(Doc Name h:\legwork\house\amend\h-wm\001\h2 santee cooper.docx):
EXPLANATION: provide for the sale or management of santee cooper
Amend the bill, as and if amended, Part IB, Section 117, GENERAL
PROVISIONS, page 523, after line 8, by adding an appropriately
numbered paragraph to read:
/ (GP: Santee Cooper Competitive
Bidding Process/Management Proposals) (A) The Department of
Administration shall establish a process to conduct a
competitive bidding process for the sale of some or all of the
Public Service Authority ("Santee Cooper") and to
receive management proposals that do not involve a sale of
Santee Cooper but are designed to improve the efficiency and
cost-effectiveness of Santee Cooper's electric operations,
including but not limited to, a management arrangement, joint
venture or alternative arrangement. This process shall not be
limited to the individuals or entities that responded to ICF's
Requests for Expressions of Interest for its February 1, 2019
report to the Public Service Authority Evaluation and
Recommendation Committee. The department shall resume the
competitive bidding process and receipt of management proposals
that do not involve a sale of Santee Cooper from the February 1,
2019 ICF Requests for Expressions of Interest; provided however,
that the department shall, for a period of time set by the
department, (1) allow any individual or entity submitting bids
or management proposals the option to resubmit, modify, or
replace its prior submission to ICF and (2) allow other
individuals or entities to submit offers for sale of some or all
of Santee Cooper or management proposals that do not involve a
sale of Santee Cooper but are designed to improve the efficiency
and cost-effectiveness of Santee Cooper's electric operations,
including but not limited to, a management arrangement, joint
venture or alternative arrangement. Santee Cooper shall also
submit a proposal to the department, as an alternative to a sale
or management proposal, setting forth its plans for reform,
restructuring and changes in operation. Santee Cooper's
proposal shall be given to the department simultaneously with
the sale and management proposal deadline set by the department.
This process must be established in accordance with
commercially reasonable terms that are customary in connection
with bids and proposals of this type. Nothing in this joint
resolution precludes the department, through its professional
services experts, from negotiating with entities offering bids,
management proposals or Santee Cooper to improve their proposal.
The department shall determine the date when the bids and
proposals must be received; however, the process to receive
bids, management proposals and Santee Cooper's proposal shall be
concurrent.
The department shall procure
such professional services that are necessary to qualify bids
and proposals; conduct a sale; evaluate bids received for a
sale, management proposals, and Santee Cooper's proposal; and,
negotiate contracts for the consummation of a sale or a
management proposal, and related activities. These professional
services shall include, but may not be limited to, financial
institutions, investment bankers, legal counsel, industry
consultants and utility consultants.
The department must not
utilize the professional services of an individual or entity
that would have a financial interest in the outcome of this
process, nor may the department contract or otherwise employ an
individual or entity based upon a contingency fee due to the
outcome of this process. The department must not utilize the
professional services of an individual or entity that has
engaged in a substantive commercial, fee-earning or services
relationship since January 1, 2018 with any party that has
submitted a conforming bid into the ICF-led Requests for
Expressions of Interest process earlier this year.
Staff from the State Fiscal
Accountability Authority's Procurement Services Division shall
assist the department in conducting the competitive bidding
process and reviewing management proposals and procuring
necessary professional services.
Santee Cooper is directed to
provide any and all resources necessary to assist in the process
for competitive bids and management proposals, as well as the
evaluation of the bids and management proposals received by the
department. Due diligence material provided to the bidders and
those making management proposals shall include any significant
information Santee Cooper is utilizing in making its own
proposal. The department shall have the authority to consult
with Santee Cooper's bondholders, underwriters, financial
institutions, and any other advisors to gather information to
assist the department in carrying out its responsibilities, and
Santee Cooper shall be cooperative in providing the department
with access to the bondholders, underwriters, financial
institutions, and other advisors. Santee Cooper shall ensure
that the bidders have full access to due diligence materials and
fair opportunity for access to Santee Cooper staff, and shall
ensure that its responses to any inquiries are timely.
