Calling Santee Cooper a “rogue” agency, South Carolina Gov. Henry McMaster vowed to veto any rate increases planned by the state-owned utility.

But it's far from certain that he has that authority.

South Carolina Gov. Henry McMaster
“I will veto any attempt to raise rates” by Santee Cooper, said South Carolina Gov. Henry McMaster. Bloomberg

There is no provision in state law that allows the governor to bar the utility from raising its rates, according to Dan Aschenbach, a senior vice president for Moody's Investors Service.

McMaster made the veto promise at a press conference Wednesday, during which he handed out documents that he said proved Santee Cooper hired lobbyists to try and persuade lawmakers not to sell the agency, formally known as the South Carolina Public Service Authority.

“We have a bureaucracy that is operating on its own, contrary to instruction, contrary to the law and contrary to the instructions given by me to the board of directors,” McMaster said. “This must end. This is not in the best interest of the ratepayers of Santee Cooper.”

McMaster, a Republican who is running this year for a full term as governor after ascending from the lieutenant governorship in 2017 when Nikki Haley resigned to join the Trump administration, repeatedly said Santee Cooper has over $4 billion of bonded indebtedness related to a failed nuclear reactor project and “the only way to get rid of it is to raise rates.”

“I will veto any attempt to raise rates,” he said.

Santee Cooper’s board of directors sets utility rates that comply with its rate covenant, Aschenbach said. Santee Cooper has a rate covenant promising bondholders that it will raise rates necessary to pay debt service and all other expenses, according to bond documents. Its enabling statute also requires that it establish rates and charges that will pay all expenses, including debt service.

“The only way that the governor could veto would be through his appointed board,” he said. “It is not a veto but a governor’s request of the board not to raise rates.”

Aschenbach also said that if the board, which has the authority to establish rates to maintain sound financial metrics and to pay debt service in a timely fashion, failed to act in a timely manner “that would be a significant credit negative and likely result in a downgrade.”

The governor’s office did not respond to requests for comment.

While the governor mentioned the word veto twice in his press conference, Santee Cooper spokeswoman Mollie Gore said she thought it might have been “a misstatement” and the governor meant to say something else.

“There is currently no legislative oversight on our ratemaking (there is a bill that would change that, but currently there is no legislative oversight) and so there would be nothing for the governor to veto,” Gore said in an email.

Gore also said the role of the agency’s lobbyists is to provide information, answer questions, gather data and information, and where appropriate to correct misinformation.

“Their role is not to advocate for or against a sale of Santee Cooper, and they have been told that,” she said.

McMaster said during the press conference that he tried to guide and warn Santee Cooper about its duties first by “forcing the removal of the chairman.”

Chairman Leighton Lord resigned in December after a showdown in which the governor accused Lord of not complying with his requests for documents related to the failed nuclear reactor project at V.C. Summer. On March 7, McMaster nominated former South Carolina Attorney General Charlie Condon as the new chairman.

“As the future and mission of Santee Cooper is debated, my goal is to provide transparent and accountable leadership of the board, with the interests of ratepayers and customers my number one priority,” Condon said in a release at the time.

McMaster urged the Senate to confirm Condon’s appointment, and he called on lawmakers to immediately establish a process to evaluate offers to purchase Santee Cooper. The law, he said, does not allow Santee Cooper to participate in discussion of the sale.

McMaster has pursued selling the utility after it ended construction on two nuclear reactors at the V.C. Summer plant last year. The authority has $8 billion in co-mingled outstanding debt, more than half of which is to pay for the shelved reactors the agency co-sponsored with South Carolina Electric & Gas.

The bonds are rated A1 by Moody's Investors Service and A-plus by Fitch Ratings and S&P Global Ratings. All three have negative outlooks largely because of the nuclear-related debt with that has no viable asset to show for it.

Two date, five Republicans, including McMaster, have signed up for the GOP’s gubernatorial nomination this year. Two Democrats are also running for governor. The South Carolina primary is June 12. An American Party-registered candidate will appear on the general election ballot.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.