♪ Welcome to This Week In South Carolina.

I'm Gavin Jackson at the Statehouse in Columbia.

Where I talk with two prominent Republican Senators this week, including Senator Stephen Goldfinch of Georgetown and Senator Tom Davis of Beaufort.

We talked to Senator Davis about a multitude of topics, including energy, which is what I asked him about right when we started our conversation.

Yeah, I mean, and this really stems back to July of 2017, when the V.C.

Summer two and three reactor projects failed.

And at that point in time, I did a deep dive into, okay, how could that have happened?

And learned more about how we generate power in South Carolina, how it's transmitted, how it's distributed.

And sort of, the bill that... before us right now is the culmination of, I guess so, seven, seven and a half years worth of study into energy.

And so the interesting thing is, is we've had a model that's been in place for about 100 years.

We divided the state up into three geographic regions about 100 years ago.

And we said to a utility, we'll give you a monopoly to provide power in this area and give you a guaranteed rate of return on every dollar you invest in power production.

And we needed to do that 100 years ago to bring capital to South Carolina, to bring electrical power to South Carolina.

We needed to do that as an inducement.

But there's a moral hazard associated with that, because if you're paying a utility, a guaranteed return on every dollar they invest in generation, there is a bias toward capital intensive projects.

So there's a bias toward not pursuing efficiency.

There's a bias towards not doing something innovative.

And so, and looking at what happened in V.C.

Summer two and three back in July of 2017.

One of the things I realized was we need to bring more market pressure into the system.

We need to bring more independent power producers generating power, creating competition in the production sector, making these utilities adopt best practices.

So, we analyzed the need for power, but also the way we provide power in South Carolina.

So this House bill takes up a lot of those things.

We started the debate last year on it.

And it's important to kind of, table set here, in terms of power generation South Carolina has 55% of its power is nuclear.

A substantial portion of its power, especially for Santee Cooper is coal.

And then third would be natural gas.

We're trying to move away from coal because, more carbon emissions more toward natural gas, that has less carbon emissions.

And also building on our nuclear power.

Gavin> And we'll talk more about this in a minute.

But yes, so far they really still do need that coal production online because we are in such demand right now.

Tell us about that demand.

What you're hearing from folks.

And, you know, when we're talking about this bill, how it might help South Carolinians?

I mean, is it gonna make things cheaper if we can get more energy on, online in the state how does this work?

Sen. Davis> Yeah.

Well, first of all, we have an abundance of natural gas in the United States.

And in terms of comparative advantage, you want to take advantage of that.

And so, given the fact that we have an abundance of natural gas in the United States, gas plants in South Carolina are part of our future.

There's a joint venture proposed between Dominion and Santee Cooper that I think is going to go forward.

You also have more gas being brought throughout the state.

So I think, you know, but you made a good point about coal earlier.

Coal is a big part of our current power generation, and we want to move away from that, but we can't move away from it until we are substitute power.

So until you bring these other forms of generation online to replace it, it doesn't make sense to talk about shutting down these coal plants.

Now, that is an objective, but we got to be practical about that.

You can't shut down something that's providing 30 to 35% of our power generation, because if you don't have replacement energy, people's lights aren't going to come on.

Gavin> And that's something that they're looking to phase out, I think, in early 2030s when it comes to coal.

And that... at that point will be transitioning possibly to a new gas fired plant if that partnership goes forward with Santee Cooper and Dominion for that natural gas plant.

Sen. Davis> And you've got other, I mean in terms of replacement energy coming online, to retire these coal plants, I talked about nuclear.

We're talking about V.C.

Summer two and three and trying to complete those facilities.

I mean, and that's very important that, $9 billion was spent toward building these reactors.

And then they walked away, they being SCE and G and Santee Cooper back in July of 2017, saying "we couldn't finish this."

One smart thing we did is said to Santee Cooper, "keep that in good condition, keep what's on the ground out there in good repair, because economic conditions may change at some point in the future that make it economically viable."

And those situations have changed because there is a higher demand for power now than there was back in 2017.

A lot of these, you know, big hyperscalers like Microsoft and Google and Meta, I mean, they need power generation and they're willing to pay premium for that power generation.

