Dominion Energy Inc. and SCANA Corp. reached a settlement with the North Carolina Utilities Commission staff and an intervenor in the companies' pending merger.

The settlement agreement is intended to ensure rate stability and service reliability for more than 500,000 customers of Public Service Co. of North Carolina Inc., or PSNC Energy, a gas utility owned by SCANA, according to an Oct. 5 news release.

If approved by North Carolina regulators, PSNC Energy will create a regulatory liability of approximately $3.8 million representing a refund to customers of 2017 revenues. The refund will be provided to customers as three annual bill credits of $1.25 million on Jan. 1 of 2019, 2020 and 2021.

Under the agreement, PSNC Energy will also implement a rate moratorium, prohibiting it to file a general rate case before April 1, 2021. The gas utility would also be barred from increasing its nongas cost margin in rates until Nov. 1, 2021.

But the utility may seek adjustments to its nongas cost margin before the aforementioned date to change its customer usage tracker, purchased gas adjustment procedures and integrity management; to reflect the financial impact of a gas industry-focused governmental action like major expenditures for environmental compliance; to implement natural gas expansion surcharges; and to reflect the financial impact of major expenditures associated with force majeure.

PSNC Energy must also not file any cost deferral during or covering any period from the date of an order approving the merger until after Oct. 31, 2021. (NCUC Docket Nos. E-22, Sub 551 and G-5, Sub 585)

"This marks significant progress in our proposed merger," Dominion Energy and SCANA said. Aside from the NCUC, the deal still needs the approval of the South Carolina Public Service Commission.

The transaction is expected to close in the fourth quarter of 2018. However, many analysts and observers remain skeptical the merger will close given political and legal hurdles.