(B) The
department shall conduct a thorough evaluation of all bids for
the sale of Santee Cooper received through the competitive
bidding process. The evaluation must take into account at least
the following:
(1)
the financial capability of each bidder;
(2)
the bidder's plan to address Santee Cooper's
bonds and other indebtedness, to include but not be limited
to:
(a)
satisfaction of any or all of Santee
Cooper's existing debt, to include an opinion letter from a bond
attorney as to whether or not the bidder's plan to satisfy the
existing debt would violate any bond provisions or otherwise
impact the State;
(b)
issuance of new bonds and plans to finance
other indebtedness;
(c)
the projected financial impact on all
customer classes of Santee Cooper's retail customers for the
satisfaction of existing debt and issuance of new bonds and
finance of other indebtedness; and
(d)
the bidder's projected capital to debt ratio
for the five years following the acquisition of Santee
Cooper;
(3)
consideration, in cash, to be paid by the
bidder to the State for the benefit of South Carolina and its
taxpayers;
(4)
the amount of projected rates and revenue
requirements for each customer class of Santee Cooper's retail
customers over the next 20 years and plans demonstrating how
these rates can be achieved, and the bidder's willingness to
contractually agree to those rates;
(5)
the bidder's plans for generation, power
purchases, and other resources over the next 20 years, including
but not limited to:
(a)
the forecasted demand;
(b) a timeline of when those
plans would be put in place;
(c)
the projected financial impact to Santee
Cooper's retail customers; and
(d)
the assumptions underlying its plans,
including but not limited to, additional infrastructure required
to support any generating unit, the projected rate base,
debt-to-equity ratios, authorized return on equity, inflation
and cost escalation rates, fuel costs, tax rates, assumed tax
abatements, credits and payments in lieu of taxes and projected
GAAP accounting financial statements of the rate
projections;
(6)
the bidder's plans for transmission
investment over the next 20 years, including but not limited
to:
(a)
a timeline of when those investments will be
needed;
(b)
the projected financial impact to Santee
Cooper's retail customers; and
(c)
the assumptions underlying those plans,
including but not limited to, projected rate base,
debt-to-equity ratios, authorized return on equity, inflation
and cost escalation rates, fuel costs, tax rates, assumed tax
abatements, credits and payments in lieu of taxes, and projected
GAAP accounting financial statements of the rate
projections;
(7)
the bidder's willingness to bear any costs
required by the Federal Energy Regulatory Commission to mitigate
market power resulting from an acquisition of Santee Cooper;
(8)
the bidder's provision of reasonable
financial and other protections for Santee Cooper employees and
retirees in a manner that would not impact South Carolina's
pension system liability or the liability associated with
providing health insurance coverage to employees who have
retired from employment at Santee Cooper;
(9)
a projection of the jobs the bidder expects
to eliminate within five years if it acquires Santee Cooper;
(10)
the bidder's proposed location for its
headquarters post-acquisition;
(11)
whether bid included or excluded the assets
collectively included under FERC License 199, the wholesale
water systems operated by Santee Cooper, undeveloped lands,
other natural resources and recreational assets of Santee
Cooper. In the event that the bid excludes the assets listed
herein, each bidder shall provide for revenue streams, including
the purchase of hydroelectric power generated from Project 199,
to provide for the continued operation of Lakes Marion and
Moultrie with no loss of quality or access;
(12)
the bidder's capacity and willingness to
partner with the State for future economic development
projects;
(13)
a comparison of the bidder's service
territory in South Carolina, if the bid is successful, with
investor-owned utilities serving South Carolina; and
(14)
any terms or conditions the bidder would
require to complete the purchase of Santee Cooper.
The bidder must also submit
its regulatory filings within the past seven years from each
state where the bidder provides electric service that are
related to the bidder's forecasts for electric generation,
transmission, and distribution; requests for generation and/or
transmission projects; electric rate requests made by the
bidder; and requests to acquire, merge with, or manage another
electric utility, and the final disposition of each request.
The department must:
(1)
verify the information provided by the
bidder, to the extent possible, and may request additional
information from the bidder if needed to conduct its
verification;
(2)
establish a list of items that would be
excluded from the sale of Santee Cooper's electric utility
assets, including but not limited to, the wholesale water
systems operated by Santee Cooper, undeveloped lands, other
natural resources and recreational assets of Santee Cooper;
(3)
conduct an analysis as to the potential
risks to South Carolina taxpayers, Santee Cooper's retail
customers, and Santee Cooper's bondholders, that could result
from the sale of Santee Cooper, either in whole or in part.
