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Electric cooperatives seek to preserve options in court

(Columbia, S.C.) – Central Electric Power Cooperative took action today to preserve legal options for electric cooperatives after two unfinished nuclear generating units in Fairfield County were abandoned by the owners. Santee Cooper and SCE&G stopped construction on V.C. Summer Nuclear Units 2 and 3 in July 2017.

Following approval today by its board of trustees, next week Central will ask the court to declare that Santee Cooper cannot charge Central for costs related to the two abandoned generators. The cooperative also wants its members’ share of a payment made to Santee Cooper after the main contractor, Westinghouse Electric, declared bankruptcy.

The action by Central will take the form of a cross-claim against Santee Cooper in an existing case in which they are both defendants. That case was brought last year as a class action in the 14th Circuit Court of Common Pleas, seeking damages against Santee Cooper, Central and other defendants. 

Central is Santee Cooper’s largest customer and serves as the power aggregator for 20 independent, member-owned electricity distribution cooperatives.

“We took this action because it’s the right thing to do to protect both our member-cooperatives and their consumer-members,” said Robert C. Hochstetler, Central’s president and CEO. “From the beginning, we’ve made the consumers our first priority. They are both our owners and our customers, so we’re going to do what we must to protect their interests in this very difficult situation.”

The cooperative acted now, before the court hands down any rulings in the existing lawsuit, because such rulings might reduce the cooperative’s options, Hochstetler said.

The filing will focus on two key parts of state law that are described in three counts.

In count one, Central claims that the state-owned utility failed to comply with the law regarding duties assigned to it by state statute. Santee Cooper has no authority to charge Central for the abandoned nuclear units because the units are not “used or useful,” according to the filing. Central also claims that Santee Cooper has a legal obligation to charge “just and reasonable rates” and that charging for power generators that are not producing power is “unjust and unreasonable.”

Central argues in the second count that Santee Cooper has breached its contract with the cooperative. The business relationship between the two organizations is governed by a contract known as the Coordination Agreement. The contract calls for an annual “Cost of Service Study” to determine rates and charges for Central’s power purchases from Santee Cooper. That study is based on costs that are “reasonably” recovered through rates and charges for “service” during a given period.

“Because the abandoned V.C. Summer Units 2 and 3 are not providing and will not provide any service to Central,” the suit argues that “the Coordination Agreement does not permit Santee Cooper to recover costs associated” with the nuclear units from Central. 

Count three asks the court to allocate to Central its share of a payment made by Toshiba Corp. Toshiba, the parent company of the bankrupt contractor Westinghouse Electric, had paid Santee Cooper and its partner in the nuclear units, SCE&G, $2.168 billion after the Toshiba subsidiary filed for bankruptcy. Santee Cooper’s 45 percent share was $976 million, later discounted for a lump sum cash payment of $831.2 million. Because Central, through its contract, bears approximately 70 percent of Santee Cooper’s capital costs, the cooperative has asked the court for 70 percent of the lump sum payment made to the state utility.

“This does not stop our ongoing efforts to significantly transform Santee Cooper through a formal test of the market,” said Michael N. Couick, president and CEO of the state association of electric cooperatives. “We’re anxious to work with the General Assembly and all other involved parties to minimize the impact on consumers and Santee Cooper’s employees.”

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