In a surprise move sure to shake up already contentious negotiations, Virginia-based Dominion Energy has signaled its interest in beleaguered Santee Cooper – the state-owned utility at the heart of #NukeGate, South Carolina’s latest (and greatest) command economic failure.
In a letter sent this week to Santee Cooper president and CEO James Brogdon, Dominion CEO Thomas Farrell II rebuked the former’s suggestion that the latter’s company should pay the debt-addled government-run utility $351 million from Dominion’s proposed purchase of SCANA.
According to Santee Cooper attorneys, Dominion’s proposals – one of which recently drew support from S.C. speaker of the House Jay Lucas – failed to take into account that ratepayers from all corners of the Palmetto State were “negatively affected by SCE&G’s decision to abandon the facility.”
SCE&G is a subsidiary of SCANA, which partnered with Santee Cooper on the abandoned expansion of the V.C. Summer nuclear generating station in Jenkinsville, S.C.
Last time we checked, though, it was Santee Cooper that pulled the plug on this $10 billion boondoggle. In fact, just eight days before it bailed on the project, Santee Cooper announced massive rate increases on customers tied to “costs associated with nuclear construction and other system improvements.”
The utility has also given its former leader a multimillion-dollar, taxpayer-subsidized golden parachute – even though documents released last summer showed its executives (and SCANA’s leaders) knew two years ago that the project was doomed.
[su_dominion_video_scb]Either way, Farrell was having none of it.
“This eleventh hour suggestion … concerning the merger of SCANA and Dominion Energy is legally and procedurally improper,” Ferrell wrote in his letter to Brogdon, adding that the two companies “will address those irregularities” at a future meeting of the state’s embattled Public Service Commission (SCPSC).
Farrell went on to say that Santee Cooper’s request “would be self-defeating in that it would prevent the business combination between SCANA and Dominion Energy from occurring.”
However, Farrell offered an interesting carrot along with this stick.
“We would like to offer a proposal to Santee Cooper to enter into a unique management arrangement that we believe will save Santee’s electric customers hundreds of millions of dollars in overhead, fuel and capital related costs, providing significant cost savings on an ongoing basis for years to come,” he wrote. “Acceptance of this proposal would preserve South Carolina’s ownership of Santee Cooper’s valuable assets, thereby keeping Santee Cooper an independent, state-owned entity focused on serving its electricity customers.”
Exactly what sort of “unique management arrangement” is Ferrell envisioning?
It’s not immediately clear. We reached out to our sources at Dominion seeking clarification of the company’s proposal, but they referred us back to the letter from Farrell – and Dominion’s latest filing with the SCPSC.
“We won’t be commenting beyond what is in the filing,” said Kristen Beckham, Dominion’s southeastern director of external affairs.
In that document (.pdf), Dominion attorneys argued that they company could dramatically improve the efficiency of this debt-addled asset.
“By operating and managing Santee Cooper as part of its extensive utility operation, Dominion can achieve efficiencies, rationalize structures, and generate extensive economies of scale,” the filing noted, adding that Dominion’s proposal “represents a lawful, practical and constructive response to the issues Santee Cooper seeks to address with its misguided request.”
No dollar amounts were discussed in either the letter or the filing, but state leaders – who are scheduled to meet this week to discuss privatizing Santee Cooper – haven’t exactly been besieged by offers for the state-owned asset. In fact the only “deal” offered for the utility – a secretive proposal that made the rounds back in March – involved a massive taxpayer-funded bailout.
Farrell made clear in his letter to Brogdon that Dominion’s deal would create “value for all stakeholders without requiring any ‘bailout’ or tax abatements from the state or its taxpayers.”
Conversely, Ferrell wrote that “any attempt by an investor owned utility or private holding company to purchase or ‘take over’ Santee Cooper would in our view only result in higher rates for Santee Cooper’s electric customers (and/or, as noted, a state-financed bailout).”
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