This analysis must include, but is not limited to, the loss of
tax-exempt status of a buyer, impact on economic development,
and whether the bid would preclude South Carolina from
recovering the full value of Santee Cooper;
(4)
compare the bidder's financing options for
anticipated projects with the financing options currently
available to Santee Cooper;
(5)
require that the bidder's projected ratebase
for all of Santee Cooper's retail customers exclude any portion
of debt attributed to V.C. Summer nuclear units 2 and 3 that is
not considered to be used and useful, as determined by the
professional services experts and the Office of Regulatory
Staff;
(6)
consider if the bidder is committed to
keeping its headquarters in South Carolina post-acquisition;
(7)
consider if the bidder intends to, and has
the capability to, provide electric services in South Carolina
for at least 20 years; and
(8)
engage a third party to administer the
procurement and dissemination of information from Santee Cooper
to third party bidders in order to ensure consistency, proper
characterization and accuracy of information provided.
(C) The
department shall conduct a thorough evaluation of all management
proposals for Santee Cooper. The evaluation must take into
account at least the following:
(1)
terms and conditions of the proposal,
including the proposed time period for the management
proposal;
(2)
the amount of projected rates for each
customer class of Santee Cooper's retail customers over the next
20 years and plans demonstrating how these rates can be
achieved;
(3)
fees and costs to be paid by Santee Cooper
retail customers for the management proposal, as well as any
other benefits to that entity resulting from the proposal;
(4)
projected needs for generation, transmission
and distribution during the period of the proposal and how those
needs would be met;
(5)
an opinion letter from a bond attorney that
the management proposal would neither violate nor alter the
terms of Santee Cooper's bonds and other indebtedness;
(6)
an opinion letter from a tax attorney that
the proposal would not impact Santee Cooper's current tax
status;
(7)
the proposer's experience with the type of
arrangement as proposed with an investor-owned utility and a
publicly owned utility;
(8)
the impact the management proposal would
have on Santee Cooper's employees, including but not limited to,
any projected elimination of positions within the next five
years, if any;
(9)
the financial capability of the entity
offering the proposal;
(10)
a comparison of the service territory in
South Carolina of the entity offering the proposal, if the
proposal is successful, with investor-owned utilities serving
South Carolina; and
(11)
an agreement that if the management proposal
is awarded, the entity offering the proposal will submit an
annual report to the Governor, the President of the Senate, and
the Speaker of the House of Representatives regarding the
implementation of the management plan, including but not limited
to, plans for the next calendar year and accomplishments and
challenges for the prior calendar year.
The department must:
(1)
verify the information provided by the
entity submitting the management proposal, to the extent
possible, and may request additional information if needed to
conduct its verification;
(2)
conduct an analysis as to the potential
risks to South Carolina taxpayers, Santee Cooper's retail
customers, and Santee Cooper's bondholders, that could result
from the management proposal;
(3)
compare the proposing entity's financing
options for anticipated projects with the financing options
currently available to Santee Cooper; and
(4)
consider if the proposing entity offers to
pay a franchise fee or another form of consideration to the
State of South Carolina as a condition of the management
proposal.
(D)
Santee Cooper must submit a proposal to the department for
reform, restructuring and changes in operation that must
include, but is not limited to:
(1)
its plans for generation, power purchases,
and other resources over the next 20 years, including but not
limited to:
(a)
the forecasted demand;
(b)
a timeline of when those plans would be put
in place;
(c)
the projected financial impact to all
customer classes of ratepayers;
(d)
the assumptions underlying its plans,
including but not limited to, additional infrastructure required
to support any generating unit, projected financial ratios,
including debt-to-equity and debt service coverage ratios,
projected contribution percentages to the Capital Improvement
Fund, inflation and cost escalation rates, fuel costs, and
payments to the State and other sums in lieu of taxes; and
(e)
the amount of projected rates and revenue
requirements for each customer class of Santee Cooper's retail
customers over the next 20 years and plans demonstrating how
these rates can be achieved;
(2)
its plans for transmission investment over the next
20 years, including but not limited to:
(a)
a timeline of when those investments will be
needed;
(b)
the projected financial impact to all
classes of its retail customers; and
(c)
the assumptions underlying its plans,
including but not limited to, projected financial ratios,
including debt-to-equity and debt service coverage ratios,
projected contribution percentages to the Capital Improvement
Fund inflation and cost escalation rates, fuel costs, and
payments to the State and other sums in lieu of taxes;
(3)
its plans to address the V.C. Summer debt
and the projected impact to all customer classes of its
ratepayers;
(4)
a proposal for Santee Cooper reform,
restructuring and operational changes;
(5)
any other information Santee Cooper deems
relevant as to future operations as a state asset;
(6)
the projected financial impact on all
customer classes of Santee Cooper's retail customers for the
satisfaction of existing debt and issuance of new bonds and
finance of other indebtedness; and
(7)
a projection of the jobs Santee Cooper
expects to eliminate within five years.
