California Lawmakers Propose Government Takeover Of Private Utility, While South Carolina Officials Look To Sell A Palmetto State-Owned Power Co.

February 27, 2020

Palmetto Promise’s Oran Smith and board chair Phil Hughes are quoted in this Forbes pieces comparing California and South Carolina’s approach to their utilities. To learn more about the research referenced in this article, click here. 

By Patrick Gleason, Forbes Contributor 

California lawmakers and state officials recently went through a very high profile failure in progressive governance with the now-aborted high speed rail boondoggle, the lasting legacy of which will likely be the concrete dinosaurs of abandoned train platforms strewn across sparsely populated segments of the Central Valley. California also faces more than a trillion dollars in unfunded government pension liabilities that state’s ruling political class has shown no interest in addressing. Despite all of this, lawmakers in Sacramento still think state government is also up to the task of taking over a massive utility company undergoing extreme financial stress.

California lawmakers are now considering a bill (SB 917) introduced by state Senator Scott Wiener (D-San Francisco) that would have California state government take over Pacific Gas & Electric (PG&E), the state’s largest utility company, one that is working on a plan to emerge from bankruptcy. Senator Wiener’s bill would create a new state agency called the California Consumer Energy and Conservation Financing Authority. That agency would have the authority to purchase PG&E assets and pay debts. Those debts include billions of dollars owed for wildfire compensation.

A five-member board appointed by Governor Gavin Newsom (D), the same guy who wants doctors to prescribe homes to people like they do with medication (really), would oversee government takeover of PG&E that would cost taxpayers close to $100 billion. The new government-owned utility created by Senator Wiener’s bill, which would continue to employ most of PG&E’s 24,000 workers, would then contract with a private company that would run the utility, serving its 16 million customers.

“Taking over PG&E is about the dumbest thing you could do at the worst possible time,” California state Senator John Moorlach (R-Costa Mesa), said of Senator Wiener’s proposal.

Aside from the many reasons why a state takeover of PG&E would not be prudent from a taxpayer perspective, the pitfalls of government-ownership in the utility space are currently on display on the other side of the country in South Carolina, a red state unlike California where Republicans control state government.

South Carolina Lawmakers Look To Sell A Heavily Indebted State-Run Utility

Following a failed nuclear project that Governing Magazine dubbed “one of the greatest wastes of money in any state’s history,” South Carolina lawmakers are now considering three options for what to do with Santee Cooper, the 80 year old state-owned utility company that has racked up billions of dollars in debt on a since-aborted project to build two new reactors at the V.C. Summer nuclear station located 30 miles northwest of the state capitol in Columbia. This is debt for which ratepayers and taxpayers are currently on the hook.

The three options now before South Carolina lawmakers include the following:

  1. Santee Cooper’s bid to keep the utility under state ownership, but with a new management plan.
  2. A proposal from Dominion Energy that have the utility remain state-owned, but with Virginia-based Dominion managing operations.
  3. A multibillion-dollar offer from NextEra Energy to purchase Santee Cooper in a deal that would have the Florida-based energy provider assume the billions of dollars in debt brought on by the V.C. Summer expansion debacle.

“The offer from NextEra is very generous and resolves all debt. Accepting this offer will allow for real ratepayer relief and taxpayer protection,” said Phil Hughes, Chairman of the Palmetto Promise Institute, a South Carolina-based think tank.

The Palmetto Promise Institute (PPI) has published a wealth of research and analysis on the situation with Santee Cooper going back to the initial abandonment of the V.C. Summer nuclear expansion project.

“PPI has predicted from the start of the debate over the future of Santee Cooper that a private utility would indeed offer top dollar for the utility and resolve the cloud of debt and litigation hanging over co-op and direct serve customers of the state agency,” Dr. Oran Smith, PPI senior fellow, said. “The free market has spoken today, and with an all-in offer of up to $9.5 billion, has spoken loudly.”

South Carolina lawmakers will now debate the merits of the three options proposed for Santee Cooper, with the matter not likely to be decided for a number of weeks and months.

“I think that is clearly going to have a lot of questions and scrutiny on it,” South Carolina Senate Majority Leader Shane Massey (R) said of the three proposals for the state-owned utility. “This is a big deal. People are taking it seriously. And they should be.”

South Carolina Governor Henry McMaster (R) has been urging state legislators to sell Santee Cooper, thus relieving ratepayers and taxpayers of the billions of dollars in debt that they are ultimately responsible for if the utility remains under state-ownership. The South Carolina House and Senate held hearings this week on Santee Cooper and the options for what to do with it. If South Carolina lawmakers agree with their Governor’s advice, there is a strong chance that members of the GOP-led South Carolina statehouse get the state out of the utility business in 2020, just as the progressives who run California state government vote to commit roughly $100 million in taxpayer resources to buying a massive utility company that is currently in private hands.

As the second month of 2020 comes to a close, a Republican-run red state legislature is looking to privatize in the utility space, whereas members of the Democrat-dominated California statehouse look to seize the means of energy production. This is all fitting for a year in which a socialist is on track to be the Democratic Party’s presidential nominee.