while providing more transparency for state residents and ratepayers. He recommended the utility provide specific pricing principles and make them part of the public purview.

“Transparency is another major issue in the reform plan,” he said. “If you want to affect prices 10 years from now, you’d better start talking about it now.”

Representatives from financial advisers Moelis & Co., legal advisers Gibson, Dunn & Crutcher, and market advisers Energy + Environmental Economics presented details of the Department of Administration report Thursday afternoon to state legislators.

The report outlines three options for what should be done with Santee Cooper: allow the utility to continue operating under reformed procedures, sell it, or allow it to be managed by another entity. Although the report recommends a potential purchaser and a company to manage the utility, it does not make a recommendation to legislators as to which option they should select. The report also recommends proposed agreements for each option.

Department of Administration Executive Director Marcia Adams told Thursday's joint Senate Finance and House Ways and Means committee meeting that the department stands by the recommendations but will remain a neutral party during the legislature’s decision-making process.

Santee Cooper’s future became clouded after the utility, along with partner SCE&G, announced in 2017 that construction on nuclear reactors at V.C. Summer Nuclear Station would cease.

New York, N.Y.-based financial adivsory company Moelis and Co. was hired by the Department of Administration to evaluate the submitted bids, which also included proposals from Charlotte-based Duke Energy and Greenville investment firm Pacolet Milliken. John Colella, managing director of Moelis and Co., told legislators that the process proved challenging for several reasons, including working with Santee Cooper, which he described as "not necessarily the most willing participant in this process."

The reform plan for Santee Cooper includes reducing reliance on coal-fired energy generation and emphasizing renewable energy such as natural gas and solar.

If the legislature votes to have Santee Cooper managed by an outside authority, the consultants determined that a proposal from Dominion Energy would be the best option. Dominion Energy would not charge a management fee, and the only additional cost would be for employment expenses for Dominion Energy employees assigned to Santee Cooper. The consultants said the 10-year plan would require the least amount of legislation to enact.

If the utility is sold, the consultants determined through their vetting process that NextEra Energy’s proposal is the best option. Next Era would discharge 100% of Santee Cooper’s $6.5 billion debt upon closing of the sale. The plan also includes $400 million in rate credits to ratepayers and $541 million in credits to ratepayers who were charged to finance construction on the failed nuclear project.

None of the consultants nor Adams took questions from legislators at Thursday’s meeting.