The department must verify
the information provided by Santee Cooper, to the extent
possible, and may request additional information if needed to
conduct its verification. The department must also conduct an
analysis to determine if the proposal is feasible. As part of
the analysis, the department will:
(1)
compare Santee Cooper's rate projections
with all other proposals on a comparable basis and assess the
risks associated with Santee Cooper's projections of revenue
requirements and consumer rates;
(2)
Conduct an analysis as to the potential risk
to South Carolina taxpayers, Santee Cooper's retail customers
and Santee Cooper's bondholders; and
(3)
Determine if changes are needed to the
Santee Cooper enabling legislation to make the Santee Cooper
proposal successful.
If Santee Cooper's proposal
to reform its operations is accepted by the General Assembly,
Santee Cooper shall submit an annual report to the Governor, the
President of the Senate, and the Speaker of the House of
Representatives regarding the implementation of its plan,
including but not limited to, plans for the next calendar year
and accomplishments and challenges for the prior calendar
year.
(E) The
Department of Administration shall establish a process in which
its professional services experts oversee confidential
negotiations between Central Electric Power Cooperative, Inc.
("Central") and each entity that is determined to be
qualified to submit a bid to purchase Santee Cooper or a
proposal to manage Santee Cooper. The department shall first
establish a process by which parties interested in making offers
to purchase or proposals to manage Santee Cooper can demonstrate
that they are qualified to meet the requirements set out in this
joint resolution. Once the qualification process is finalized,
those parties determined by the department to be qualified shall
undertake negotiations with Central pursuant to a process
overseen by the department's professional services expert.
Santee Cooper shall also conduct negotiations with Central
pursuant to a process overseen by the department's professional
services expert. No negotiations or any form of discussion
regarding potential terms or conditions for an agreement with
Central can occur outside of the process established by the
department. The department shall require that the parties enter
into a contract to negotiate in good faith, as well as any other
conditions for negotiation as determined by the department.
Each entity that submitted a bid or proposal, including Santee
Cooper, must individually negotiate with Central to determine
terms for a binding contract between Central and that entity in
the event the entity's bid or proposal is successful. If the
professional services experts conducting the negotiations
determine that one or more parties, including Central, is not
negotiating in good faith, that negotiation shall be terminated
and the professional services experts may submit terms they
determine to be reasonable and in the best interests of Santee
Cooper's customers and of the State of South Carolina and its
taxpayers to the General Assembly. The General Assembly may
consider a party's failure to negotiate in good faith as a
disqualification of the bid or proposal.
(F)
Following the negotiations between Central and each entity
which submitted a bid or proposal, the professional services
experts shall review the projected financial impact on Santee
Cooper's retail customers to ensure that any increases or
decreases to current rates for the retail and wholesale
customers are initially proportionate.
(G) (1)
To protect the integrity of the process,
information received during this process and ensuing
negotiations must be confidential prior to the department
providing its professional services experts' recommendations to
the General Assembly. Each individual and entity involved in
the process shall handle the information with sufficient care to
prevent disclosure of information submitted, received or
reviewed during the process. After the department has provided
its professional services experts' recommendations to the
General Assembly, only information regarding those
recommendations shall be released in accordance with the
provisions of the Freedom of Information Act, provided that
information described in Section 30-4-40 of the 1976 Code must
not be released without the written permission of the entity
whose bid or proposal was recommended. In order to effectuate
the purposes of this paragraph, the department shall require
non-disclosure agreements which must be entered into by each
individual or entity involved in the process, including but not
limited to, an individual or entity that submits a bid or
proposal, or receives or reviews any part of the submission.
The non-disclosure agreement must also contain a provision in
which the signer agrees that neither it nor its agents,
servants, officers, directors or employees, except as provided
in subsection (G)(2), shall advocate for or against, directly or
indirectly, a recommendation provided by the department to the
General Assembly pursuant to Section (H). Members of the
General Assembly, the Governor, and their respective staff must
not be provided with, or have access by any means to, the
information obtained during this process except as provided in
this section.
