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And provider of packaging services, with more than 300 operations in 35 countries.

- For the past couple of years at least the relationship with South Carolina and the state-owned utility Santee Cooper has been incendiary to say the least.

In a moment he is the chief executive officer of Santee Cooper, Mark Bonsall, joins us and we hope you will too.

It starts now.

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Providing the foundation upon which our communities improve and grow.

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Visit us at SouthCarolinaBlues.com.

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Learn more at barings.com.

(upbeat music) On this edition of Carolina Business Review, an executive profile featuring Mark Bonsall, president and CEO of Santee Cooper.

(upbeat music) - Thank you and welcome again to our program.

We are honored to have at least for the first time on broad media here in North and South Carolina the chief executive officer of the South Carolina based Santee Cooper, Mark Bonsall.

Mark welcome to the program and welcome to the Carolinas if it's not too late to say that.

- Thank you very much Chris, I appreciate being here.

- Almost don't know where to start.

Santee Cooper has been an incendiary topic in the media but, and Mark not being flippant about that but this whole idea of a state owned public utility and some of the, some of the issues around the over budget in the VC summer Nuclear Plants and the closing down of that a couple of years, two or three years ago.

Now and then you showed up on the scene about 18 months ago as CEO of Santee Cooper.

What, what is job one for You?

What do you hope to accomplish?

- Well, let me give you a little background on kinda how I got here.

I was the CEO of an organization called Salt River Project in Phoenix, Arizona for about eight years.

And I spent a 40 year career there.

And I retired and my wife and I spent all the time doing bucket list things.

And then I got a little itchy and I was aware of this situation.

I had worked with Sandy Cooper, Chris for over 30 years, since the early 80s and knew of the institution.

There was a kinship between Salt River Project and Santee Cooper because both institutions had both power and water.

And large public power institution, they were the only two that shared that commonality.

And I had worked with the people of Santee Cooper before.

I knew a little bit about the situation and was empathetic.

And had done some homework on it.

And I also know it, it was a solvable problem and my commitment thus was to not throw the baby out with the bath water.

It's a good institution and, because it was a solvable problem and I could help, when the call came and I didn't call them, they called me, expressed an interest in lo and behold.

You know here I, here I am.

The, and job one I would say is was to achieve stability.

And I think we've made a huge amount of progress in doing that.

The first 60 days, I brought an individual with me from Salt River Project, whom you may have read about, individual named Charlie Duckworth.

He was my resource planning manager and strategic planning manager and expert in resource economics.

And I viewed the issue as being fundamentally a resource economics issue.

The rest of Santee Cooper, the reliability portion of Santee Cooper, the customer service part of Santee Cooper, the safety part of Santee Cooper and basically the existing price structure of Santee Cooper, they were fine.

The bones were not broken.

The issue was resource planning that frankly got off the tracks and it needed to be put back on the, back on the tracks.

Mitigate the damage that had been done to the extent that it could be.

And uh, and it could be substantially.

And then get the, get the train kind of back on the tracks.

'Cause the institution itself, is a very beneficial institution that provides both (indistinct) power infrastructure to much of the state of South Carolina that laps over obviously into North Carolina as well.

So, I wanted to help and I perceived it as a problem that could in fact be fixed.

Can I tell you a little bit about the how?

- Please.

- The opportunities that existed in the utility business, the electric utility business, in this decade are unprecedented in my experience.

I've got over 40 years of experience doing this.

Um the economics of natural gas, the economics of renewables have undertaken such a seismic shift that in fact the ability to reduce your marginal longterm costs exists today and it never had in the 30 years prior to that point in this industry.

So you can in fact affect both a leaner and a greener marginal cost of electricity.

That opportunity existed, it was not being taken advantage of at Santee Cooper.

But it could be and.

So that's the, that was the opportunity to come in and affect those kinds of changes.

Maintaining the health of the bones, the skeleton.

And improving the longterm economics of the operation.

Anybody that came in, whether you sold this institution, whether somebody else came in to manage it or whether Santee Cooper managed it themselves, would do those same things.

And the benefit I thought that I could bring to it was some way shaper form.

I know how to do those things.

That's the piece that they were missing.

Good organization otherwise, but the two together and create a new future for the institution.

- Well what's the, you know the acrimonious part, the, in the court of public opinion, it depends who you talk to.

Which of course Santee Cooper has its supporters in the low country and the service area.

And then it has those folks in the state.

