Santee Cooper operates as a self-funded, independent electric and water utility that each year contributes 1% of gross budgeted revenues (more than $17 million in 2020) to the state general fund to help pay for vital priorities such as education, transportation and public safety. As a state-owned utility, Santee Cooper has a responsibility to South Carolinians to maintain financial health that withstands the test of time.
We are holding prices stable. Specifically, we have committed to not increase base rates for the vast majority of our customers from August 2020 through December 2024 and to hold normally adjustable components of those rates, such as fuel charges, stable with Reform Plan projections. For residential and commercial customers, that means fuel charges will actually decrease 7% from 2020 through 2024. Beyond 2024, we believe our efficiencies and savings will help us continue to offer customers the lowest typical monthly bill among large utilities in South Carolina.
We are reducing our debt. Since 2017, Santee Cooper has paid off over $1 billion in debt, and debt paydown will accelerate as we move to cheaper generation with more solar power. We anticipate paying off another $3.6 billion, an amount equal to the debt related to our failed V.C. Summer nuclear project expansion, in 12 years, in part through debt management strategy and operational savings.
We are returning money to customers. As part of a landmark settlement reached earlier in 2020, ratepayers who were Santee Cooper customers between Jan. 1, 2007 and Jan. 31, 2020 will receive refunds from a Common Benefit Fund of $520 million ($320 million of that provided by Dominion Energy). This settlement is an important step as we turn the page on the past and focus on a leaner, greener and more efficient electric system.
We are maximizing value for South Carolina. Through selling surplus assets, expanding strategic partnerships, increasing operational efficiency and reducing overhead costs, Santee Cooper will improve our overall efficiency and financial health.
(October 28, 2020) According to 2019 data just released from the U.S. Energy Information Administration, Santee Cooper’s rates are even lower than in 2018, compared to state and national average for all retail classes.
Based on 2019 data, our average residential rate is 11% lower than the state average and 9% lower than national average. Santee Cooper’s average commercial rate is 10% lower than the state average and 8% lower than the national. And, among industrial rates, our average is 17% lower than the state average and 25% lower than the national average.
By comparison, in 2018 our average residential rate was 5% below the state and 7% below the national averages, our average commercial rate was 3% below the state and 6% below the national averages, and our average industrial rate was 10% below the state and 20% below the national averages.
(October 22, 2020) Fitch Ratings has upgraded its outlook for Santee Cooper from negative to stable as part of a ratings report associated with a planned bond sale.
Next week, Santee Cooper anticipates refinancing more than $550 million in debt and issuing approximately $100 million in new bonds, all to take advantage of current low interest rates and provide savings to customers. Fitch assigned a rating of “A-“ to the planned transaction and maintained that “A-“ rating on existing debt.
“The revision in Rating Outlook to Stable from Negative reflects Santee Cooper's recent agreement to settle the most significant aspects of outstanding litigation, the enactment of legislation that provides greater operating stability and progress related to stabilizing its management and governance structure. Collectively, these developments meaningfully address the asymmetric risk factors confronting the authority and weighing on its credit quality,” Fitch wrote.
Earlier this week, Moody’s Investor Service also upgraded its outlook on Santee Cooper to stable and maintained its “A2” rating on our debt, and S&P maintained its existing “A” credit rating and negative outlook.
(October 20-21, 2020) Credit rating agencies like the work we are doing. Santee Cooper expects to refinance more than $550 million in debt, at lower interest rates, next week – and those savings will help us keep your rates stable through 2024. In response to the planned transaction, Moody’s Investor Service has upgraded its outlook on Santee Cooper to stable, and maintained its “A2” rating on our debt. S&P Global Ratings held steady on its “A” rating, saying it “reflects our opinion of the utility’s strong enterprise risk profile and strong financial profile." S&P maintained its negative outlook, citing in part lingering uncertainty about Santee Cooper’s future as a state-owned utility.
(October 2, 2020) Fuel is Santee Cooper’s single biggest expense, at 42% of the 2020 budget. As such, it is an obvious area to target for efficiencies.
We’re even better situated for the next few years, thanks to new successes with fuel hedging and renegotiated and new coal commodity and transportation contracts. Specifically, we have successfully hedged natural gas and heating oil. We have also renegotiated some existing contracts and executed new deals for coal commodities and transportation, and achieved additional savings related to gas transport, that brings total fuel savings to at least $120 million through 2024.
Santee Cooper has committed to freezing rates to Reform Plan levels as part of the Cook settlement, and to holding prices steady for as long after that as we can. Fuel savings will help us fulfill both commitments.