(2)
If any person or entity that is bound by the
provisions of subsection 1 of this section is required by its
governance structure, fiduciary responsibilities or regulatory
requirements to communicate information about the report
provided by the department to the General Assembly pursuant to
Section H, the substance of such communications shall be reduced
to writing and a copy provided to the General Assembly. Any
such communication must be signed by the person or entity making
it. This exception shall not be construed to allow advocacy for
or against a recommendation in the department's report.
(H) (1)
At the conclusion of the evaluation of the
bids and proposals, and negotiations, as required by this joint
resolution, but no later than December 1, 2019, the department
shall concurrently present a recommendation by its professional
service experts of one bid for sale and one management proposal
that the professional service experts consider to be in the best
interests of the State, its taxpayers, and the customers of
Santee Cooper, as well as the recommendation for Santee Cooper's
proposal. Each recommendation must include justifications for
the recommendation; also, the recommendations in regard to the
sale and management proposal must include a contract for each
recommended bidder obligating the bidder to comply with terms of
its bid in the event it is approved by the General Assembly,
along with a proposed contract to execute the sale or management
proposal, and any supporting documents. The proposed contracts
must include covenants that the bidder will abide by the terms
of its bid for sale or its proposal, as applicable. The
department must also present a full evaluation of each
recommendation and for Santee Cooper's proposal. An evaluation
must include, but not be limited to: (a) a description of each
item listed in Sections B, C or D, as applicable, along with a
copy of an opinion letter submitted by a bond attorney and/or
tax attorney; (b) a proposed contract with Central Power
Electric Cooperative, Inc., including a statement from the
professional service experts involved in the negotiations that
each party did or did not negotiate in good faith; (c) the
Office of Regulatory Staff's commentary; (d) any recommendations
or concerns from the department's professional services; and (e)
any supporting documents.
The department must enter
into a contract with each entity that submitted a bid for sale
or management proposal that establishes penalties for failure to
proceed with finalizing the sale or management proposal in the
event the bid or proposal is selected by the General Assembly.
This contract must include, but is not limited to, earnest money
to be paid upon a recommendation of that entity being made to
the General Assembly and penalties for failure to finalize the
terms of the bid or proposal upon selection by the General
Assembly.
(2)
The department shall present to the Chairman
of the Senate Finance Committee and the Chairman of the House of
Representatives Ways and Means Committee the documents described
in subsection (H)(1). The Senate Finance Committee and the
House Ways and Means Committee shall each meet as soon as
practicable to review each recommendation presented by the
department and determine which recommendation to approve. Each
committee shall make a recommendation within 30 days of receipt
of the recommendations presented by the department. Upon
receipt of the recommendation from their respective committees,
the President of the Senate and the Speaker of the House shall
convene their respective bodies and each body shall, within 30
days of receipt of the committee recommendation, approve or
disapprove the legislation needed to effectuate the sale or
management proposal or to implement reform, restructuring and
changes in operation at Santee Cooper. Such legislation shall
be in the form of a resolution approving the contract for sale
or management or approving Santee Cooper's reform proposal. The
question before each body shall then be the approval of the
contract or proposal which must be decided by a vote of
"yeas" or "nays.
(3)
In the event that the General Assembly
approves the sale of Santee Cooper, the department must execute
any documents necessary in order to effectuate the sale upon the
enactment of a joint resolution approving the sale. The net
proceeds of the sale shall be deposited in the General Fund of
the State, and such amounts may never be recoverable in rates or
otherwise by the purchaser.
(4)
In the event that the General Assembly
approves a management proposal, the department must execute any
documents necessary in order to effectuate the proposal upon the
enactment of a joint resolution approving the proposal.
(5)
It is the intent of the General Assembly
that this provision is the sole governing instrument regarding
the sale or management of Santee Cooper and that a vote of the
General Assembly in favor of approving the sale or management of
Santee Cooper is sufficient to authorize the department to
execute the sale.
(I) The
provisions of the Consolidated Procurement Code in Chapter 35,
Title 11 of the 1976 Code, the provisions of Chapter 31, Title
58 relating to the South Carolina Public Service Authority, and
any other provisions of the general law of this State in
conflict with this provision, are hereby suspended with regard
to the activities undertaken herein. /
Renumber sections to conform.
Amend totals and titles to conform.