And this is not gonna be a surprise to you.

And especially in the general assembly that absolutely wanna sell the asset and don't like, don't like the attitude from senior management at Santee Cooper.

Did that surprise you?

Does that surprise you?

And is there a way to remediate that at this hour of the game?

- Well, I think the answer to that is is you have to be committed to rebuilding trust.

So let's, let's go back a little bit on the history of the, of the issue.

And by the way, I'm not an expert on the history of the issue.

Cause I wasn't here.

Thank me to look forward, not necessarily look backward but that you really kind of have to do the same at the same time.

And, and the history of developing nuclear generating stations in this industry, it is not good if you look back on it.

The allure of nuclear power is very compelling and an enormous amount of non emitting energy.

The problem is getting them built.

And the industry is checkered with difficulties in getting these kinds of plants built.

And all you gotta do is look across the border at Vogel and through quite a difficult history.

It would appear that it's gonna make it.

But it's gonna be real expensive once they get it built.

So that was the, that's the ch the allure was there.

And I understood that.

I can understand a lot of people in South Carolina and the Carolinas, finding that to be attractive.

The challenge is getting them, getting them built.

And this one kinda got off the, off the tracks.

Now Santee Cooper you know was kind of the junior partner.

It was not senior partner, in the project.

And, but it made the right decision when it could, which was to say, stop, this is going to rails, the economics are going South on us, this is not gonna be realizable.

We need to shut it down.

This is the, those are very very very difficult decisions to make, but I credit the board in making the right decision.

- I don't wanna beat this up, I promise we're not gonna talk about this for the whole extent that we're together Mark, the idea that a salvageable relationship is with the general assembly, are you optimistic?

- Well, I'm I'm, am I optimistic?

I, I'm hopeful.

The issue is what to trust and their knowledge of what was going on here.

And that was broken.

And I understand that.

And I understand why they would be full of angst about that.

I get that.

The, and we need to put those pieces back together again.

And part of, part of putting the pieces back together again is restoring the healthy institution which we can talk about.

And I think we have, have in fact done.

But then, installing systematic processes for transparency and disclosure.

And we should do that.

That's fine with me.

I think that's in fact the right thing to do it.

That's the beast that seems to me to have been in uh.

So, as you look to what needs to be kind of repaired or addressed here to some degree, to some large degree, I think the issue was not so much the failure of the project.

It was the failure to talk about it.

(indistinct chattering) - Go ahead, I'm sorry.

- I understand that we've made suggestions about, you and I both have a financial background.

And in the old days of municipal finance, I'm thinking 90s and earlier, all of us in this business used to produce systematically a consulting engineer's report.

And we included it in our official statement so that our investors could rely on somebody else coming in kicking the tires, making sure that everything worked well, the plans were in sync, it made sense, et cetera.

And we included that as part of our official statement.

That practice died sometime in the 1990s.

But that to me is an example of the kind of thing that can be done systematically to provide people with, you know, external party validation that the operation of the institution is good, is rational, is accomplishing its purpose.

- Do you get the feel during the general assembly session that is now in progress, that there will be one thing or two things or several bullet points that come out of the reform so far that you've been able you and your team, have been able to achieve?

That will tip the scales for the best long-term viability of Santee Cooper, as an agency in South Carolina.

- Do I believe that that will emerge from the general assembly?

I do, I, like I said I'm hopeful.

But that's (indistinct) because I think that's the rational solution.

The entirety of the institution is, if you look at it's very good.

I mean it produces good results.

It's a publicly owned institution, it delivers the benefits that it's supposed to deliver, reliability, water, broadband, now, et cetera.

So all those things are good.

The issue was one of, I think, principally communication.

And I do believe that that there are responses to that, that question that are, this should be fully satisfactory.

And it should be in fact implemented.

Kind of environment that I had at Salt River Project.

Full disclosure on the website, come on in, take a look.

We're a public institution and we're draped in the public interest.

And as a result have a responsibility to inform that public interest about what we're doing.

I believe that.

- You've had at least two seismic challenges since you took over.

One is the closing and the shattering of the Atlantic Coast Pipeline.

And the second one is a new administration in Washington.

Any which of one will have a pretty big impact on the DNA of your, of your business?

How does the Atlantic coast Pipeline, how does that shutting down affect where you are now?

And what about a new Biden administration's policies?

- I'll address the Atlantic Coast Pipeline question in terms of planning.

