Goose Creek considers becoming electric city

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Goose Creek could grow by 5,000 acres if a ballot referendum to start a municipal electric utility passes Dec. 3, a move that proponents say would provide an economic boost to the city and allow Century Aluminum to nearly double its workforce.

Santee Cooper, which provides electricity to Century Aluminum by contract, is opposing the move on the grounds that the state-owned utility has the rights and obligation to serve Century Aluminum and its 5,000 surrounding acres in the Mt. Holly area.

If voters approve the Goose Creek electric utility, the city would annex the aluminum smelter so as to begin providing electricity to Century Aluminum beginning in 2021; the aluminum smelter’s current contract with Santee Cooper expires on Dec. 31, 2020.

The S.C. Constitution allows any municipality to establish a public utility if approved by the majority of voters. South Carolina has 21 cities that operate municipal electric utilities, though a new one has not been created in decades. Goose Creek established a water utility in 1972, which provides water to portions of the city.

Century Aluminum has long complained that its electricity, which it receives partly by contract from Santee Cooper, is too expensive. The company cited the cost of electricity as the reason it had to shut down one of its two pot lines in 2015. Century Aluminum receives 25% of its electricity from Santee Cooper and 75% on the open market; Century Aluminum and Santee Cooper struck that deal in 2016 to avoid the complete closure of the aluminum smelter

Century sued Santee Cooper in 2017, alleging antitrust violations, but the lawsuit was settled in 2018 with an extension of the electricity contract to 2020.

Goose Creek Mayor Greg Habib said the idea of the city providing electricity to Century Aluminum began shortly after he became mayor in April 2018 and started reaching out to area businesses.

“We had never really had a good relationship with Century Aluminum in the past,” Habib said. “Obviously, being right next to our city, they have an impact; their employees living in our city have an impact, so they have an impact already on our city.”

Century told the mayor that if it could buy 100% of its electricity at a lower rate instead of just the 75% stipulated by the contract with Santee Cooper, it would be able to restart its second pot line and hire 300 new employees.

“The biggest benefit is going to be the ability to have open market power access,” said Dennis Harbath, Mt. Holly plant manager for Century Aluminum. “The price on the open market is probably about 50% of what we’re being presently charged by Santee Cooper, so there’s a huge, huge dollar value that would occur.”

If Century Aluminum tried to buy 100% of its power on the open market on its own when the Santee Cooper contract ends, Harbath said Santee Cooper would stand in the company’s way and force them to negotiate.

“It’s not even the electric utility that’s the prize here for the city of Goose Creek,” he said. “It’s the acreage that is Century Aluminum and their business to come in, in terms of property tax revenue, business license revenue and zoning control or zoning influence over any, if any, future development of that acreage. That’s the prize. … There’s almost zero impact, and its additional revenue to the city, and then the win for Century Aluminum, obviously, is to be able to buy power at a competitive rate.”

Mollie Gore, spokeswoman for Santee Cooper, said the state-owned utility has the “statutory rights and obligations” to serve Century Aluminum and its surrounding property, and it sees a legal issue with Goose Creek potentially providing electricity to the aluminum smelter.

“Those rights are independent of who occupies the property,” Gore said. “It’s a territory, not a customer consideration.”

She added that Santee Cooper offers Century Aluminum its best industrial electricity rate, and noted that Santee Cooper allows Century to buy the majority of its electricity elsewhere and use the transmission lines owned by Santee Cooper.

“We could do that because having them still purchase a portion of their electricity from Santee Cooper covers our costs to serve them,” Gore said. “The thing we have been consistent in opposing is any move that would shift costs to our other customers.”

Personnel at both the Public Service Commission and the S.C. Office of Regulatory Staff said their agencies do not regulate municipal utility service areas and so they could not speak to how those right are assigned. Nanette Edwards, executive director of the Office of Regulatory Staff, directed the Business Journal to contact Eric Budds, interim executive director of the Municipal Association of South Carolina.

The authority for municipalities to get into the electric business is in the state constitution and state statutes, Budds said, “and then specifically who they can serve, there’s a very complex set of statutes and court rulings that have interpreted those statutes that generally guide the municipality’s ability to serve customers.”

Budds said he had no knowledge of the specifics in Goose Creek’s case.

Habib said he thinks Goose Creek is within its legal right to sell electricity to Century Aluminum starting in 2021 because Santee Cooper serves the Mt. Holly property by contract. The territory is technically assigned to Berkeley Electric Cooperative, but since the cooperative is not currently serving the area, Goose Creek would have the right to service Century Aluminum, provided that the aluminum smelter is within the city limits.

“This is like a needle in a haystack that all these laws line up for us to be able to do this,” Habib said. “You know what I’m saying? This is hard. This doesn’t just — this is an extremely specific circumstance that all of these things line up, and what makes it attractive to me and the city is the load. You’re talking about 400 megawatts. It’s a huge load of electricity. It’s bigger than most cities.”

The mayor said he’s also heard criticisms that Goose Creek shouldn’t start an electric utility because the government shouldn’t be in the electricity business, but he sees that as a different conversation.

“That idea that there shouldn’t be government electricity may have merit. The problem is A, those aren’t the rules we’re playing under right now. B, those rules are not going to change. … Santee Cooper is a government agency, so how do you manage that little aspect of it?” Habib said. “But if you say you want government out of it, that is an ideological response, and it’s an ideological issue. It is not a practical one. We have to live where we live, and we have to do business under the climate under which we do business.”

The only cost to the city is the cost of the election, Habib said; all other costs will be covered by Century Aluminum or recovered through power rates.

Century Aluminum owns the substation from which power is stepped down and distributed, and Goose Creek would acquire the substation to provide electricity to the aluminum smelter either through lease or purchase.

Goose Creek would also be responsible for maintenance and repairs to the substation and other electric infrastructure; Habib said the current plan is to contract out to a third-party for repairs and maintenance.

The prospective Goose Creek electric utility would not serve any current Goose Creek businesses or residents because those are served by Berkeley Electric, but anyone who moves to or develops in the 5,000 acres that would be annexed into the city would be served by Goose Creek.

Marvin Dickerson, human resources manager for Century Aluminum’s Mt. Holly plant, said he’s not worried about finding 300 new workers if the referendum passes.

“I have no doubt we’d be able to attract the kind of employees that we need,” he said. “We pay a very good wage at this plant, great benefits, and that’s why it’s so important to get those 300 jobs back. These are some of the higher-paid jobs in the Lowcountry from a manufacturing standpoint, and I have no doubt that we’d be able to get the resources necessary to restart the plant.”

Failure of the referendum would have little effect on the city, Habib said, outside of inhibiting Goose Creek’s ability to grow and control what happens in its surrounding area.

For Century Aluminum, however, it would mean not restarting the second pot line, and Habib fears it could be the beginning of the end for the aluminum smelter in Mt. Holly.

“Twenty-five years ago, there were 23 aluminum smelters in the United States,” Habib said. “Today there’s six. There’s a reason they’re all closing and moving overseas.”

Goose Creek isn’t the only municipality that sees utilities as an engine for economic development: Laurens Commission of Public Works, a subsidiary of the city of Laurens, attempted to become the exclusive provider of natural gas to Owings Industrial Park. The S.C. Supreme Court ruled, however, that because the industrial park is outside the city limits, the city of Laurens could not claim the park as a designated service area.

This story originally appeared in the Oct. 28, 2019, print edition of the Charleston Regional Business Journal.