Dominion Energy Inc.'s offer to acquire troubled South Carolina company SCANA Corp. is the only "realistic solution" that provides benefits to the state and customers, Dominion's top executives told lawmakers.
"What we have proposed is neither a shortcut nor a quick fix. It is a comprehensive and permanent resolution," Dominion Energy Chairman, President and CEO Thomas Farrell II said Feb. 14 in testimony before a special South Carolina Senate committee.
Dominion announced Jan. 3 that it agreed to acquire SCANA in a $7.9 billion stock-for-stock deal designed to provide a lifeline to the Cayce, S.C.-headquartered company reeling from the failure of the more than $9 billion V.C. Summer nuclear expansion.
Dominion and SCANA utility South Carolina Electric & Gas Co. filed a Jan. 12 petition with the Public Service Commission of South Carolina for merger approval and asked for an expedited hearing to be held on or before April 17. They also requested a prudency determination under the state's Base Load Review Act, or BLRA, regarding SCE&G's abandonment of the V.C. Summer reactors, including a proposed customer benefits package and cost recovery plan.
Specifically, the merger agreement states SCE&G must be allowed to include $3.3 billion tied to nuclear investment in retail rates, as allowed under the BLRA, during a 20-year amortization period.
"I think it would be beneficial for all concerned to have the uncertainty resolved," Farrell said as he addressed a panel of senators largely skeptical of the deal and its timeline.
Regulators prefer a hearing in late July, with South Carolina lawmakers looking to slow down regulatory action through legislation that originally pushed a ruling into late this year or early 2019. The South Carolina Senate Committee on Judiciary on Feb. 7 gave a favorable report to a bill, Senate Bill 954, that would prohibit the PSC from issuing an order tied to the state's BLRA until 90 days after the Senate adjourns its 2018 legislative session.
Following the Feb. 14 committee meeting, senators introduced an amendment to S.B. 954 that prevents the PSC from holding a hearing before Nov. 1, with an order issued no later than Dec. 21. In addition, the bill states inaction by the PSC does not constitute approval of the planned merger or the change in rates.
The move comes after Farrell acknowledged that April 17 is an "aggressive date" for a hearing on the merger but argued that other similar deals have closed in about nine months. The CEO was told that the South Carolina Office of Regulatory Staff, or ORS, has indicated it may need through the end of the year to properly review the proposal.
"More time is always better, but the uncertainty has to end," Farrell said.
Dominion and SCANA contend regulators are under a "six-month statutory deadline" to issue an order tied to their proposed merger and relief from the V.C. Summer abandonment. The companies argue that delaying action on the merger petition could postpone benefits including an immediate rate credit of $1.3 billion for SCE&G's customers as outlined in their agreement and provide further financial risk to the utility and its parent.
Meanwhile, SCANA shareholders are expected to vote on the merger in May.
'Guns to our head'
"We've got two guns to our head," Sen. Nikki Setzler, co-chairman of the V.C. Summer Nuclear Project Review Committee, said at the Feb. 14 meeting.
The senator said the push for an expedited hearing and a vote by SCANA shareholders in the next couple of months is "inconsistent" with pleas that lawmakers take their time to make "reasonable, responsible and intelligent decisions" on the matter. Setzler said lawmakers need to pass pending legislation that would provide more time to consider the merger.
"We want finality too, but we need, and ORS needs, the time to deal with [these issues]," Setzler said. "One way or another, we have to pass this bill we have on special order to take that gun away from us."
Dominion has warned that any "material change" to regulation or legislation in South Carolina that impacts cost recovery tied to V.C. Summer or hinders certain financial aspects of the deal, including lowering SCE&G's 10.25% return on equity, would threaten the merger agreement.
SCE&G owns 55% of the abandoned reactors and state-owned utility Santee Cooper, known legally as the South Carolina Public Service Authority, owns the remaining 45% of the project.
Farrell said Dominion "would not alter" SCANA's decision to scrap the nuclear units and added that the company "does not see a way" to purchase Santee Cooper and absorb that utility's $8 billion in debt.