A motion to dismiss a lawsuit against Santee Cooper first postponed for bad weather has been postponed again after a request to have the lawsuit deemed a “complex” case.
Attorneys for Santee Cooper say the lawsuit, filed by Conway attorney and former state legislator George Hearn, will likely require as many as 13 witnesses and take seven days to hear.
Hearn alleges in his lawsuit that Santee Cooper paid $249 million to purchase a disassembled power plant from China that was to be constructed in Florence County, but violated its own policies by buying the plant before securing all of the needed permits. Hearn’s lawyers argue that when the plant was purchased, due to federal and state regulations, the plant could never have been put online to generate electricity. He contends that in April of 2010, the quasi-state agency announced plans to stop the construction of the plant, and it is sitting idle in a field in Florence County now. Yet the utility is spending $13 million a year to maintain and protect the plant, the lawsuit claims.
Hearn contends that Santee Cooper has declined many offers to purchase the plant, which proves that it has value on the open market, but that value is dropping as technology progresses, so time is of the essence.
The legal filing also argues that Santee Cooper has increased its rates more than the approved amount to continue to fund it.
“However, Santee Cooper, not the innocent ratepayers, should be required to bear the costs of its imprudent and incompetent conduct regarding the plant,” his attorneys wrote in an answer to Santee Cooper’s motion asking a judge to dismiss the lawsuit.
In its motion to have the lawsuit declared complex, Santee Cooper also asks that it be postponed at least until after February of 2019.
Conway attorney Morgan Martin, one of the lawyers working on the case, says a piece of litigation is considered complex when it is expected to take significant court time and when it needs the same judge throughout so every time there is a hearing the judge doesn’t need to be educated about the case.
He says it’s more effective for the legal system and better for the parties involved to always have a judge that understands the case. Judge William H. Seals Jr., the chief administrative judge, will make the decision to declare the case complex or not. Martin says it isn’t an unusual practice, and he believes this case surely fits the requirements for a complex case.
He doesn’t know if the case will be assigned to a judge this week, next week or in 30 days, but he expects that action “in the near future.”
Hearn hopes a judge will bring ratepayers into his case by declaring it a class action.
Santee Cooper lawyers contend that there will be many more motions before a trial can be heard. They foresee a motion to certify a “class” and motions for a judge to decide regarding the case plus others to be discussed outside of the presence of a jury.
They say the lawsuit involved millions of dollars and they want a judge who is not a Santee Cooper customer to be assigned to the case to make sure there are no “perceived conflicts.”
In their motion to dismiss the case, B. Rush Smith III, an attorney in the Columbia firm of Nelson Mullins Riley and Scarborough, argues first that the statue of limitations on the issue expired way back in 2012, three years after Hearn should have or could have known that a possible action might exist.
They say a rate increase to pay for the plant was announced on Aug. 24, 2009, and implemented two months later.
They also argue that any rate increases were properly approved by the utility’s board of directors and were required by state law because the law mandates that Santee Cooper act in a manner that preserves the “financial integrity of the Public Service Authority” and its business and to distribute electricity on a “reliable, adequate, efficient, and safe basis, at just and reasonable rates, regardless of class of customers.”
It says the board is required to act for the benefit of Santee Cooper and not for a particular group or an individual.
It also claims that it has no specific duty to provide low cost electricity to individuals.
“South Carolina Code empowers Santee Cooper to fix and collect rates and charges and requires it to do so at rates sufficient to provide for all of its expenses and obligations,” Smith contends.
The pleading also contends that Santee Cooper has no hope of operating the plant and, therefore, has not been unjustly enriched by having it.
Hearn wants Santee Cooper to sell the plant and return the money customers have paid in increased rates for the failed project. Smith calls that a drastic remedy.
He says Santee Cooper has breached no duty – tort, contract or otherwise in allegedly charging Hearn rates to cover its costs, because state law says it must.
“Santee Cooper’s Board of Directors made good faith, fully informed decisions as a matter of law. For example, Plaintiff admits that his rates for electric service were established by Santee Cooper after notice and hearings regarding the prescribed increases, which is what the law requires,” Smith wrote.
He says the board made its decisions based on “valid exercises of business judgment.”
And, he argues, the resolutions regarding the suspension and cancellation of the project were also based on valid exercises of business judgment.
Hearn’s response, filed by his lawyers, says that the utility announced a 4.4 percent rate increase beginning in November 2009 and a 5.5 percent increase in November 2010; However, in 2009 Santee Cooper increased its base rates from 6.32 per kilowatt hour to 8.88 cents per KWH with an additional one cent per KWH during the summer months, which reflects on increase of more than 40 percent. And, the answer to the motion to dismiss says the increase was not properly authorized by the Board.
In 2013, Santee Cooper announced that it had approved a two-year rate increase totaling a 7 percent increase. However, customers actually paid rates about 10 percent higher than their previous rates, the court filing claims.
“Santee Cooper did not go through the proper process of notice and hearing in order to obtain this 10% increase charged to its customers…Santee Cooper has continually charged its ratepayers, including Plaintiff, these improper rates causing continual damage to the ratepayers,” the legal filing says.
As to the statute of limitations, the legal filing says it runs anew with each occurrence and that comes every time it sends out bills to its ratepayers. It also says that the Defendants are assuming that he was aware, or should have been aware, that Santee Cooper was violating its own policies and procedures concerning obtaining permits for the plan at the time that the announcements were made and they were aware, or should have been aware, that the plant was never constructible due to permitting issues when the announcements were made.
It says Santee Cooper must prove when Hearn knew or should have known that the utility was violating the law and its own policies and procedures by charging the improper rates.
The legal filing argues that Santee Cooper should pay the costs of its error in buying and maintaining the plant instead of its innocent ratepayers.
As to the request to delay the case until at least February of 2019, Martin says, “I think in the normal course of events that it would not be tried before then anyway.”