Santee Cooper customers are vulnerable too

This article was originally published by the Post and Courier on July 1, 2018.

Much of the public debate about how to resolve the debacle surrounding the abandonment of two incomplete nuclear reactors in Fairfield County has centered on SCANA and the thousands of South Carolina residents who get their electricity from its subsidiary, SCE&G.

Fair enough. SCE&G customers are still paying a whopping 18 percent of their monthly bills toward the failed reactors, a year after construction stopped. Their electric rates are about 30 percent higher than Santee Cooper’s.

But Santee Cooper customers are paying for the abandoned project too, and because there are far fewer of them, their individual share of the multibillion-dollar burden is mathematically higher. That’s the concern raised in a new report from the Palmetto Promise Institute.

The report reveals that Santee Cooper’s roughly 180,000 ratepayers could end up on the hook for as much as $52,000 per customer to be paid off over the next three decades unless courts and state officials step in.

Obviously, such an incredible burden on thousands of South Carolina households and businesses would be a devastating drag on the state’s economy. Intervention will be necessary.

The individual obligation for the reactors would be cut by a little more than half, however, if courts find that Santee Cooper’s largest customer, Central Electric Power Cooperative, is obligated to pay for the failed project as well. Most of the people who get their electricity from Santee Cooper power plants buy it through several electric co-ops.

Forcing Santee Cooper’s co-ops to pitch in their fair share would significantly reduce the burden each customer faces. But thousands of South Carolina residents would still pay unacceptably higher electric bills well into the future for reactors that will never generate electricity.

Unlike SCANA, Santee Cooper doesn’t have shareholders. It can’t reduce its dividend payments to cover the nuclear cost without raising rates.

But Santee Cooper does have bondholders. And renegotiating the terms on those bonds could lessen the pain on ratepayers.

“That seems to me to be the appropriate thing to do,” said M.T. Maloney, a Clemson economics professor and one of the report’s authors. “The financial stakeholders should bear the burden of a financial failure.”

“To bail [bondholders] out is just giving them free money,” he said, “and that’s not right.”

State officials, including Gov. Henry McMaster, also have suggested selling Santee Cooper as a way to recover some of the money to pay for the nuclear mess. It’s an intriguing idea, but nobody is sure just how much money Santee Cooper and its assets are worth.

And selling state-owned Santee Cooper to a private company would likely mean higher rates for customers because the new owner would be allowed to earn a profit.

Lawmakers have proposed establishing a commission to investigate Santee Cooper’s resources and study the potential impacts of a sale. That should be a prerequisite to any serious negotiations.

In the meantime, it’s critical to remember that just because Santee Cooper customers are paying a relatively low electric rate now doesn’t mean that they are immune to the fallout from the nuclear disaster. On the contrary, they are in many ways more vulnerable than SCANA ratepayers.

And however this mess is eventually resolved, customers must come first.