So the demand side of the equation has changed materially.

Also, you've got federal tax credits and loan guarantees available to cover up to 40% of the cost of completing those nuclear reactors.

And then thirdly, I would say that these reactors that were abandoned back in July 2017, they were brand new AP1000 Westinghouse design.

We were the first ones to build it.

So we encountered a lot of beta logistical problems.

Since then, Georgia has completed an AP1000, China's completed two.

We now have detailed blueprints on how to complete it, so the economic conditions have changed.

The circumstances are now such that it may be feasible to complete those reactors, but on these conditions.

Making sure it's, the private sector that does it, no risk to the ratepayer, no risk to the taxpayer.

If a large company wants to come along and they want to purchase the asset that's on the ground out there and use their own money to complete it, that's 2200MW of clean energy that's brought online, and it's also going to take a lot of money out of existing rate bases and lower utility bills.

Because a substantial portion of the $9 billion that was spent to build V.C.

Summer two and three, those are still embedded in Santee Cooper and Dominion ratepayer's base.

So, if we can come up with a model whereby private sector comes in and purchases that asset and completes it using totally private sector dollars, not only do we have new generation that's carbon free, but we take that sunk cost off existing power bills.

Gavin> So then do you feel comfortable in going forward with all this?

I mean, I feel like a lot of people have concerns about this big bill when we were seeing it move last year, and there's even talk about it maybe taking another year to get through the whole process here.

Though, it does seem like it's poised to move because that bill's in subcommittee this week.

But when we talked about looking at the past and the Baseload Review Act and how people felt, that was rushed through.

And then we saw how it played out during V.C.

Summer, back in 2017, $9 billion later.

I mean, do you feel like we are in a better place now, at least ratepayers, the state, regulators when it comes to trying to do this again?

And you can maybe even give some guarantees that we won't see another boondoggle like we saw back in 2017.

Sen. Davis> Yes, I think, and the reason is this since that failure in July 2017 with V.C.

Summer, that was a wake up call.

And 170 legislators who probably most of them, including me, didn't really understand much about power generation, transmission, distribution.

We now know a lot more about it.

We know a lot about the generation model.

We know all about the mechanics of the industry.

We understand utilities point of view.

We understand the point of view of ratepayers.

So you have a more informed legislative body, right now.

And so it's, you're right, with the Baseload Review Act, I was in Sanford's office as Chief of Staff when that was passed.

And as I recall, a lot of deference was paid by legislators to utility representatives because they're the ones, the experts, they're the ones in the business.

And so a lot of faith and trust was placed in them.

So once burned, twice shy.

I think this time around- Gavin> -And he didn't sign that bill either.

Sen. Davis> He did not, he did not, you know, and I was I was there when we made the decision not to sign that bill.

But to your point, I think things are different now in that there is a lot more knowledge in the legislative body in regard to the mechanics and the procedures associated with generating power and transmitting it and distributing it.

So I do think we're going to pass a good bill.

I do think we're going to set the table to meet South Carolina's energy needs, for generations to come.

And I think we're going to introduce into the system a market dynamic to where independent power producers, if they've got a new idea, if they have, if they have an ability to generate power, that's less than what the utilities cost is that they have the ability to bring that power online and the savings get passed on to the consumer.

So, that's the objective here, is to provide for power, but also in a way that benefits the consumer.

> And Senator, when we talk about this, we talk about these requests for proposals that Santee Cooper's put out there for V.C.

Summer reactors two and three construction.

Have you got any indication about just what that market, what that appetite is like out there, who potential, investors could be what that situation is like right now?

> Yeah, I spoke with an official at Santee Cooper about a week ago, and they had gotten 17, responses from the private sector to sign non-disclosure agreements, which is a condition to then getting the RFP and then responding.

So, there's a robust interest in the private sector here.

And what I suspect will happen as the process moves along.

And Santee Cooper has until May 5th to solicit these offers, make a determination of which one it wants to accept, and then bring that proposal to the Joint Bond Review Committee for approval.

I think what you're likely to see over the next few months are a lot of these respondents, a lot of these bidders maybe forming consortiums and getting together and doing something collectively.