One of the things we did early on at Santee Cooper in creating the reform plan, was to ask the board to adopt formal resource planning and formal financial planning principles.

And we built our plan around those principles.

And one of the principles in the resource planning side, as I think you can particularly value, is optionality, optionally, yeah optionality.

So measure your risks and have backup plans.

So we did have backup plans for the potential event that the Atlantic Coast Pipeline could in fact be canceled.

And there's, there's two of them.

In fact one of the backup plans is probably preferable to the principal plan, which is to restore the potential for additional generation, in the West part of the State.

In fact at UC Summer Site, and, the reason for that is you've got existing transmission, you've got land, you've got water, you've got an existing operation, you've got existing common facilities.

None of that has to be replicated.

It's an existing site that can be used fruitfully for the entire region actually.

'Cause there's a lot of transmission that kinda intersects at that particular point.

So that's the backup plan.

That's one of the backup plans.

We have another backup plan in place as well.

So optionality, I think is the answer to your question.

Is that, was that a big hit?

Yeah, it but it was not unexpected.

And, and as a result of not being unexpected, we had backup plans in place that we could go pursue.

As to the Biden administration question, um I think the Biden administration, there will be pluses and minuses, as there are in any administrative change.

One of the things that has been talked about even within the last few days, the first few days of the administration, is to lift the prohibition against public power undies on advanced refundings of their debt.

That's the tool that everybody in the world had.

Refinance our mortgages periodically.

There's actually limitations on the ability of an institution like Santee Cooper to do that.

So you're managing your debt with one hand tied behind your back.

And they're talking about lifting that restriction.

That's a very sophisticated concept for a new administration to talk about.

But it's actually tremendously meaningful to institutions like Santee Cooper and my former employer Salt River Project.

The implications potentially to what goes on with natural gas prices, fracking, et cetera, et cetera.

Clearly there could be some implications there and they drive the fuel, economics of an institution like this.

And we're just gonna see actually how they play out.

But you can probably expect that it's not gonna be as cheap as it has been over the last decade, clearly.

And just plan for that, you have to plan for that.

- So as the metric changes, the matrix changes rather around power generation, solar.

And now we also have EVs and we've got, you know Tesla has certainly helped a whole generation discover that electric cars are certainly a wave of the future.

How does all of this change the way that Santee Cooper could potentially continue to generate power beyond just solar?

- Well batteries certainly are a tremendous opportunity.

And everybody has in touting the potential value of batteries for a long long period of time.

But in recent years and forecast in the next few years, battery technology I think really will make substantial advances.

And the advances are the density of energy that can be contained within a battery.

So same size battery, but five times as much energy, huge change.

That's a sea change in the ability to deploy batteries effectively.

And, things like batteries thus, they're off, the changes you talk about are actually all favorable.

So storage mechanisms can smooth out your load, smooth out your production and it, 'cause now you have a storage mechanism that can intervene.

So your production, can in fact be more efficient.

'Cause you're producing seven by 24.

That the load user may, may go up and down.

But you can produce pretty much in the shape of a rectangle and just feed the excess into the batteries and then take it out of the battery.

So that's, that's a dramatic improvement actually in the economics of the industry because it improves the economics generation.

Same thing with the electric vehicles.

Because if for instance in Arizona in particular, or anywhere frankly, that, more than likely the load goes down generally at night.

And if people are charging at night, or you can influence people to charge whenever your load otherwise goes down, same, same effect.

You flatten your load, you thus flat and you make more efficient your ability to produce, produce energy.

Those are both favorable changes to the industry.

- Do producers like Santee Cooper and the Salt River Project, is where you were before, and as you referenced a couple of times now, do you have the leverage?

Do you have the economies of scale that a Duke Energy or NextEra or Dominion would have?

Does it allow you to be competitive long-term?

Or would you eventually have to look for some capital structure reset.

Or some type of strategic partnership to remain competitive, the long longterm.

- No, I think the that's a very complex quest question (indistinct), but I think Santee Cooper is just about of the size where you need to be, to be functional in this and configured in a way with both generation transmission, distribution that to be a player there.

Do I think there are opportunities that necessitate growth in the institutional size of the business to maintain economies of scale?

As long as you're about the size of Santee Cooper I think you're okay.

It's smaller entities probably would suffer.

But most of what you're talking about, can be accomplished through contractual relationships.

Not necessarily physical or ownership relationships.

And let me give you an example.

You've probably heard of project SeaM?

