Santee Cooper fire sale? SC governor in talks with 5 utilities about utility’s future

S.C. Gov. Henry McMaster is negotiating with five Fortune 500 companies about buying some or all of South Carolina’s state-owned utility, The State newspaper has learned.

None of those firms want to restart immediately the construction of the two Fairfield County nuclear reactors that Santee Cooper abandoned in July, according to two sources with knowledge of the negotiations.

Those negotiations have been mostly conceptual so far, filled with what-if scenarios, the sources said.

Santee Cooper and investor-owned SCE&G, a subsidiary of Cayce-based SCANA, abandoned the V.C. Summer nuclear expansion effort in July, having spent $9 billion and nine years on the project.

The utilities largely have blamed the project’s contractor, Westinghouse, for the collapse of the Jenkinsville project. Westinghouse, which had filed for bankruptcy protection, was over budget and unable to meet a construction schedule, the utilities have said.

While the S.C. House and Senate have convened special committees to investigate what went wrong, Republican McMaster has tried to recruit companies to somehow revive the project.

Among the ideas the power companies have discussed with the governor:

▪  Buying the right to supply energy to 177,000 retail customers that Santee Cooper serves directly, mostly along the S.C. coast

▪  Taking over Santee Cooper’s long-term contract to supply electricity to 20 S.C. electric cooperatives with more than 764,000 customers. That deal ends in 2058.

▪  Buying Santee Cooper’s transmission system, which transports electricity from the utility’s generation plants to its substations

▪  Putting a nearby utility on the same power grid as Santee Cooper and, if possible, SCE&G, allowing the utilities to distribute energy more efficiently

Some companies have expressed interest in those options, and talks are serious on both sides. But the companies have made no formal bids, according to the sources.

“I wouldn't call them offers,” McMaster said Wednesday, speaking to reporters at an aerospace conference. “There have been many suggestions of options. The different power companies have different needs themselves.”

Some of the companies have signed nondisclosure agreements in order to enter negotiations.

McMaster has not named the companies publicly. However, three of the utilities – Dominion Energy of Richmond, Va.; Duke Energy of Charlotte; and the Southern Co. of Atlanta – previously have been identified.

McMaster has not explained how selling Santee Cooper, which owns 45 percent of the botched Jenkinsville project, would help S.C. power customers who already have paid more than $2 billion for the project.

As governor, McMaster does not have the authority to sell Santee Cooper. However, he could negotiate a deal and present it to S.C. legislators for their approval.

Legislators have expressed skepticism that another company would be willing to buy Santee Cooper and take on its $8 billion in debt, half because of the nuclear project.

Some also have expressed concern that this is not the right time to sell the state-owned utility, its future clouded by the uncertainties associated with the failed V.C. Summer expansion.

A sale to a for-profit utility also could mean higher electric rates for Santee Cooper’s customers.

Earlier this month, Santee Cooper chief executive Lonnie Carter – who is retiring – told reporters, “Any objective evaluation of selling Santee Cooper will demonstrate that that’s not in the interests of our consumers.”

None of the companies in talks with McMaster envision restarting the nuclear project in the short term, the sources said.

Last week, for instance, Duke Energy – one of three companies McMaster initially approached – said publicly it would not help restart the “far too expensive” project.

Southern Co. and Dominion Energy have not commented publicly.

However, Southern has nuclear woes of its own. That utility also has two partially built nuclear power plants – that also were being built by Westinghouse – in limbo.

Still, some of those companies could be open to finishing the project later – perhaps decades down the road – so long as the unfinished reactors haven’t been scrapped for parts and still can clear regulatory hurdles, sources said.

In time, market conditions might make finishing V.C. Summer’s Units No. 2 and 3 more practical, one source said.

McMaster has worked on the issue almost daily, meeting with utility representatives in the Governor’s Mansion and over the phone, the source said.

This story was originally published August 30, 2017 at 6:38 PM with the headline "Santee Cooper fire sale? SC governor in talks with 5 utilities about utility’s future."