But that will happen organically in the private sector.

Let them decide how they want to submit their proposals because, it is a tremendously complex and expensive piece of generation.

So, you know, having a Google or a Meta or a Microsoft or, or a large industrial user like Century Aluminum or or things of that nature, I suspect you're going to see a lot of these large hyperscaler users coming together, forming a consortium, and then moving forward on that basis.

Gavin> Do you have any concerns about how that could affect rates in the future for just the average person, when we talk about these large scale users, data centers, advanced manufacturing?

Sen. Davis> Well, in regard to the V.C.

Summer piece not a concern, because what we're talking about there is taking a sunk cost off of existing ratepayer's base.

Longer term, which what I think you're asking is as these hyperscalers and data centers come in and they generate demand for power, you're right, under the old model, the model we have right now, historically, the cost of those new generation needs are born across the entire population.

So you have all the rate base essentially, you know, subsidizing or socializing the need for that new generation.

One of the things we're trying to do with this energy bill that the House passed, and which the Senate is taking up, is try to align the cost of new generation with the entities that are causing the need for that new generation, and trying to have them shoulder the financial cost of that and not having it spread across the rate base as a whole.

And what you're seeing are large energy users, they're willing to do that.

I mean, they're willing to put up their capital.

They're willing to take on that risk.

But again, it's a different model than what we've had for the past 100 years because for the past 100 years, we've had a model where you've got three geographic regions, a utility that's a monopoly, in each of those regions, they build the generation, they get paid a guaranteed rate of return on what they, what they put in to build that generation.

And then that's paid for by the entire rate base, by users.

We're moving, I think, incrementally away from that and trying to align the costs associated with new generation, with the entities that are causing the need for that new generation.

And that's a much more equitable way of going about doing it.

Gavin> And we have a few minutes left Senator, I want to ask you just about, how long this could take?

And if you think we're behind the eight ball on this, I mean, are you worried that we're not gonna be able to meet...

I mean, it seems like we're having demand, meeting demand issues right now, but do you feel like the amount of time it takes to maybe get V.C.

Summer two and three back online or online, I should say, as well as creating more energy within these other plants.

I mean, do you think we're on track to meet this moment?

Sen. Davis> Yeah and it's a good question.

I mean, we've got near-term, mid-term and long-term energy needs.

When we talk about V.C.

Summer two and three, that's more in the nature of a long-term fix.

That's going to be 8 or 9 years to bring that online.

More intermediate term, is a gas plant.

You can bring a gas plant online in about six years or so.

And then near-term, what we can do to meet some of our energy needs, if we're short, is maybe expanding the opportunity for large users to go outside the existing system and go to generators from outside the state and purchase their power in that way.

So, you know, as we approach this and we talk about the need for power, you have to break it down in the near-term, mid-term and long-term.

And so, gas is mid-term, nuclear is long-term, the near-term, I think one of the ways to meet the demand needs is to open up the system and allow large energy users to go outside the three utilities we have in the state and maybe purchase directly from a generator from out of state.

Gavin> But then how do you get them to come back to play ball if you do add more generation in the state, then?

Sen. Davis> Well, I think that's the balancing act here, because utilities will say rightly, how can we plan for generation if we don't know who our customers are going to be?

And if you give them the right to go outside of our system, we can't plan.

So I think you have to have a reasonable threshold whereby if you're a large user, then you can opt out and do that.

But, I think you got to be careful about what that threshold is, because utilities do need to have that knowledge of who their base is going to be when they propose generation.

Gavin> Senator, we have two minutes left.

I wanna ask you about a couple different things, including the Senate education bill, the voucher bill that's going to use lottery funds to fund those vouchers.

You proposed a bill or backed one that would use tax credits instead.

Why did you see that as a better way of getting around, I guess, you know, using funds to fund private education.

Sen. Davis> First of all, I think... using lottery dollars, to fund, the voucher program through K-12, takes the money away from the scholarships for the universities, which historically what it's been used for, and so there's, there's that one issue.

But more to that, if you want to open up to competition and have a voucher program, there's a state constitutional provision that says, public money cannot be used for private religious purposes.

