New Analysis: Santee Cooper at Mercy of Credit Market
Columbia, SC. (September 24, 2020) – A scholar with Palmetto Promise Institute (PPI), the most prolific publisher of independent analysis on Santee Cooper, today released a new report on the state agency. The study, written as a Memorandum to state leaders by Dr. Katie Grace of Clemson Economics Associates, presents the current financial state and future outlook for the state-owned utility.
In Memorandum, Dr. Grace analyzes publicly available financial statements and proceedings of recent meetings of Santee Cooper’s Board of Directors. Topline stats from the extensive analysis include:
- Santee Cooper will be underfunded by $525 million through 2029.
- The state agency is relying on reissuing $4.2 billion in callable debt as a condition of its Reform Plan.
- To-date, Santee Cooper has experienced an 11% reduction in revenues attributed to the demand shock of COVID-19. The state-owned utility expects to lose $24 million in 2020.
- Santee Cooper has enough cash from operations to invest in Capital Expenditures and maintain its asset base, or service its debt through 2029, but not both.
According to Dr. Grace, the question to sell Santee Cooper or keep it as a state agency all comes down the General Assembly’s tolerance for risk on behalf of South Carolinians. From the report: “Selling Santee Cooper relieves the state, and the taxpayer, of the risks and responsibilities of the entity…If the state chooses to keep Santee Cooper, risk mitigation becomes more difficult.” The report concludes with the fact that “For the next 4-7 years, without the ability to set rates, Santee Cooper is completely at the mercy of the market.”
Dr. Oran Smith, PPI’s Senior Fellow who co-authored PPI’s previous reports, and first began calling for the sale of Santee Cooper in the book Reclaiming the Legacy in 1995 stated, “The findings in Dr. Grace’s Memorandum further support PPI’s long-held belief that South Carolina will be better off if Santee Cooper is sold to private enterprise. The numbers speak for themselves. Selling Santee Cooper should remain on the legislative table when the General Assembly reconvenes in 2021.”
Palmetto Promise Institute Chairman Phil Hughes of Greenville also agreed with the findings:
“As a business person, I read balance sheets for a living. The numbers clearly show that Santee Cooper is piling up debt and at the mercy of the market. South Carolina should keep the sell option on the table for Santee Cooper. Ratepayers and taxpayers—and their grandchildren—need not be on the hook for massive debt that even the state-owned utility’s best ‘Reform Plan’ cannot erase.”
The Memorandum joins PPI’s robust catalog of research and analysis including The Uncertain Future of Santee Cooper (March 2018) which accurately predicted future Santee Cooper electricity rates post-V.C. Summer, and After the Iceberg: Which Lifeboat is Safe for Santee Cooper Ratepayers and South Carolina Taxpayers? (January 2020), an analysis of the agency’s debt and balance sheet through the eyes of an investor-owned utility.
Palmetto Promise Institute (PPI) is an independent, nonpartisan, nonprofit, 501(c)(3) educational organization. PPI conducts public policy research dedicated to advancing a free and flourishing South Carolina, where every individual has the opportunity to reach their full potential.