My buddy Dana in his weekly email provides lots of info about this:
First, the nuclear plant debacle continues to unfold. There are
important lessons about how to avoid these types of train wrecks in the
future, if we pay attention.
Both Governor Henry McMaster and Senator Lindsey Graham are publicly
promoting the sale of Santee Cooper, our state-owned electric utility
that was a 45% investor (with SCANA, at 55%) in the $9 billion hole in
the ground in Jenkinsville. But, as this article from the /Post and
Courier/ reports, although two companies have expressed interest,
neither is “viable,” according to (now former) CEO Lonnie Carter.
http://www.postandcourier.com/business/santee-cooper-has-heard-from-companies-interested-in-joining-v/article_213370d2-86a8-11e7-a901-6707466a42ed.html
This next article begins to explain why no “viable” companies are
interested.
http://www.postandcourier.com/news/potential-santee-cooper-sale-moving-forward-buyers-sign-non-disclosure/article_43bd5ba4-88ce-11e7-8402-97b80d7317cb.html
From the article:
/Industry experts have said Santee Cooper's higher-than-average debt
would make a sale challenging. The utility has $8 billion in debt
— about half from the nuclear project — that would need to be
refinanced. And because a private-sector owner wouldn't be able to offer
investors tax-free returns like Santee Cooper can now, the buyer would
face even higher costs./
I’ll add one more salient fact. Santee Cooper is insolvent. The
agency’s liabilities are greater than its assets. In ordinary language,
it is broke – under water – to the tune of at least $2 billion. Anyone
who is interested, including our governor and our senator, can find this
out by looking at the utility’s 2016 financial statements.
So a conventional “sale” is simply not going to happen. But something
must be done, and it will probably look more like a fire sale and give
away, where assets are stripped out and sold, including the incomplete
nuclear plant, and some of the debt is taken over by the state. Under
any circumstance, in one configuration or another, South Carolina
taxpayers will be on the hook for billions of dollars in losses for
years to come.
There was a time, not long ago, when the utility was on solid financial
ground. Its financial decline occurred with extraordinary speed over
the last decade, under the current management and most of the current board.
As this next article from the /Post and Courier/ reminds us, Santee
Cooper’s abandonment of the nuclear project is not the first major
miscalculation. Eight years ago, almost to the day, the agency threw in
the towel on an ill-conceived coal plant on the Pee Dee River, after
wasting a quarter of a billion dollars on land and plant parts.
http://www.postandcourier.com/business/lawsuit-seeks-to-force-santee-cooper-to-sell-off-scuttled/article_b9865e18-876f-11e7-ac54-0fa28ce1528d.html
All of this explains why, as this next article from the /Post and
Courier/ reports, CEO Lonnie Carter has announced his retirement.
http://www.postandcourier.com/news/santee-cooper-ceo-lonnie-carter-announces-retirement-amid-nuclear-reactor/article_028b009a-89a1-11e7-b6ea-c7d3c51a93d2.html
Finding a new CEO will be no mean feat. From the article:
/Carter’s replacement will be tasked with running an agency with a pile
of debt tied to the nuclear project and an uncertain political future./
Re: the nuclear plant. We are now in the blame-assignment phase. As I
reported in my last news summary, there is a lot of blame to spread
around – from the Legislature, who set the stage 10 years ago for
shifting the costs and risks from SCANA management and shareholders to
its ratepayers, (and now are shocked that the utility did exactly that),
to the Public Service Commission members, who approved one rate increase
after another as costs skyrocketed, to the boards of both SCANA and
Santee Cooper, who failed to protect shareholders, rate payers and the
public from apocalyptically bad business decisions, to, again, the
Legislature, who created the little known Office of Regulatory Staff
(ORS) to protect ratepayers and utilities (at the same time), but failed
abysmally to do either.
As this article from the /Nerve/ explains, ORS had a job assignment that
was impossible from the beginning. The creation of the new agency
shifted the responsibility for oversight from the Office of Consumer
Affairs where, according to the historical data, things were working
fairly well.
https://thenerve.org/an-agency-that-doesnt-even-work-on-paper/
Says the Nerve:
/Clearly, the (old) system was working, despite the view that Consumer
Affairs was underfunded.
<http://dc.statelibrary.sc.gov/bitstream/handle/10827/12162/DCA_Annual_Accountability_Report_2003-2004.pdf?sequence=1&isAllowed=y> Why
shift the representation of ratepayers to a new, conflicted agency that
doesn’t even work on paper – unless that was the point? According to the
House and Senate journals, not a single lawmaker spoke in opposition to
Act 175 at any point in the legislative process./
//
That (creating an agency that spent more time doing the bidding of the
regulated utilities than protecting the consumer) was exactly the point.
This final article, from today’s /Post and Courier/, provides an in
depth look at how the plant construction proceeded over ten years,
including stunning – almost unbelievable – revelations that plans for
completion never existed, and that defective parts, work inefficiencies
and “incompentence at every level,” plagued the project, and were
largely ignored by management, from the beginning.
http://www.postandcourier.com/business/early-signs-of-incompetence-at-every-level-went-unheeded-as/article_b47acd2c-89a5-11e7-830a-9364c7e7b71b.html
From the article:
/The decade-long saga that led to the financial crisis now facing South
Carolina is complex./
//
/It includes corporate-friendly politicians, an ambitious for-profit
utility, an untested nuclear design, utility regulators who didn't raise
questions, investors who had nothing to lose, a state-operated financial
partner and a small state looking to be on the leading edge of a nuclear
renaissance./
It is clear that no single change will avert future meltdowns of this
sort – there are 20 or 30 things that must be changed.
The most important, and most difficult, is to end the too-close
relationships between SCANA, a regulated monopoly, and the “corporate
friendly politicians” who created the regulatory system and decided who
would run it.
Re: Santee Cooper… the problem boils down to a massive public agency run
by unaccountable insiders with carte blanche to do whatever they want
with public assets. Even the fig leaf of SCANA oversight afforded by
the Office of Regulatory Staff and the Public Service commission is
absent with this now insolvent authority.
South Carolina is an unusual place. We consider ourselves politically
conservative, and if electing Republicans indicates a belief in minimal
government intervention and the power of free markets, we express that
at the ballot box.
But we tolerate, and embrace, a political and economic system that more
closely resembles something from Eastern Europe than Adam Smith’s
“Wealth of Nations.” We are a place where major commercial sectors,
notably transportation and energy, are either state-owned, and
controlled by a small clique of political leaders, or where laws confer
extensive protections and economic benefits on a few private
corporations, whose campaign contributions flow back to said elected
officials.
This political structure is best described as a “corporate state,” a
form of government that has been criticized for the past century for
exactly the types of abuses we are experiencing today. This is the
fundamental problem we must correct, and the reason change will be so
difficult. But if we ever had a shot at reform, it is now.
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