And a lot of parochial schools are participating in these, in these voucher programs.

And so a way around that, other states also have amendments that say that if you do it on a tax credit basis, the money never gets into the state treasury, it never becomes public funds, so that particular issue doesn't arise.

So, that's why I proposed a tax credit approach instead of using lottery funds.

I think it's cleaner from a constitutional standpoint.

And I think it also, whether or not to direct lottery dollars away from scholarships to universities and colleges, I think is a problematic notion.

So, but there's a lot of work to be done on that.

The bill's now over in the House, I'm sure they're going to have their own funding mechanism to propose.

And so, but I do think you're going to see a choice bill before the end of the session.

Gavin> And really quick, Senate Finance Committee, you're on there, we just saw the BEA announce more money for y'all to use to craft the budget with.

We're talking about $666 million in recurring additional and then also an additional $1.2 billion in one-time dollars.

What does that signal to you?

Do you think y'all still need to be very cautious when we talk about the economy and how things are stabilizing right now?

Sen. Davis> Well, I think that BEA report, you know, puts winds in the sails of those who want to cut taxes further.

I mean, you know, look, there's only scarce resources in society.

And I'm of a belief that those dollars can be more productive in the private sector than they can in the public sector.

So the more money we can leave in the private sector, the more yield you get on those scarce dollars.

So I do think those BEA numbers suggest, that we ought to have further tax relief.

You know, the Governor has called for it.

The Speaker of the House has called for it.

The Senate Finance Chairman Peeler has called for it.

So I anticipate that a lot of those new revenues that are coming in above and beyond expectations are not going to be spent by government, but are going to be returned back to the tax payers- Gavin> -Like 6% or lower than 6% or where do you think we can go?

Sen. Davis> Well, I think, you know, the Speaker and the Governor have talked in terms of lowering the top marginal rate to six or below 6%.

I personally think we need to take a broader approach and look at maybe doing something in regard to the sales tax as well as income tax, doing something comprehensive.

But again, the devil's in the details.

And the broader you make a tax proposal, the more stakeholders that come out who have an interest in keeping things the way they are, the more they lobby up.

So, but the bottom line is, I don't know exactly what the tax reform is going to look like, but at the end of the session, there will be more money going back to taxpayers through a tax cut of some sort.

Gavin> And we'll leave it there with Senate LCI Chairman Tom Davis, thank you so much.

Sen. Davis> I appreciate you having me, thank you.

> Joining me now is Georgetown Republican Senator Stephen Goldfinch to talk about several legislative priorities, including that $1.8 billion accounting discrepancy.

Senator Goldfinch, thanks for joining us here at the State House.

Sen. Goldfinch> Thanks for having me.

Gavin> So I want to talk about that $1.8 billion that's been getting a lot of traction, you're on the Senate Finance Subcommittee dealing with that, looking into that matter.

You just had the Treasurer's Office Chief of Staff before that committee this week.

Tell us what you heard from her.

And if you're satisfied with this, the answers and going forward with this investigation.

> I heard a lot of nonsense.

She was clearly coached.

She actually admitted to being coached by a crisis consulting team that the, clearly state tax dollars paid for.

That's a concern in and of itself.

But she said a lot of nothing.

We asked a lot of pertinent, substantive questions that need to be answered.

She did answer a few questions that I think are, not in the best interest of the Treasurer.

But for the most part, she avoided our questions and was clearly coached and that's a problem.

Gavin> Again we're talking about Clarissa, who's been at the State Treasurer's Office for 11 years.

This problem has been going on since 2017, and it came to light when there were some changes with the Comptroller General's Office too.

So, tell us about this $1.8 billion.

Where do you see this going?

What more needs to be done at this point?

Sen. Goldfinch> Well, if you want a history of the $1.8 billion, we'd be here for the next two hours.

But basically it was an accounting error, that goes back even prior to 2017.

But it appears from the documents that we have uncovered that the Treasurer's Office and the Comptroller General, the former Comptroller General, knew about the accounting error, knew that it did not actually exist, the money did not actually exist because both of those offices had discussions on writing it down, writing it off to zero.

