DRAFT

Presentation to the

Santee Cooper Ad Hoc Committee

®

Today’s Agenda

• Reform Plan Overview – Mark Bonsall

• Resource Planning – Charlie Duckworth

• Governance & Oversight – Pamela Williams

• Closing – Mark Bonsall

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What Did We Find?

• 9% less than IOU average

Low-Cost Provider

• 1st among large agencies, 2nd highest among all agencies (SC Human Affairs Commission)

Diverse Workforce

• #4 of 534 IOUs and co-ops, US EIA

Superior Reliability

• APPA First Place 2 out of last 3 years

Award-Winning Safety

date-unit no-pres no-33

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What Did We Find? (cont’d)

• 93% residential, 97% commercial

High Retail Customer Satisfaction

• Received DHEC Community Star Award in 2019

Strong Environmental Stewardship

• Volvo, statewide successes with Cooperatives

Innovative Economic Development

• “A” Credit Rating

Solid Financial Metrics

date-unit no-pres no-44

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Problems to Solve

VCS 2/3 Debt and Mitigation

Transparency

We will take these in turn

in this presentation.

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Debt Challenge

What can we save to offset VCS 2/3 while:

– Preserving reliability

– Preserving safety

– Preserving economic development

– Preserving water operations

– Preserving State and community support

– Preserving jobs

– Without cost shifts to taxpayers

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The Reform Plan saves

$4 billion

in future costs

Key Takeaway #1

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Reform Plan

Capacity and Demand

4,500

5,000

5,500

6,000

6,500

2020 2022 2024 2026 2028 2030 2032 2034 2036 2038

MW

Axis Title

Winter Peak Demand Plus Req. Reserves Total Capacity

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Modernizing the Fleet

• Coal down

• CapEx down

• Solar up

• Batteries up

• Demand-side management up

• Supply and demand balance maintained

• Modular, modular, modular!

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Leaner, greener and more flexible

These are “principle-driven” changes

They are not a guess

They are subject to extensive oversight

Key Takeaway #2

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Results

$158m

$39m

$79m

$237m

0

50

100

150

200

250

300

2020 2022 2024 2026 2028 2030 2032 2034 2036 2038

$ m

illio

ns

Reform Plan Savings vs. Nuclear Interest Cost

Nuclear Debt - Interest Cost Reform Plan Savings

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Strategic Choices

$6.9B $2.0B

8.33 ȼ/kWh

7.32 ȼ/kWh

5.61 ȼ/kWh

0

1

2

3

4

5

6

7

8

9

0

1

2

3

4

5

6

7

8

9

2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039

Bill

ion

s

cen

ts/k

Wh

Reform Plan – Debt Outstanding and System Rate

Debt Outstanding System Avg Rate (Nominal) System Avg Rate (Real)

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Key Takeaway #3

Reform Plan savings provide:

Long-term price stability

Aggressive debt reduction

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$73$71

$71

$70 $69 $69$71

$72 $72 $73$75 $75

$76 $77 $77$78

$79 $80$80

$83 $83

$70

$71 $70 $71

$72$73 $73

$74$75

$78 $78

$80$81

$82$83

$85

$87

$90

$92

60

65

70

75

80

85

90

95

2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039

Reform Plan DOA Normalized

DOA Normalized:

Santee Cooper

DOA’s experts normalized Santee Cooper prices for comparison

Reform Plan vs DOA Normalized (21-39)

Reform Plan aggregate revenues $1.4 billion lower than DOA normalized

scenario ($900 million present value savings)

$/M

Wh

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$70$71

$70$71

$72$73 $73

$74$75

$78 $78$80

$81$82

$83$85

$87

$90$92

$64 $64 $64 $64

$77 $77 $77$78

$79$81 $81

$84$85

$86$87

$89$91

$93$94

60

65

70

75

80

85

90

95

2021 2023 2025 2027 2029 2031 2033 2035 2037 2039

Santee Cooper Normalized NextEra Normalized

DOA Normalized:

Santee Cooper and NextEra

Santee Cooper versus NextEra (‘Market Case’ Normalized by DOA)

$/M

Wh

Santee Cooper Normalized vs NextEra Normalized (21-39)

Santee Cooper plan saves estimated $840 million over NextEra bid, after

normalized by DOA ($450 million present value savings)

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$/M

Wh

DOA Normalized (incl. credits):

Santee Cooper and NextEraAssuming a $500m settlement, Santee Cooper’s rates are

comparable during rate freeze and lower following 2024

$65$66

$65$66

$72$73 $73

$74$75

$78 $78$80

$81$82

$83$85

$87

$90$92

$64 $64 $64 $64

$77 $77 $77$78

$79$81 $81

$84$85

$86$87

$89$91

$93$94

60

65

70

75

80

85

90

95

2021 2023 2025 2027 2029 2031 2033 2035 2037 2039

Santee Cooper Normalized NextEra Normalized

Santee Cooper Normalized vs NextEra Normalized (21-39)

