Nuke Project Fallout Lingers Over Dominion-SCANA Deal
The Federal Energy Regulatory Commission approved Dominion Energy’s proposed acquisition of South Carolina-based SCANA Corp., but ongoing issues related to SCANA’s role as a partial owner of the abandoned V.C. Summer nuclear power plant expansion project continue to raise uncertainty surrounding the merger.
Nevertheless, FERC ruled on July 12 that it found the terms to be “consistent with the public interest.”
The Virginia-based utility initially announced an agreement in January to purchase SCANA in a deal it then valued at $14.6 billion. According to the utility, the combined company would have an electric generating portfolio of about 31,400 MW and 93,600 miles of electric transmission and distribution lines.
Dominion notes its offer to buy the utility includes the May 2018 acquisition by SCANA subsidiary SCE&G of a natural gas-fired power plant that replaces more than 40% of the projected generating capacity from the SCE&G portion of the unfinished V.C. Summer plant.
“We are pleased by the FERC’s considered and timely action,” Dominion CEO Thomas Farrell stated. “We will continue working toward achieving the other required regulatory approvals and completing our transaction by the end of this year.” The merger still requires approval by SCANA shareholders, review and approval from the public service commissions of South Carolina and North Carolina, and authorization by the Nuclear Regulatory Commission.
However, a big question remains—whether Dominion will go forward with the acquisition, even though the South Carolina legislature took action in June to slash rates for SCANA’s customers, who are continuing to be billed for the unfinished nuclear plant.
In April, Farrell said Dominion’s offer to acquire SCANA could not accommodate further rate cuts. But South Carolina legislators, in an effort to quell the widespread uproar over high bills because of the abandoned nuclear project, introduced H. 4375.
The bill amends the state’s Base Load Review Act, which enabled utilities to charge customers in advance for prudent costs related to a nuclear project’s construction, and cuts a nuclear project-related fee from a rate of about 18% of an average residential customer’s bill to roughly 3.2%.
On June 27, just prior to the vote to enact the rate reduction, Farrell warned legislators the rate cut could scuttle the deal. Calling South Carolina legislators’ rate-reduction efforts “a high-stakes game,” Farrell said, “Legislators are risking cash payments to SCE&G’s electric customers of $1.3 billion—equal to $1,000 for the typical residential customer—and a permanent rate reduction of 7%.”
Republican Gov. Henry McMaster vetoed the measure, but the legislature voted to override.
After the bill passed, the next day SCANA cut its quarterly dividend by 80%—to 12.37¢ per share from 61.25¢ per share—in order “to preserve its options as the company continues to seek a resolution to the recovery of costs for the V.C. Summer new nuclear construction project.”
A day later, on June 29, SCE&G filed suit in U.S. District Court challenging the constitutionality of H. 4375. SCE&G said in a court filing that it “is prepared to place in escrow the funds that would otherwise be taken from SCE&G by operation of H. 4375.” The utility says the law constitutes “an unlawful taking of private property.”
Dominion has not commented further on the matter. The company’s next quarterly investors call is set for Aug. 1.
Meanwhile, SCANA and SCE&G continue to face scrutiny over the V.C. Summer project. On July 20, the South Carolina Public Service Commission approved the state Office of Regulatory Staff’s request to depose nearly 20 utility and contractor officials about the utility’s management of the abandoned project.