I asked a question yesterday of Mrs. Adams, if you knew going back to 2017 that you could write it down to zero and it wouldn't make any difference, doesn't that mean that you knew that the money wasn't real?

And she wouldn't answer that question.

So I suspect that we... we all know, in theory now, but we'll find out in reality, that they knew going back to 17, the money wasn't real.

And yet the Treasurer came to us, testified behind, closed doors I'm sorry, in open session, testified last year to our subcommittee that the money existed.

Not only did the money exist that he had, that he had gotten about $225 million in interest, off that money.

And the General Assembly had spent that money.

Mysteriously, about that same amount of money appeared in an account about that time.

So, you know, some of us are suspicious whether or not he's moved money around to try to cover up his tracks from a lie.

Gavin> So then when we get to this, I mean, when you get down to it and, you know, this money didn't exist and there's some money that did, there's interest being generated there's not interest being generated.

We've never really got a definitive answer or like a silver bullet or a smoking gun here.

But like, what do you think was actually happening that we're not being told happened?

Sen Goldfinch> Yeah.

So if you, if I had... had a crystal ball and I could see behind closed doors, I think when the conversion happened between the old, the state's old accounting system and the state's new accounting system, they didn't have people in place, and certainly the Treasurer is not an expert.

The Treasurer's not an accountant by any means, he has no expertise in, in accounting or in the Treasury Department.

He's just an elected official.

I think what happened in that conversion, there was a big giant figure that was left over.

Nobody knew why, and they didn't have the expertise in-house to figure it out.

So the treasurer values his image a lot it's clear, and I think he didn't want his image to be tarnished and tainted.

And so he began, he began a cover up campaign to try to make himself look like he knew what he was doing.

And quite frankly, I don't think anybody on the subcommittee believes he knew what he was doing.

It's usually not the problem or the error that gets you in trouble.

It's the cover up that gets you in trouble.

<Yeah> He has a duty, I'm sorry to interrupt you, but the treasurer has a duty to inform the General Assembly of any anomalies in the state's finances.

A $1.8 billion anomaly is a big anomaly, that needed to be reported.

He didn't report it, he covered it up.

Gavin> Which is the biggest concern there too, because everyone said, "oh it's going to wash out, it's not real money, it's not a big deal."

But then it never came to your attention.

So the oversight there was not, working the way it should.

So we're talking about what more needs to be done.

He wasn't before your subcommittee this week.

Is he going to be before it next week?

And then what's, is going to be under oath?

What more do you need to learn from the State Treasurer's Office?

Sen. Goldfinch> For clarity, we asked him to come to our subcommittee.

He didn't show up.

He sent his staff in place, knowing that his staff was going to get grilled by us.

Supposedly, he's on some RV camping trip across country right now, nobody knows where.

We're going to ask him to come back, probably next week.

And I expect him to be there.

I know the Chairman expects him to be there.

And at some point in time, if he decides not to show up again, he might find himself with a subpoena.

Gavin> And so there are moves to make the auditor, who resigned as well amid this controversy, an appointed position by the Governor.

There's also moves to do that with, and that was a House bill that moved out on Wednesday of this week.

A bill making the Comptroller General an appointed position has also been on the move in the Senate.

What more efforts need to be done?

Will this be enough?

I mean, obviously, we have to see something from the Treasurer's office too.

What moves do we see happening here when it comes to reforms needed to be passed?

Sen. Goldfinch> I think all three of those need to go.

Of course, it'll require constitutional amendment.

The Treasurer's a constitutional officer.

So it'll require a constitutional amendment.

But yeah, that needs to be done.

All three of those offices need to be appointed based on merit, based on qualification, based on competence, not based on how well you can talk to the general public.

> And when we're talking about, this ongoing investigation, there's also a Securities and Exchange Commission investigation into the state looking into that "cover up," as you call it.

What do we know about that?

I feel like it's been going on for about a year right now.

There's always talk about our credit rating being affected, but it seems like people are more concerned about penalties and fines at this stage.

> I'm very concerned about penalties and fines.

But honestly, I think our credit rating is probably the most important thing that we should be focused on.

That could cost all of our local districts, our school districts, our hospitals, our counties, our municipalities, millions of dollars, just a fraction of a tick in an interest point can cost all those things millions of dollars in interest every single year.