- Mmh.

- Is that right?

- Mmh.

- Yeah, SeaM is a regional construct where the last little bit of energy that exists on the system can in fact be traded on a marginal cost basis with no transmission costs.

So it allows you to optimize that last five minutes.

It's a 15 minute market basically for energy.

You don't have to be huge to avail yourself of that.

You have to have transmission interconnections.

But you don't have to be huge to avail yourself of that.

That kind of market requires size, scope, but that can be created contractually among the parties.

It doesn't have to be a physical reality one owner systems.

I'm responding to your?

- Yeah yeah yeah.

Yeah and I'm also thinking about Mark, the larger, we go back to the Biden administration's policies that are unknown right now in large part.

But, the idea that many people have said there needs to be reform among the electric grid in the U S anyway.

Could there be, could there be something, I don't want to just speculate too much because hypothetically it's not gonna mean anything, but in major change or upgrade in the grid itself.

Does that, could that be a prohibitive costs for someone like Santee Cooper?

If it came down the pipe.

- It could be a large cost.

Whether it would be a prohibitive cost or not is a relative question relative to others.

But it, could be a large cost?

Yes, it could be.

Because the grid obviously was not built to be omnidirectional.

It was built to get power from point A to point B, because there was a load there and there was a generator here.

And if you want to restructure the grid to basically be omnidirectional, is that a huge investment?

Yeah, it is a huge investment.

It's not built (indistinct) right now.

So it would be difficult to do that.

It's a long-term to, to answer your question If you wanna do that, it can be done, but you should give it a long lead time.

Because it's not a simple process and it's not gonna happen overnight.

Could it happened?

Yeah, it could but it's probably a 10, 15 maybe 20 year kind of a transition.

- Yeah, that's what I thought.

We have about three minutes left and I wanna unpack the ideas is you drew parallels to the salt region, Salt River Project, that you came from in Arizona as well as Santee Cooper.

One of the service capabilities you have is also water.

But another one is broadband.

And there's a lot of talk about broadband access in that last mile to everyone's home as well as everyone's business.

Mark, do you, would you forecast that the South Carolina General Assembly will fully fund whatever that broadband accessibility and connectivity will be and needs to be?

Will they do it this year?

- I can't answer that question.

I apologize I really can't answer that question.

I think that is clearly their intent.

I don't know if anybody knows exactly how much that's gonna cost but I do know that Santee Cooper has an existing grid.

It delivers energy to every single County in the state of South Carolina.

It doesn't, it doesn't have polls in every County, but it reaches into every County.

So you don't (indistinct), you do not need to reinvent the wheel there.

You don't need to make a new investment in a new grid.

You can hop on ours.

And, we have no intention of being the last mile provider as you know, but we do wanna be a meaningful player in creating the broadband backbone for the state of South Carolina.

And I think we can go a long ways to doing that.

I hope they do.

It's a, you know, it's as important as when Santee Cooper was created 85 years ago to bring light to rural South Carolina.

It's this, it's the same kind of public purpose of bringing communication, TeleMed, tele-education, et cetera, to all of Santee, all of South Carolina.

And we look forward to playing a role in that.

- In a minute left, we're gonna end up where we started Mark.

And as much as you feel comfortable answering this question, how would you handicap this year, in the general session, the General Assembly session, that the fate of Santee Cooper will be sealed by a vote in the General Assembly.

- Well, between you and me, I hope that it does.

This is the third year, that it's under consideration.

And uh, there's been a lot of deep thought given to, a lot of, a lot of effort, et cetera, et cetera.

And I am hopeful that, that we get an answer, frankly.

And it's up to the General Assembly.

It's clearly up to the General Assembly But I feel comfortable, pleased.

I've made a couple of mistakes, but I feel comfortable and pleased that we've made progress in delivering a better institution to the state South, for their consideration.

Whatever they decide, it's a better institution.

It's got more value associated with it.

It's got fewer problems.

So I'm pleased with that.

- Chief executive Bonsall thank you for taking time on a half an hour is no small commitment out of your schedule.

And thank you for your leadership in South Carolina.

Best of luck and please stay healthy.

- Thank you much I appreciate that, you take care.

- [Narrator] Major funding for Carolina Business Review provided by High Point University, Martin Marietta, Colonial Life, The Duke Endowment, Barings, Grant Thornton, Sonoco, BlueCross BlueShield of South Carolina and by viewers like you, thank you.

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