Legal & Regulatory

Suit Claims Santee Cooper Charging Customers for Unbuilt Coal Plant

A lawsuit filed in South Carolina wants state-owned utility Santee Cooper to sell the parts from a coal-fired power plant project it suspended in 2009, saying customers should receive the proceeds as payback for Santee Cooper raising residential and commercial rates after the project was stopped.

Conway, S.C., attorney George Hearn Jr. filed the lawsuit last week, and details have been released over the past few days. Hearn wants the court to order Santee Cooper to sell the assets it bought as it sought to build the coal plant in Florence County, claiming costs related to the failed Pee Dee plant project have been and continue to be passed on to Santee Cooper customers. The suit says the utility’s customers have been paying for about $842 million in bonds taken out for the plant’s construction.

Santee Cooper spokeswoman Mollie Gore told reporters the utility is reviewing the case and plans to “vigorously” defend itself against this lawsuit. Hearn and his legal team did not immediately respond to requests for comment.

The suit presents another challenge for Santee Cooper, which is dealing with the fallout from its decision to end construction of the much-delayed and costly V.C. Summer nuclear plant in South Carolina. The utility has since announced it is looking for a buyer for its 45% stake in the nuclear project.

Hearn’s lawsuit related to the Pee Dee project says Santee Cooper should have sold the parts from the project in a “commercially reasonable manner,” and should be required to repay customers for the project’s costs. “Santee Cooper had the opportunity to sell the unused Pee Dee plant equipment for an amount lower than the purchase price, but did not do so,” according to the lawsuit.

Santee Cooper in 2006 said it wanted to pursue the $2.2 billion 600-MW coal-fired Pee Dee project, as it anticipated electricity shortages in the region, and began getting federal and state work permits. The utility in 2009 suspended efforts to permit the plant after spending $362 million, according to the suit, for equipment and thousands of acres of land. Santee Cooper received pieces for the plant from China; the unused equipment still sits on the site, and the lawsuit says Santee Cooper pays $13 million a year for maintenance and security.

The lawsuit says Santee Cooper’s board of directors voted in August 2009 to consider a two-year rate increase, increasing customer bills by an average 4.4% in November 2009 and another 5.5% in November 2010. The board did not approve the increase, but the lawsuit says the utility went ahead and increased residential rates in November 2009.

The lawsuit states Santee Cooper’s board in September 2012 approved a two-year rate hike, with a total 7% increase, but then began charging customers a level 10% higher than previous rates. The lawsuit says the rate hikes were illegal according to state statutes.

Another current challenge for Santee Cooper is its attempt to sell its stake in the V.C. Summer nuclear project. The utility has set a September 15 deadline to find a buyer. CEO Lonnie Carter on August 21 said two companies had contacted the utility, but he said neither appears to be a viable option to continue the project. Santee Cooper’s board on July 31 said it was suspending construction of the two AP1000 units at the Summer plant, and project partner South Carolina Electric & Gas Co. (SCE&G) also announced it would cease construction that same day, with both citing the additional costs necessary to complete the project.

However, SCANA Corp., the parent of SCE&G, on August 15 said it would withdraw its abandonment petition in order to give stakeholders and state legislators more time to discuss the future of the project.

Darrell Proctor is a POWER associate editor (@DarrellProctor1, @POWERmagazine)



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