(September 2, 2020) Since July 2017, Santee Cooper has reduced its outstanding debt by $1.2 billion, and is evaluating opportunities to take advantage of today’s extraordinarily low interest rates to continue to reduce its annual debt service costs. Santee Cooper Treasurer Suzanne Ritter discussed debt strategy at the August Board meeting of the Santee Cooper Board of Directors. “When putting together our reform plan, we made certain assumptions regarding interest rates. Rates today are lower than those assumptions, and it may possible to lock in these rates, resulting in savings,” said Ritter.
Santee Cooper has primarily used tax-exempt refinancing and, at current rates, will see traditional refunding opportunities over the next couple of years. We are also evaluating more non-traditional means, such as taxable advanced refunding and interest rate swaps, that could be deployed sooner. “Taxable advanced refunding allows us to lock in a rate early,” Ritter said. “Because the debt is taxable, the savings are less, but you take some risk off the table.” On the other end of the spectrum, interest rate swaps yield higher savings but include other risks that need to be managed.
An effective and efficient debt management plan is a crucial component of Santee Cooper’s overall financial plan. This plan facilitates our ability to meet our objectives to capably and reliably serve our customers throughout South Carolina while preserving our financial health. Click here to view Ritter’s presentation to the Board of Directors, beginning at the 38-minute mark.
(August 31, 2020) Santee Cooper and Westinghouse Electric Co. finalized terms of a settlement over equipment associated with the V.C. Summer project, a significant milestone that gives Santee Cooper full ownership of and the ability to begin marketing all non-nuclear equipment immediately. Additionally, Westinghouse has the responsibility to market the nuclear-related equipment, and the companies will split the net sales proceeds of nuclear-related equipment according to these terms:
Read more in the press release.
(August 5, 2020) Moody’s Investors Service calls the Cook settlement, approved July 20, “a positive development for Santee Cooper as it places an upper limit on the uncertainty associated with the lawsuit.”
The settlement resolves the matter of Cook et al, involving costs associated with the failed V.C. Summer expansion. Also, as part of the settlement Santee Cooper and Dominion Energy (parent of former V.C. Summer majority partner SCANA) resolved all matters between them related to the project.
Moody’s noted that Santee Cooper will provide cash payments to a settlement fund over the next three years, with $65 million in each of 2020 and 2021, and $70 million in 2022, “which alleviates the cash impact.” Dominion is providing another $320 million to the settlement fund.
The settlement also provides that Santee Cooper will hold most customer rates to levels reflected in the Reform Plan, for the next 4½ years. Moody’s notes that “as part of its submitted reform plan, Santee Cooper had already projected not having any rate base adjustments through 2027 for retail customers. Since fuel costs have declined relative to what was previously considered in the reform plan, Santee Cooper anticipates the lower operating costs will help it mitigate the rate freeze impact.” Read the full Moody’s report.
(July 21, 2020) Following Justice Toal’s approval of a landmark settlement over costs related to the failed V.C. Summer nuclear project, Santee Cooper’s Board of Directors will meet July 31 to consider authorizing management to take actions necessary to comply with that settlement.
The settlement provides a $520 million refund to ratepayers who were customers between Jan. 1, 2007 and Jan. 31, 2020, with the project’s majority partner Dominion Energy funding $320 million of that and Santee Cooper, $200 million. The settlement also provides a nearly 4 ½-year rate freeze, through 2024. That rate freeze holds most customer base rates stable and holds normally adjustable charges, such as the fuel charge, to levels set out in our 2020 Reform Plan. As fuel charges are projected to decrease, that means (for example) that related charges for residential and commercial customers will drop 7% from 2020 through 2024.
The freeze affects all residential, commercial and lighting customer rates, and all other customer rates as listed on Schedule B in the Customer Settlement Agreement. It does not apply to certain municipal customers who are served under specific contracts, or to rates or riders not listed on Schedule B. Rates for Central Electric Power Cooperative, which purchases electricity wholesale from Santee Cooper on behalf of the state’s individual electric cooperatives, will be held to terms in the Reform Plan. Read the full settlement.
(June 19, 2020) Santee Cooper has signed a Memorandum of Understanding with Dominion Energy South Carolina, and another with Southern Company, seeking to identify operating efficiencies with each utility that will yield savings for customers.
Santee Cooper is looking for savings by working jointly in areas such as right-of-way maintenance, fleet management, dispatch of generating units and technical services.
Already, Santee Cooper and Dominion are conducting a pilot tree-trimming operation. We have identified common corridors where we each maintain transmission right-of-way and divided up planned work in those areas to avoid each of us deploying equipment and personnel to the same corridors. The pilot began in July, will last a few weeks and will help us identify potential for longer-term vegetation management cooperation.