US utilities Dominion Energy and Scana Corporation have agreed to combine in a stock-for-stock merger.
The agreement calls for "significant benefits" to Scana's South Carolina Electric & Gas Company subsidiary (SCE&G) electricity customers to offset previous and future costs related to the cancellation of VC Summer 2&3. The benefits include a $1.3bn cash payment within 90 days upon completion of the merger to all customers, worth an average of $1000 to residential electricity customers. That is, in effect a refund to compensate for the $9bn already spent on the unfinished reactors. Electricity rates would fall by 5% a month, mitigating some of the higher costs ratepayers have shouldered to finance the failed project. Also, a more than $1.7bn write-off of existing VC Summer 2&3 capital and regulatory assets will never be collected from customers.
If the agreement goes through later this year, Scana would operate as a wholly owned subsidiary of Dominion Energy, maintaining its "significant community presence", local management structure and the headquarters of its SCE&G utility in South Carolina.
The combined company would operate in 18 states from Connecticut to California delivering energy to some 6.5 million regulated customer accounts in eight states. It would have an electric generating portfolio of 31,400MWe, 93,600 miles of transmission and distribution lines, as well as 106,400 miles of natural gas pipeline network and one of most extensive US natural gas storage systems with 1 trillion cubic feet of capacity.
However, it remains to be seen whether the deal will be acceptable to state legislators and regulators as the sale depends on keeping a state law that allows Scana to collect customer payments for the two unfinished reactors. South Carolina regulators are considering whether customers of SCE&G should continue paying $37m a month for work that will not provide any power. State lawmakers also will begin considering legislation next week that would cut off payments for the nuclear project, which account for 18% of customers' electricity bills.
Dominion says the sale would cut the time that SCE&G customers needed to continue paying for the unfinished reactors by more than half. It would also assure the financial stability of its power company, a major economic driver in South Carolina. Customers would pay on average $5000 to cover the cost of the reactors over the next 20 years if the sale goes through.
Dominion warned lawmakers and the regulators that the company would go only so far in making concessions to complete the sale. Dominion CEO Thomas Farrell told investors that the Dominion could walk away from the deal if lawmakers or regulators took any actions that cause "adverse economic consequences”.
South Carolina governor Henry McMaster, who like many lawmakers have advocated for total customer refunds of nuclear project costs, described the sale offer as "progress”. He said in a statement: "Under the proposed agreement between Scana and Dominion Energy, SCE&G ratepayers will get most of the money back they paid for the nuclear reactors and will no longer face paying billions for this nuclear collapse."
Work the two reactors at the Summer nuclear plant stopped in July in the wake of the Westinghouse bankruptcy. Scana announced on 28 December that SCE&G had filed a formal request with the Nuclear Regulatory Commission (NRC) to withdraw the combined operating licences for the two units. "This notification is consistent with our plans for abandonment and helps to ensure we qualify for a tax deduction in 2017 so that we can capture approximately $2bn for our customers to offset the costs of the new nuclear project," incoming Scana CFO Iris Griffin said in the company statement.