This article was originally published in the Columbia Business Report on March 21, 2018.
An economic analysis by a conservative S.C. think tank suggests that Santee Cooper residential utility bills could increase by anywhere from $167 to $750 annually until the state-owned utility’s V.C. summer-related debt is paid off in 2056.
The study, commissioned by the Palmetto Promise Institute, projected a likely rate increase of 13.62%, or nearly $195 for an average annual electricity bill. That increase would remain in place for the next 38 years, the analysis said, meaning that the average Santee Cooper customer would pay $7,390 toward debt from the nuclear project.
Industrial customers could see bills increase by as much as $80,000 a month, according to the institute’s research.
“We couldn’t ignore what has become one of the biggest financial and policy crises in the state’s history,” said Ellen Weaver, president and CEO of Palmetto Promise Institute. “As often is the case in South Carolina, we find powerful insiders are making decisions while the little guy is left holding the bag.”
The report’s three authors are Katie Player, who received a doctorate in economics from Clemson in 2012, was an assistant finance professor at Furman from 2012-15 and will join the faculty at Wofford College in the fall; M.T. Maloney, professor emeritus of economics at Clemson and principal at Clemson Economic Associates; and Oran Smith, senior fellow with the Palmetto Promise Institute who received a master’s in public administration and a doctorate in philosophy from the University of South Carolina.
“Our economic analysis shows that, even with no change in demand, rates must increase significantly for all Santee Cooper customers, as well as those of the (state electric) cooperatives, in order to service the V.C. Summer debt,” Player said in the report.
The report recommends selling Santee Cooper and calls upon the S.C. Legislature to create a commission to seek independent valuation of the utility and to vet potential offers.
“Santee Cooper must be sold,” Smith said.
Florida-based NextEra Energy is reportedly interested in acquiring the utility, which is being shopped by S.C. Gov. Henry McMaster. The Legislature would have to approve a sale.
Mollie Gore, manager of corporate communications for Santee Cooper, said via email that the company has not had a chance to look at the report in detail but maintained that Santee Cooper’s power costs are competitive.
“We have the second-lowest power costs in the state among 40 utilities, according to information on the S.C. Energy Office website, and our costs are significantly lower than the national average as well,” Gore said.
The report cited the Energy Office in noting that Santee Cooper’s rates of 11.62 cents per kilowatt-hour with the nuclear surcharge (or 11.10 without) are higher than Duke Energy’s rates of 11.01 cents per kWh. S.C. Electric & Gas, co-owners with Santee Cooper of the V.C. Summer project, charges ratepayers 14.56 cents per kWh with the surcharge and 11.93 cents per kWh without.
The report also noted the historical significance of Santee Cooper, formed in 1934 to electrify rural parts of South Carolina. But, it said, “Santee Cooper has endangered economic development by antagonizing an industry it has been charged with serving.”
Player said several factors could affect the projected increases, including pending litigation and what Santee Cooper does with the $831 million it received in a settlement with Toshiba, parent company of V.C. Summer contractor Westinghouse.
Toshiba had agreed to cover budget overruns of the nuclear project, which was abandoned in July after Westinghouse filed for Chapter 11 bankruptcy protection in April, following a series of mounting delays and rising costs.
“We assume Santee Cooper will use the Toshiba note to pay down the debt,” Player said in a conference call with reporters. “If not, rates could take another significant jump across the board.”
Smith has been advocating for a Santee Cooper sale since taking that position in the 1995 book Reclaiming the Legacy: A New Public Policy for South Carolina. “The interest was ideological then,” he said. “I believed that state government should not be in the utility business.”
The V.C. Summer fiasco has reinforced that opinion for Smith and his fellow report authors.
“In the opinion of the authors of this paper, having ratepayers pay the debt would be nearly criminal,” the report said. “The ratepayers of Santee Cooper, many of them already challenged economically, do not deserve to be saddled with additional costs due to the failure of Santee Cooper.”