Fitch outlines Santee Cooper generation options

Fitch Ratings, in a March 27 statement about its rating of bonds for the South Carolina Public Service Authority (Santee Cooper), said the utility is pursuing various initiatives, including reducing its stake in a nuclear project and retrofitting coal-fired capacity.

Santee Cooper has been working to restructure its power supply mix with a slowdown in customer growth, the elimination of electric sales to five Central Electric Cooperative customers (1,000 MW), who will be served by Duke Power beginning in 2013, lower natural gas prices and environmental issues, Fitch said.

The authority has also been attempting to reduce its ownership interest in the new V.C. Summer nuclear expansion project (Units 2 and 3), from 45% to 20%. It expects to receive the Combined Construction and Operating License (COL) in early 2012 and anticipates Summer Unit 2 will go into service approximately five years after the COL is issued. Santee Cooper expects Summer Unit 3 will go into service about 16 months after Summer Unit 2.

The authority’s generating resources are primarily coal-fired, with the fuel mix (energy) being: coal (70.5%), natural gas (13.4%), nuclear (8.7%), power purchases (6.1%) and other (1.3%). While it has been aggressive in meeting environmental requirements, management is currently budgeting about $300m for coal-plant improvements and is considering shutting down or reducing operations at several older units, Fitch said. The authority owns and operates various power resources (primarily coal-fired) that have a combined (summer) generating capacity of 5,665 MW.

In September 2009, the authority and Central Electric entered into an agreement which would permit Central Electric to purchase electric power and energy requirements necessary to serve five of its member cooperatives located in the upper part of the state. These were formerly member systems of Saluda River Electric Cooperative and are connected to the transmission system of Duke Energy Carolinas LLC, Fitch noted.

The upstate load of 1,000 MW, which is approximately 22% of Central Electric’s current energy requirements, will transition to the new supplier over a six-year period beginning in 2013. While certain Central Electric members will be moving off the Santee Cooper system, the Central Electric member systems have extended their power purchase agreements through Dec. 31, 2030, Fitch reported.

Future drop in load alters nuclear thinking

Santee Cooper is participating in the development of the V.C. Summer Units 2 and 3, which are expected to be in commercial operation in 2016 and 2019, respectively. The plan was to acquire a 45% ownership interest (990 MW) in the proposed two 1,100 MW nuclear units. “The participation in the project continues to be a key component in the authority’s strategy to address the potential for increasing costs associated with environmental regulation and carbon emissions,” Fitch said.

However, in light of lower forecasted growth (estimated at 1% annually) combined with the gradual loss of up to 1,000 MW of Central Electric load through 2019 and a possible reduction or loss of the Alumax load (potential closure due to pricing pressure for aluminum), Santee Cooper has reviewed its level of participation in the nuclear units.

Santee Cooper’s forecast also assumes an April 1, 2016, retirement of Grainger (170 MW) and Jefferies Units 1-2 (92 MW) and retrofitting Jefferies Units 3-4 (306 MW). “However, these assumptions may be modified upon further review of existing and proposed regulations,” Fitch added.

The Santee Cooper website shows Jefferies Units 1-2 as oil-fired and with a combined 92 MW of capacity. Jefferies Units 3-4 are fired by coal and have a combined capacity of 306 MW. The website shows Grainger as a two-unit, coal-fired plant with a total of 170 MW of capacity.

On its website, Santee Cooper said about complying with the new Cross-State Air Pollution Rule for SO2 and NOx control: “Beginning in the 1970s, Santee Cooper has installed environmental control technology on all of its large coal-fired generating stations, retrofitting those that were built without such technology and incorporating it into the newer units. This technology removes most sulfur dioxide, nitrogen oxides and particulate matter from the generating process. We cannot retrofit units at Grainger and Jefferies generating stations, our smallest and oldest units, because there is no space to accommodate the equipment. However, annual emissions at these units fall below the allowance established by the new EPA rule.”

The website said about compliance with the U.S. Environmental Protection Agency’s new Mercury and Air Toxics Standards: “These new standards require significant additional emissions control equipment at a significant price, with negligible results beyond what Santee Cooper already achieves through our existing environmental controls. Although our evaluation will ultimately determine this, the rule also could force us to close Jefferies Generating Station and Grainger Generating Station, our two oldest and smallest stations, because compliance could be economically or physically impossible.”

Santee Cooper is South Carolina’s state-owned electric and water utility, and the state’s largest power producer, supplying electricity to more than 164,000 retail customers in Berkeley, Georgetown, and Horry counties, as well as to 30 large industrial facilities, Central Electric and two municipal electric systems, the cities of Bamberg and Georgetown. Santee Cooper also generates the power distributed by the state’s 20 electric cooperatives to more than 732,000 customers in all 46 counties. About 2 million South Carolinians receive their power directly or indirectly from Santee Cooper.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.