And so that's a huge concern.

And quite honestly, if the rating agencies see us, see weakness in us, see, let's just say a treasurer that may or may not be caught up in some kind of a scandal.

I don't, you know, there's a real possibility that they ding us on our credit rating.

Gavin> How do we get to the bottom of this?

I mean, is it going to have to be the result of this SEC investigation to find out what really happened in your opinion, or is it going to be continued focus on your committee to find out what happened too or both.

Sen. Goldfinch> I think that our committee knows enough about the Treasurer's conduct to take the next step.

And, the next step, in my opinion, is the Treasurer needs to go.

However he needs to go, he either needs to go via his own, I would hope that he would save the state and its tax dollars, you know, its taxpayers a lot of money and just remove himself.

Gavin> Because you're talking about money being spent for legal fees, crisis communications, I mean, do we even have an idea how much money is being spent right now?

Sen. Goldfinch> Well, yeah.

I mean, I do have an idea.

So far, the Attorney General's Office has asked so far for about $5 million in attorney's fees.

It's already been spent, for Curtis Loftis' mistake.

They're asking for another about $4 million, obviously crisis communications, obviously the forensic audit, which was, I think, close to $3 million.

So we're talking about, you know, mid-teens, you know, let's just say 13, 14, $15 million, so far without fines and penalties because of Treasurer Loftis.

Gavin> And to pivot really quick and with two minutes left, you're talking about a lot of money being spent, some would say unnecessarily, but there's something going on here obviously, so it needs to be spent.

But when you look at state government as a whole, you have a new bill that you introduced, replicating what we're seeing at the federal level with the department, the so-called "Department of Government Efficiency," DOGE.

What are you trying to accomplish with that?

And what do you see needing to be done in South Carolina when it comes to streamlining government?

Sen. Goldfinch> I just I think self-reflection is a good thing.

Anytime you can look in the mirror and figure out whether or not you're doing the right things for the state, the right things for our constituencies, that's a good thing.

Transparency, sunlight, I don't know why you could ever argue with it.

Now, some people are saying, you know, "we're already doing a lot of these things at the legislative level.

We have a legislative oversight committee," and they're correct about that.

But most of our constituents that are paying close attention to this would say, well, that may be, you know, we've been doing this a long time.

That may be the fox guarding the henhouse.

Is there any harm in having an outside panel look inside?

You know we're, we're very, isolated sometimes we're in a bubble here in the State House, and we don't necessarily understand what the people outside dealing with those regulations, dealing with those over burdensome regulations, the bureaucrats, the agencies on a daily basis, we don't quite understand the burden that that puts on them.

Having those folks talk to us on the inside and saying, "this is a real issue, give us a little different perspective."

That's a good thing.

Gavin> Yeah.

So some more oversight there.

Some more, couple more eyes, about ten more on that.

So with about a minute left there, Senator, we have about an extra $1.9 billion, part of that recurring part of that one-time dollars.

Where do you want to see that money go?

Obviously the budget's still in the House, but you're on the Senate Finance Committee.

What do you see happening with that extra money?

Giving it back to people, perhaps?

Sen. Goldfinch> Well, certainly.

You know, I'm in favor of always, and I have been in favor for the last five years of giving it a lot of that money back to our teachers.

Our education system has come a long ways in the last decade.

It needs to come a lot farther.

So anytime we have a little extra money, we can give those to the teachers to keep those teachers not only retain those teachers, but also bring in new teachers, get those folks into the system.

That's always a good thing.

State employees, it's always a good thing to try to incentivize those guys that have the institutional knowledge to stay.

But at the end of the day, if we have extra money, it's not a bad thing to try to return that back to the people.

But in furtherance of that, instead of returning it back to the people, it's probably a good idea that we cut our income tax and not take it from the people in the first place.

Gavin> So a lot of similarities there from what we're hearing from the Governor, from the House and now the Senate.

So we'll see that play out in the coming weeks.

So Senator Goldfinch, thank you so much.

<Thank you> For South Carolina ETV, I'm Gavin Jackson, be well South Carolina.

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