After adjusting for assumed settlement, Santee Cooper plan saves

$1.3 billion over NextEra bid ($910 million present value savings)

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Prices to CentralCentral Cost of Service

4.79 4.80 4.75 4.69 4.64 4.73 4.78 4.80 4.77 4.87 4.85 4.87 4.87 4.86 4.89 4.86 4.87 4.90 5.03 5.00

2.35 2.30 2.20 2.21 2.23 2.26 2.32 2.36 2.43 2.52 2.57 2.61 2.70 2.77 2.81 2.93 2.95 3.01 3.13 3.21

7.28 7.15 7.03 7.14 7.09 6.95 6.91 6.87 6.99 7.10 7.16 7.20 7.39 7.42 7.48 7.58 7.62 7.70 7.79 7.82 7.91

8.16 8.21

0

1

2

3

4

5

6

7

8

9

10

2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039

(¢/K

Wh

)

12 years of stable prices

Fuel

Rate

Non-

Fuel

Rate

1

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Pricing Principles

– Santee Cooper to adopt Pricing Principles, subject to annual

compliance review by the ORS, which are:

• Mission – Limit price increases to less than inflation and maintain

competitiveness in the region

• Equity – Allocate costs to specific customer classes in a reasonable,

equitable and defensible manner

• Efficiency – Design prices so that conservation savings are shared with

the customers

• Adequacy – Provide sufficient revenue to preserve the financial integrity of

Santee Cooper

• Notice – Ensure customer notice and engagement in rate proceedings

• Protection – Allow reasonable relief mechanisms for financially distressed

customers

• Transparency – Require openness in annual review of compliance with

Pricing Principles

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Resource Planning

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Resource Planning Principles

• Customer Focus

• Cost Management

• Ensuring Reliability

• Environmental Stewardship

• Optionality: Long-Term View

• Resource Additions in Small Increments

• Embracing Innovation

• Transparency20

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Power Supply Plan

• Retire Winyah 3&4 in 2023

• Retire Winyah 1&2 in 2027

Meaningful Reduction in Coal

• 100 MW of dual-fuel aeroderivative CTs in 2023

Reliability

• Addition of ~500 MW of combined cycle generation in 2027

• Power Purchases in 2030s to match needs

Natural Gas Resources

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Power Supply Plan

• 1,000 MW of solar by 2024 and another 500MW by 2031

Sustainable Resources

• 200 MW of energy storage, phased in 2024-2028

Energy Storage

• 150 MW phased in 2020-2027

• 50 MW phased in 2028-2037

Demand Side Programs

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New, Diverse L&R Path

2030’s Energy Mix

Old L&R New Plan

52%

9%

29%

5% 5%

33%

10%30%

17%

5% 5%

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Solar Resources

Utility scale solar costs have declined by 89% since 2009.

Data Source: Lazard, “Lazard’s Levelized Cost of Energy Analysis – Version 13.0”, November 2019.

0%

20%

40%

60%

80%

100%

2009 2011 2013 2015 2017 2019

% o

f 2

00

9 C

ost

s

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Battery Storage

Battery storage costs have declined by 85% since 2010.

Data Source: Bloomberg New Energy Finance, “A Behind the Scenes Take on Lithium-ion Battery

Prices, March 2019.

0%

20%

40%

60%

80%

100%

2010 2012 2014 2016 2018

% o

f 2

01

0 C

ost

s

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Reform Plan

New Generation Capex

Santee Cooper’s plan is low risk with low capital needs

17

44 68

121 117

91

29

59

0

50

100

150

200

250

300

2020 2022 2024 2026 2028 2030 2032 2034 2036 2038

$ m

illio

ns

Only $547 million of

capital expenditures

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®Moving Forward under the

Coordination Agreement (CA)

• Reform Plan provides over a decade of price stability

• CA remains fully effective with beneficial changes

– 5-year contract term reduction to 2053

– Remove Cap on distributed energy resources

• subject to implementing policies and processes that avoid cost

shifts between Central and retail customers

– Evaluate sale of transmission assets after Act 95

process

– Improved communications and coordination on energy

risk management

date-unit no-pres no-2727

®Moving Forward under the

Coordination Agreement (cont’d)

• Resource planning and implementation

– Central would work side-by-side with Santee Cooper through new

planning and oversight processes to meet full Combined System loads

– Would together consider options for improving economics of Reform

Plan resources, which can be implemented by

• Santee Cooper on behalf of all customers or

• Central and Santee Cooper on a load ratio share basis

– Santee Cooper’s Commitment

• Integrated Resource Planning to be based on best interests for all

customers - Central and all retail customers

• Subject to new State Energy Office review process

• Mediation if Central and Santee Cooper cannot agree on resource

plans28

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Together Santee Cooper and

Central can …

• The Reform Plan has been structured to:

