Santee Cooper ownership might change hands: Five things that surprised us in the report

The fate of South Carolina’s state-owned utility Santee Cooper came more into focus last week as a key report detailed several potential future scenarios for the utility. Read on to see how we got here, or skip ahead to see what surprised us about the potential futures for Santee Cooper.

Maggie Shober and Chris Carnevale | February 24, 2020 | Energy Policy, South Carolina, Utilities

How did we get here?

The South Carolina state government is considering selling Santee Cooper in the aftermath of the utility racking up billions of dollars in debt for the failed V.C. Summer nuclear project, which was abandoned in 2017. In 2018, decision-makers’ attention was on the other project partner in the nuclear debacle, SCANA, which ended up merging with Dominion Energy to help settle the outcome of its share of the project debt.

VC Summer Nuclear Plant Construction. Credit: High Flyer.

Now in 2020, state legislators and the Governor are examining how to move forward with Santee Cooper. At the instruction of the legislature last year, the South Carolina Department of Administration (DOA) has solicited proposals for three different types of bids on Santee Cooper’s future:

  1. A proposal from the new leadership at Santee Cooper outlining reforms the utility would take to address the issues that led up to the V.C. Summer debacle.
  2. Proposals from outside utility companies to manage Santee Cooper, allowing the utility to remain under state ownership.
  3. Proposals from outside utility companies to purchase Santee Cooper from the state outright.

DOA received bids from 10 companies and used some standardization assumptions to normalize bids and evaluate as an apples-to-apples comparison. They used this evaluation to narrow options to what they considered the best in each category (reform, management, and sale), and put these into a report released last week. The selected bidders were Dominion Energy for the management proposal and NextEra Energy for the sale proposal.

The option to reform or sell Santee Cooper is perhaps the biggest opportunity South Carolina has had, and probably will have, to make sure that the state’s energy system is transitioning into a 21st energy system. Unfortunately, these plans have us looking more backward than forward.

Five Surprising Things in the Santee Cooper Proposals

We read all 111 pages of the DOA’s report so you don’t have to. Here are the five things in the proposals that surprised us the most.

1. All options keep coal running for far too long, adding cost and risk.

  • Santee Cooper’s coal plants are already uneconomic. It would be cheaper to retire the coal plants and instead invest in clean energy resources like solar and energy efficiency.
  • Continuing to run coal plants only becomes riskier in the future, including the risk of environmental damage and high costs associated with future policy changes.

2. No option proposes to meaningfully address high customer bills through energy efficiency.

  • In 2018, South Carolina as a state-ranked 4th for the highest electric bills in the country, according to EIA data.
  • The Santee Cooper reform proposes a small amount of conservation with very little details provided in the report, and energy efficiency does not appear at all in the report’s description of the other two options.

3. All options open ratepayers up to serious financial and environmental risk by including new gas plants.

  • The utility will likely need to operate new gas for at least 30 years to recoup costs, yet fuel costs and future policies could make these power plants uneconomic much sooner and turn them into stranded assets. This could leave ratepayers on the hook to pay for new power plants without getting their money’s worth.
  • Gas is sometimes touted as a clean alternative to coal, but the combustion of gas to generate electricity also produces local air pollution and carbon emissions that contribute to climate change.

4. All options leaving us wanting more oversight and accountability.

  • The Santee Cooper Reform and Dominion Management options barely move the needle to provide more oversight than Santee Cooper had when it got itself into the V.C. Summer debacle.
  • The NextEra Plan would bring the utility under PSC regulation, however, the proposal would largely exempt NextEra from oversight while they transition over the next 4 years, potentially leaving customers with billions of dollars of costs.

5. Options are unclear on providing a just transition to workers.

  • All options propose to cut jobs, but barely mention “retraining” and do not describe what that entails.
  • None mention other aspects of a just transition, such as providing health insurance and other benefits to workers while they transition to a new career.
Report from DOA on the future options for Santee Cooper

Solar is a Clear Winner in All Options

What did not surprise us about the options in front of the SC General Assembly is the inclusion of solar. Any proposal to move a utility into the 21st century will have to include large amounts of solar. After all, solar is now often the least expensive way to generate electricity and has a minimal environmental impact. Santee Cooper’s track record on solar in recent years is terrible – – the utility is dead last among regional peer utilities on solar. This will change with any of the options picked by the DOA. The various options propose to add between 800-1,000 MW of solar in the next 4-5 years, which would rocket Santee Cooper from the bottom to near the top of peer utilities.

However, there is still room for improvement, as evidenced by Santee Cooper’s neighbors. Duke Energy Progress and Dominion Energy SC (formerly SCE&G) have current plans that put them at higher watts of solar per customer in 2022 than either of these options would put Santee Cooper in 2024.

This is, of course, a high-level assessment of the different scenarios for Santee Cooper’s future, and much remains to be learned about these proposals. The General Assembly will be hosting hearings to get additional details about the proposals in the House and Senate, and news stories are coming out almost every day highlighting different aspects of the bids.

If anything is for sure, it is that we won’t know how the bids will ultimately play out for months to come. SACE will continue tracking this issue and working for a future for Santee Cooper that prioritizes clean energy, climate and economic justice, and healthy communities.

Maggie Shober
Maggie Shober started as the Director of Power Market Analytics at SACE in March of 2018. In her position, she works to speed the clean energy transformation in the Southeast…
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