While several South Carolina regulators admitted they were conflicted about the decision, they all agreed that approving Dominion Energy Inc.'s offer to acquire SCANA Corp. was necessary to provide "certainty" for the embattled utility, its ratepayers and the state.
The Public Service Commission of South Carolina in a Dec. 14 meeting interrupted by protesters voted unanimously to approve the blockbuster merger. The approval is subject to certain conditions, including lower cost recovery for the abandoned V.C. Summer nuclear plant expansion.
"It pains me that SCANA and [South Carolina Electric & Gas Co.] will no longer be a standalone company," Commissioner Swain Whitfield said. "However, I note that utilities in our neighboring states in the Southeast have virtually all become part of multi-state holding companies."
Nearly a year ago, Richmond, Va.-headquartered Dominion announced that it had agreed to acquire SCANA in a stock-for-stock deal valued at about $7.9 billion. Including the assumption of debt, the transaction is valued at more than $14 billion.
"This commission did not leave any stone unturned," Commissioner Justin Williams said before the decision was announced. "We're going to be hard-pressed to say at any time in the future that there was any information that we did not know."
Dominion's offer was announced months after SCANA utility SCE&G and government-owned utility Santee Cooper, known legally as South Carolina Public Service Authority, decided to pull the plug on the V.C. Summer reactors.
Regulators determined that SCE&G's abandonment of the more than $9 billion units was prudent based on the March 2017 bankruptcy of primary contractor Westinghouse Electric Co. LLC and Santee Cooper's decision to withdraw from the project.
Under the approved deal, Dominion will lower nuclear cost recovery to about $2.77 billion from $3.33 billion over a 20-year amortization period.
"It is my wish that more could be done," said Vice Chairman Elliott Elam, who made the motion to approve the deal. "However, this commission has to utilize the record in this case to provide the best remedy or the least-worst remedy that it can under the circumstances."
Commissioner G. O'Neal Hamilton and a couple of his fellow regulators said they initially planned to vote against the merger.
"But as we received testimony and started the case, it became evident to me that if we continued the path that I had hoped this commission would follow, that it would lead the company into bankruptcy and the ratepayers would be worse off now than they were when we started," Hamilton said. SCANA stock closed up more than 6% at $50.98 on Dec. 14.
While Dominion and SCANA's merger agreement filed in January with the PSC outlined a total of $1.3 billion in customer refunds and a 7% rate reduction, the company twice upped its offer amid contentious regulatory proceedings.
Regulators ultimately decided to accept Dominion's latest offer, filed in November, which provides "a total of $2.039 billion in refunds" over a 20-year period and a steeper rate reduction of approximately 15% by eliminating nuclear cost recovery after March 12, 2015.
This cutoff date is based on SCE&G's failure to disclose problems with the nuclear expansion outlined in an independent assessment.
"We have heard conflicting testimony on the reasons for the withholding of that information, but even SCE&G recognizes a resulting loss of trust for its lack of transparency," Elam said.
The commission-approved plan lowers Dominion's requested return on equity on the V.C. Summer development to 9.9%, versus 10.25% proposed in the original customer benefits plan. This also provides a capital structure consisting of 52.81% equity and 47.19% debt.
Dominion also will honor SCANA's planned $180 million acquisition of the combined-cycle Columbia Energy Center with no cost to customers.
The PSC rejected the South Carolina Office of Regulatory Staff's recommendation of an approximately $193.3 million net reduction in electric rates in 2019, a cut of more than 20%.
Elam also said securitization of unrecovered nuclear costs is "not ripe" for PSC consideration given that there is not yet an enabling South Carolina state law.
A formal written order will be issued before Dec. 21, as required by state law.
Dominion has said it plans to close the merger by year-end.
"Dominion Energy is encouraged by the Commission's vote and awaits an order to review prior to making a final decision to close the merger with SCANA," Chairman, President and CEO Thomas Farrell II said in a written statement. "We are pleased with the opportunity to increase our presence in communities served by SCANA, expand our involvement in charitable giving and implement an EnergyShare-like program in South Carolina to assist low-income, elderly, disabled and veteran customers."
The North Carolina Utilities Commission approved the deal in November, subject to conditions recommended by Public Staff.
The deal also has received approvals from SCANA's shareholders, the Nuclear Regulatory Commission, the Federal Energy Regulatory Commission and the Georgia Public Service Commission.
(SC PSC dockets 2017-370-E, 2017-305-E and 2017-207-E)