Santee Cooper’s board approves class-action suit settlement
Santee Cooper has agreed to a legal settlement to end a massive class-action lawsuit filed over the nuclear reactor project that was shelved before completion, a move that's good news for bondholders, according to an energy expert.
The South Carolina-owned public utility’s board of directors agreed Thursday to pay $200 million in cash over three years and to freeze rates for four years to end the suit that was filed by a class of ratepayers led by Jessica S. Cook in the Hamilton County Court of Common Pleas on Aug. 22, 2017.
The suit, which attempted to claw back charges customers paid for the unfinished twin nuclear reactor project, also names several electric cooperatives, former and current Santee Cooper directors, South Carolina Electric & Gas and SCANA Corp., and Dominion Energy, which bought SCANA in January 2019.
“It is intended to be a global and complete settlement,” Santee Cooper General Counsel J. Michael Baxley told the board Thursday. Resolving the case is in the “best interest of Santee Cooper,” he added.
The 12 directors who oversee Santee Cooper voted unanimously to approve the terms of the deal, which includes language that precludes plaintiffs from taking future legal action.
Dominion will pay $320 million in stock that will be sold and converted to cash as part of the settlement. Santee Cooper and Dominion also agreed not to attempt to recover settlement proceeds in base rates or other customer charges.
The settlement still must be accepted formally in court by the plaintiff and presiding state Judge Jean Toal. A preliminary hearing toward that goal is set for March 17.
“The settlement is good news for bondholders,” said former Moody’s Investors Service energy analyst Dan Aschenbach, now a partner in the utility consulting firm AGVP Advisory.
Santee Cooper, a 45% partner in the failed twin nuclear project, and SCE&G, the majority owner that headed up the construction, sunk about $9 billion into the effort before halting work on the partially built units after determining that it was much farther behind schedule than was thought and that it would cost far more money to complete.
While the Cook ratepayer lawsuit had not reached the point of determining the financial liability each utility stood to incur, the proposed $520 million settlement would be far less than what had been invested into the nuclear debacle.
Santee Cooper had $4.2 billion of outstanding debt related to the twin nuclear project when work was halted July 31, 2017. It had total debt of $8.1 billion. Since then, the utility, known formally as the South Carolina Public Service Authority, has aggressively paid down debt.
As of Dec. 31, 2019, $3.6 billion of nuclear-related bonds and loans were outstanding, and total debt was $6.9 billion, according to unaudited figures provided by Santee Cooper.
Preliminary approval of the settlement by the judge will open a period during which all members of the class will be identified, and then they will be given the opportunity to opt into or opt out of the settlement.
While that is pending, state legislators are still deciding Santee Cooper’s future.
A committee in the House of Representatives determined March 3 that Santee Cooper should be reformed while trying to negotiate better terms on which to pursue a sale to NextEra, the company that owns Florida Power & Light, an investor owned utility.
House Speaker Jay Lucas, R-Darlington, also supports selling Santee Cooper and he wants to remove and replace the entire board of directors, according to The State newspaper.
While a final decision hasn't been reached in the Senate, some lawmakers in that chamber have said they believe the state should retain the publicly owned asset.
Aschenbach, in a March 12 blog post, argues that Santee Cooper should be reformed, not sold. He looks back at the history of the nuclear projects once supported by federal and state agencies and lawmakers.
The proposal to privatize Santee Cooper has “math that is being used to justify privatization, but it doesn’t add up for ratepayers in the short or long-term,” he wrote.
“Santee Cooper’s electricity rates for residential customers are still well below the main competitor in the state even when adding into the bill the amortization of the stranded nuclear debt,” Aschenbach said.