Fitch: Santee Cooper swimming in coal, trying to reduce nuke stake

Fitch Ratings, in a July 18 announcement about bond ratings for South Carolina utility Santee Cooper, said that as of May 31 the authority had a whopping 232 days of coal on hand.

“Coal inventory levels have remained high as a result of reduced usage of the utility’s coal plants due to lower gas prices, the impact of the recession and mild weather conditions,” Fitch added. “The authority would like to see coal inventory closer to 50 days.” What Fitch didn’t say is that Santee Cooper’s coal purchasing will be minimal until it can burn down inventory.

The authority faces a number of challenges over the next several years, including slower growth, a large capital program and the ability to manage its excess ownership share of the new Summer nuclear plant expansion project (units 2 and 3), Fitch said.

Santee Cooper is restructuring its power supply mix, by reducing its exposure to coal generation and adding to its natural gas and nuclear facilities. However, because of slower demand growth and large capital requirements, the authority is also attempting to reduce its ownership interest in the Summer nuclear project from 45% to about 20%, Fitch said.

Santee Cooper, a state agency also known as the South Carolina Public Service Authority, sells electricity directly and indirectly to approximately 2 million retail customers in 46 counties throughout South Carolina.

Santee Cooper has a wide range of generating resources and purchases, totaling 6,087 MW. Coal accounts for the largest component of the summer peak energy mix at 57.2%; natural gas and oil at 20.1%; nuclear 5.2%; owned hydro 2.1%; landfill methane 0.5%; and purchases 14.9%.

In January 2008, the authority’s board approved a generation resource plan that included a 45% ownership interest in the Summer nuclear units 2 and 3; South Carolina Electric & Gas owns the remaining 55%. The plan was to acquire a 45% ownership interest (990 MW) in the proposed two 1,100 MW nuclear units. This 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 pointed out.

These units are projected to increase the percentage of power generated from nuclear resources from about 8.86% to about 41.65% after both units are completed. Santee Cooper has decided to retire six coal- and oil-fired generating units and is also seeking to reduce its level of participation in Summer nuclear units below its current 45% to as low as 20% to better balance its nearer term capacity needs with the long-term benefits of nuclear power ownership.

The authority is engaged in negotiations with Duke Energy Carolinas LLC to purchase a portion of its ownership share in the nuclear units (possibly 10%), Fitch said. Santee Cooper is also exploring other opportunities to market ownership interests to potential buyers. Preliminary estimates are that cumulative base rate increases over the 2015-2020 period would range from 6%-18% depending on the level of ownership in the nuclear project, Fitch added.

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.