SC lawmakers OK Santee Cooper reform compromise, but will McMaster sign the plan?

With no offer on the table or potential bidder waiting in the wings to try to buy Santee Cooper, lawmakers moved forward Tuesday with a reform plan compromise without a sale provision.

Both chambers unanimously approved the reform plan.

The reform package includes increased regulatory oversight on how Santee Cooper sets rates, whether it issues long-term debt, and regulatory approval over when the utility wants to build new electricity generation. It also replaces current board members over the course of four years.

“The overall theme of course here is transparency, accountability and regulatory reform,” said Senate Judiciary Chairman Luke Rankin, R-Horry, who served on the conference committee that finalized the reform plan. “We have instilled a model that we hope prevents this state from going the route of a V.C. Summer project again.”

But the reform proposal doesn’t include setting up a committee of legislators for interested parties to provide offers to purchase all or part of the state-owned electric utility. It was a provision pushed by the House, but the Senate voted overwhelmingly against the idea.

Lawmakers have wrestled for years over what to do with Santee Cooper — considering whether to reform it, sell it or have an outside entity manage it — after it partnered in the failed V.C. Summer Nuclear Plant construction project, which was abandoned in July 2017, leaving the utility billions in debt customers will eventually have to cover. The utility’s current debt load is about $6.8 billion.

Whether Gov. Henry McMaster will sign the measure remains to be seen. McMaster has pushed for a sale of the utility and lauded Florida-based NextEra Energy when it was selected as the preferred buyer in 2020.

McMaster would not commit on whether he will sign the package while speaking to reporters Friday.

“I want to read it first, but as you know I believe the only way Santee Cooper will be able to survive is through a sale,” McMaster said.

He points to the billions of dollars in debt Santee Cooper has on its books.

“It’s difficult to see how an organization of that size can work its way out of that debt,” McMaster said. “That’s why a larger organization (or) company coming in and buying in and spreading that debt out and using efficiencies of scale seems to many of us to be the only way to protect the electric service Santee Cooper provides.”

McMaster does point out a sale could still happen even if a sale committee isn’t in the overall reform package.

“But the fact that the provision for a sale is not in the bill does not mean that a sale cannot take place if a suitable buyer with a suitable proposition comes along,” McMaster said. “But time will tell how this is going to work, how Santee Cooper is going to be able to function and how well.”

Rankin said having a publicly owned utility, rather than one that is investor-owned, allows for cheaper interest rates on debt utilities take out.

“When you’re returning a dividend to a shareholder of an investor-owned company, NextEra, you automatically have to generate a 10% return to their shareholder, Rankin said. “And so, public debt. across the board, universally is recognized as a cheaper debt vehicle.”

Ultimately the legislative compromise was reached by a group of high-profile lawmakers that included Rankin and House Ways and Means Chairman Murrell Smith, among others.

“In the legislative process, it’s not your way or the highway that’s not a way that you try to govern, and we realize that vote in the Senate and we’re disappointed in it, but we recognize reality and we’re ready to move forward and reform Santee Cooper and you know as the chairman of Judiciary, Chairman Rankin mentioned that it may only make it more valuable and he has the ability to sell it in the future,” Smith said.

“There also is a lot of positives to reforming Santee Cooper, getting new blood over there, make it more efficient and more accountable and provide more oversight, those things that we all ought to be in favor of,” Smith added.

NextEra not in the picture

The reform package comes after Florida utility giant NextEra formally withdrew its offer to buy Santee Cooper, and took back its $25 million deposit. But that utility and other entities pushed for lawmakers to include a sale option in the reform plan.

After spending $43,000 on lobbying efforts in South Carolina in 2020, and having a team of six lobbyists registered at the State House for the first four months of 2021, NextEra fired five members of that team on April 30 after the Senate passed a reform plan that did not include a Santee Cooper sale committee.

Proponents of having a sale committee were in the House, which overwhelmingly supported the idea. But, NextEra faced a steep climb in the Senate, which voted 36-8 against a sale committee.

As the Senate debated a reform plan, NextEra embarked on a public relations campaign to gain support for a sale component. NextEra spent more than $648,000 on television advertisements in February, March and April promoting itself, even though it had no customers in the state. More than $62,000 was spent between March2020 and April 2021 on Facebook advertising weighing in on whether to sell or just reform the entity.

Last year, NextEra efforts included reaching out to minority groups in areas served by Santee Cooper, including a Zoom meeting in the fall where utility touted its efforts to use renewable energy. Eventually members of more than 20 local chapters of the NAACP, along with a retired A.M.E. Church bishop and the president of the Baptist Educational & Missionary Convention of South Carolina, signed a letter to the General Assembly endorsing a sale to NextEra.

NextEra’s outreach also included trying to set up an appointment with Georgetown’s Mayor Brendon Barber, who leads a town which buys its electricity in bulk from Santee Cooper and has been a municipal customer for many years. But the contract with Santee Cooper is not up and Barber did not want to speak to another possible provider at the time.

“In all fairness, when you’re under a contract and the contract is good with Santee Cooper, I thought it was inappropriate for them to try to be calling us at that time to set up meetings to try to persuade us,” Barber said.

The Gullah Geechee Chamber of Commerce, which has 65 members and focuses on the profitability and sustainability of Black businesses, had been active on social media supporting NextEra’s efforts to buy the utility.

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Michele Wheeler, the executive who would have led Santee Cooper if NextEra bought the utility, appeared in a video interview last year with Hemingway posted on the chamber’s Facebook page, an interview that puts NextEra in a positive light.

According to the State Ethics Commission, NextEra also became a political donor in the state. NextEra Energy Capital Holdings donated $25,000 on Oct. 2 to the Senate Republican Caucus Committee, $15,000 on Sept. 30 to the House Democratic Caucus Committee, and $15,000 on Oct. 30 to the House Republican Caucus Committee.

Groups say a sale, not reform, needed

While NextEra was busy promoting itself, organizations that supported a sale continued to speak out on how reform of the agency would not work and a sale was needed to relieve Santee Cooper’s debt, which ratepayers will eventually have to cover.

Groups such as the SC Small Business of Commerce and the SC Club for Growth all called for a sale.

“Don’t be fooled, reforming Santee Cooper is not an option. The company has proven no ability to reform itself ever. Any reform proposal is fake reform, because it’s not possible,” said SC Club for Growth Executive Director Evan Newman during a news conference earlier this year.

The Club for Growth statements are similar to the Energy Consumers of the Carolinas, which has pushed for a sale of Santee Cooper, including writing criticisms of the utility, including its billions of dollars in debt.

NextEra’s expansion efforts didn’t start in South Carolina. The company has tried to acquire other utilities andelectrical transmission systems and NextEra has used similar approaches when either trying to expand its footprint or get favorable policies put in place in other states, said Daniel Tait, the communications manager for the Energy and Policy Institute, a watchdog group on electric and gas utilities.

“NextEra has a sordid history with using front groups and political spending to get its way, at least attempt to with acquisitions,” Tait said.

“You have SC Club for Growth being widely viewed as a right(-wing) group, and folks like the Gullah Geechee Chamber of Commerce, more of a left(-wing) group,” Tait added. “There’s an inherent strategy from NextEra to get voices from both sides of aisle. Because if you want to influence Democrats and bring them on board, you really have to have strong ties in the minority community because that’s so much of the Democratic base.”