– Minimize implementation challenges and risks

– Shift significant project risk from customers to

developers

– Moderate longer-term risks

• Central and Santee Cooper share similar missions

– Low cost, reliable service to Customers

• Together, we can realize benefits of the Reform

Plan

– Economic benefits and reliability

date-unit no-pres no-2929

Governance & Oversight

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Governance & Oversight

• The General Assembly determines Santee

Cooper’s governance structure

• Reform Plan attempts to address areas of

concern

• Balance – appropriate oversight with efficient

operations and legal requirements

• We are ready to assist as requested

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Governance & Oversight

Focus on:

• Board structural changes

• Pricing and Planning Principles

• Stakeholder engagement and transparency

• Regulatory oversight

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Board Changes

• Term Limits (2 full terms)

• PSC qualifications

• Independent Experts

– Resource planning

– Pricing

– Finance

• Livestreaming of Board/Board Committee

meetings

– Board Materials and archived livestreams publicly

available

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Planning and Pricing Principles

• Established by Santee Cooper Board

– Resource Planning Principles (ultimately

drives pricing)

– Pricing Principles

• Compliance reviews by independent

groups

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Stakeholder Engagement

• IRP Group

– Broad Representation

– Participates in Act 62 IRP Process

– Public Meetings & Compliance Report

• Public Hearings for Major Project Siting

– Public notice

– ORS participation

• Public Hearings for Pricing Changes

– Public notice

– ORS participation35

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Regulatory Oversight

• In cooperation with Central, Act 62 IRP submitted

to the State Energy Office (or other appropriate

regulatory body) for review and concurrence

• ORS reviews and comments on the Board’s siting

decisions, with differences resolved by PSC

• ORS reviews and comments on the annual pricing

compliance report

• Annual Act 95 report to the General Assembly

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We recognize the need for reforms

Four critical areas

Board changes

Principle-based decision-making

Stakeholder engagement and transparency

Regulatory oversight

The final decision is yours

Key Takeaway #4

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Additional Information

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Reactor Coolant Pump

Escrow in Progress

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What We Have Done

• Hired new leadership

• Held headcount to 10% below 2017 budget

• Produced Business Forecast

• Developed Reform Plan

• Reorganized to focus on customers, planning

and innovation

• Issued RFI for new solar projects

• Debt: paid off $1.3B, refinanced $163M

• Reduced use of coal to 38% of energy mix

(down from 52% in 2016)

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Act 95 Process

• 300 employees

• 300 requests from DOA bankers, lawyers, consultants

• 20,000+ documents initially into data room

• 450 questions before management presentations

• 5 management presentations

• 10 site visits

• 2,000 incremental questions

• 52 conference calls

• 30,000 documents ultimately in data room

• 50 due diligence schedules

• Reform Plan submitted on time and in full compliance

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HR Actions

• 30% reduction in officer positions

– vice presidents and above

• Maintain 10% headcount reduction from 2017 budget

• 2020 budget headcount = 1,675

• Headcount will decline through attrition and retirement

with closure of Winyah

• Supplemental retirement plans closed to new participants

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New Org Structure

Charlie Duckworth

Deputy CEO & Chief Plan & Inn Officer

Financial & Resource Planning

Supply & Trading

Transmission Planning

Technology & Innovation

Research & Development

Pamela Williams Chief Financial

Officer

Controller’s Office

Treasurer’s Office

Corporate Budget & Pricing

Economic Development

Real Estate & Camp Hall

Environmental & Water Systems

Mike Baxley

Chief Public Affairs Officer & Gen

Counsel

Legal Services -Litigation

Legal Services –Regulatory Comp

Corporate Communications

Federal & State

Govt Relations

Local Govt & Comm Relations

Law Enforce & Security

VCSNS 2&3

Ken Lott

Chief Administration Officer & Corp Sec

Employee Relations

Talent Management

Occupational

Safety & Health

Employee Service Center

Supply Chain Management

Corporate

Services

Corporate Secretary Office

Tommy Curtis

Chief Generation

Officer

Cross Generating Station

Rainey Generating Station

Winyah Generating Station

Renewable Generation

Gen Services

Inc. VCSNS 1

Construction Services

Mike Poston

Chief Customer Officer

Cust Service

Wholesale/Indust

Customer Service

Retail

Power System Eng& Control

Distribution Ops

& Engineering

Monique Washington

General Auditor

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Next Steps

• Be responsive to legislative guidance

• Lock in natural gas and purchase power pricing,

and study joint savings with neighboring utilities

• Coordinate with Central – CA and resources

• Work with state regulators to define new working

relationships

• Launch IRP group and process

• Initiate Winyah redeployment plan

• Issue initial solar RFP

• Depth assessment and succession planning

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Benefits for South Carolina

The Santee Cooper Reform Plan :

Transforms customers’ power supply

Aggressively pays down debt

Stabilizes prices

Continues excellent reliability and safety

Continues strong economic development

Continues strong commitment to the Santee

Cooper Lakes

Adds substantial oversight and public input

Holds us accountable to you

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Questions?

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