Dominion Virginia Energy has agreed to acquire the troubled Cayce, S.C.-based SCANA Corp. for $14.6 billion in cash and stock, the two companies announced [1] today. The deal is contingent upon numerous regulatory approvals and preservation of a South Carolina state law that allows the company to recover customer payments for two unfinished nuclear reactors costing $9 billion.
Delays, cost overruns and ultimately the abandonment of the V.C. Summer Nuclear Power Station in Fairfield County, S.C., left SCANA with a massive liability that has roiled South Carolina politics for the past year. According to the Post & Courier [2], South Carolina regulators and lawmakers are considering whether customers of SCG&E, a SCANA subsidiary, should continue to pay $37 million monthly for work done on a power plant that will never be completed.
The Dominion acquisition would stabilize the utility’s finances. The Richmond-based energy company has promised to make a $1.3 billion payment upon completion of the merger worth $1,000 to the average residential electric customer, reduce current electric rates by 5%, and write off $1.7 billion in V.C. Summer assets. The write-off would make it possible for rate payers to meet the remaining obligations on the nuclear plant in 20 years instead of 50 to 60 years.
Preliminary response in South Carolina to the deal was cautiously positive but noncommital. Gov. Henry McMaster praised the sale offer as “progress,” reported the Post & Courier. “This sounds like a better deal for ratepayers,” said state Rep. Micah Caskey, a Republican critic of SCANA. “But is this the best deal? I don’t know.”
The transaction will have no direct impact on Virginia rate payers. SCANA will be treated as a wholly owned subsidiary of Dominion Energy, comparable to Dominion Virginia Energy. There will be no co-mingling of assets, and both will answer to their own state regulatory bodies.
However, the deal does have implications for the proposed Atlantic Coast Pipeline.
“SCANA is a natural fit for Dominion Energy,” said Dominion CEO Thomas Farrell in a press release. “Our current operations in the Carolinas — the Dominion Energy Carolina Gas Transmission, Dominion Energy North Carolina and the Atlantic Coast Pipeline — complement SCANA’s, SCE&G’s and PSNC Energy’s operations. This combination can open new expansion opportunities as we seek to meet the energy needs of people and industry in the Southeast.”
If the merger goes through, observes the Dominion press release, Dominion Energy and its subsidiaries would have a natural gas pipeline network totaling 106,400 miles and would operate one of the nation’s largest natural gas storage system with 1 trillion cubic feet of capacity.
As currently envisioned, the Atlantic Coast Pipeline would terminate in North Carolina just north of the South Carolina border. Back in October, Dominion confirmed that it might extend the ACP south of the border, although it noted that such a project would have to run the complete federal and state regulatory gamut to gain approval.
Bacon’s bottom line: Any such expansion should end widespread speculation that Dominion’s secret motive in building the pipeline is to ship natural gas to its soon-to-open Cove Point facility in Maryland for export. Clearly, Dominion is eyeing southern markets. According to the Post & Courier, the company plans to buy a $180 million natural-gas power plant in South Carolina to make up for some of the electricity the nuclear plant was expected to produce. The newspaper did not speculate whether that plant might be supplied by gas from the ACP or from competing pipelines. In either case, South Carolinians undoubtedly will experience the same debate over gas vs. renewables as we have seen in Virginia.