After Santee Cooper helped facilitate the biggest business disaster in our state's history, the collapsed nuclear expansion program at V.C. Summer, two things were clear:
Whether to sell the state-owned utility had to be based on realistic numbers about how that would affect ratepayers over the long term and not on preconceived notions about whether privatization is a good or bad thing.
And the utility's secretive, unaccountable governance structure had to be overhauled to allow the governor to replace board members and bring some transparency and sense of responsibility to the utility while lawmakers sorted out its fate.
Lawmakers never seriously considered changing the governance. Finally, though, they have approved a process to gather the information needed to decide whether to sell Santee Cooper, turn its management over to another utility or allow the utility to fix itself.
That process is much better than the one they embarked on a year ago, which paid an outside company to evaluate nonbinding offers whose details it refused to reveal even to lawmakers. It's also much better than proposals House and Senate leaders rolled out in the spring, which seemed to stack the deck to match the sponsors' desired outcomes. Although the new process delegates a great deal of discretion and frankly guesswork to a state agency, it might be the best possible approach for a problem with little precedent.
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Under the terms of H.4387, the state Department of Administration will solicit bids to purchase Santee Cooper as well as bids to take over its management. It likely will hire an investment bank that specializes in utilities to help evaluate those bids, along with a proposal from Santee Cooper's management to reform itself.
Among the criteria to be evaluated: the bidders' financial capacity, how they plan to generate and transmit electricity over the next two decades, how they would pay off Santee Cooper's debt, projected rates over the next 20 years and whether they'll guarantee those rates, how many jobs they would eliminate, whether they would maintain a South Carolina headquarters and whether they plan to purchase the lakes.
Those details are crucial, because it is not intuitive to believe that anyone can assume $7 billion in debt — and collect a utility-size profit — without raising rates at least as much as Santee Cooper projects.
At the end of the evaluation, the Department of Administration will give lawmakers what it considers the best purchase offer, the best management offer and its evaluation of Santee Cooper's proposal. The legislature will accept one of the proposals or reject them all, perhaps in the spring.
The good thing about this process is that the bidders will be barred from discussing their proposals with legislators or anyone else. That means, among other things, no lobbying. The downside is that we won't be able to see the runners-up. That means we can't evaluate whether the Department of Administration gave, say, too much weight to the purchase price and not enough to rates, or not enough to green-energy options.
But there is already such a huge divide between lawmakers who are convinced that Santee Cooper must be sold no matter what and others convinced that it must never be sold no matter what, and that the last thing we need is to inject special-interest politics (and special-interest money) into the equation. So the secrecy might be the only realistic way to proceed. But the whole process still involves an uncomfortable amount of risk and guesswork.
Unfortunately, there aren't a lot of models for selling, or not selling, a state-owned utility that provides electricity to 2 million customers. Fortunately, we are no longer talking about the philosophical question of whether a state should own a utility. We're talking about the real-life question of what's in the best long-term interests for those 2 million South Carolinians when the utility pumps $4 billion into a couple of nuclear reactors whose highest and best use might turn out to be as scrap metal.
This editorial is from The Post and Courier of Charleston via The Associated Press.