As part of the deal, the Richmond-based utility giant is offering rebates for South Carolina utility customers who have been paying for the aborted nuclear projects and is also a shortened time frame to pay off the cost incurred before work stopped. Dominion has until recently fought to preserve legislation in Virginia that shields the company from having to issue refunds to customers if it “overearns” on base rates.
Customers of SCANA’s subsidiary, South Carolina Electric and Gas or SCE&G, will get a cash payment worth about $1,000 and what Dominion says will be a 5 percent rate reduction from current levels, about $7 a month for the typical residential customer. The cash payments to SCE&G customers will total about $1.3 billion and will be made within 90 days of the close of the deal.
Also, customer costs for the nuclear projects will be paid off in 20 years instead of the previously proposed 50-60 year timeframe.
In the merger, which still needs shareholder and federal and state regulatory approvals, SCANA shareholders would get about 0.67 shares of Dominion Energy common stock for each share of SCANA common stock, the equivalent of about $55.35 per share and a total value of nearly $8 billion.
The offer represents a premium of 42.4 percent to SCANA’s closing price of $38.87 on Tuesday. As of 1:15 p.m. Wednesday, SCANA shares are up more than 22 percent to $47.60.
“Dominion Energy is a strong, well-regarded company in the utility industry and its commitment to customers and communities aligns well with our values,” Jimmy Addison, CEO of SCANA, said in a statement. “Joining with Dominion Energy strengthens our company and provides resources that will enable us to once again focus on our core operations and best serve our customers.”
The combined company would serve 6.5 million electric and natural gas distribution customers in eight states, Dominion says.
Asked about his level of confidence that South Carolina officials would let the deal go through, Thomas F. Farrell II, Dominion’s CEO, chairman and president, said in a conference call with investors Wednesday that he had “lengthy and fulsome” conversations with South Carolina’s governor and leaders in the legislature about the merger.
“I’m not going to characterize their reactions,” Farrell said. “I’m pleased with where things stand right now. Very pleased.”
SCANA’s companies have a workforce of about 6,000, more than 500,000 electric customers in 25 South Carolina counties and more than 1.3 million gas customers in South Carolina, North Carolina and Georgia.
In December, SCANA filed a formal request with the federal Nuclear Regulatory Commission to withdraw its operating licenses for a pair of nuclear units at the V.C. Summer Generating Station near Jenkinsville, S.C. That came after construction on the units was halted this summer by SCE&G and Santee Cooper, another South Carolina utility, amid about $9 billion in cost overruns. Though canceling of the projects saved customers future expenses, they were still on the hook for money already spent.
Dominion says its deal to merge with SCANA will write-off about $1.7 billion in V.C. Summer costs that will never be collected from customers and completion of the $180 million purchase of the Columbia Energy Center natural gas power plant at no cost to customers. Dominion also says it will provide $1 million a year in money for charitable contributions in SCANA’s communities for at least five years and give “employment protections” for SCANA employees until 2020.
“We believe this merger will provide significant benefits to SCE&G’s customers, SCANA’s shareholders and the communities SCANA serves. It would lock in significant and immediate savings for SCE&G customers – including what we believe is the largest utility customer cash refund in history – and guarantee a rapidly declining impact from the V.C. Summer project,” Farrell said in a statement.
“There also are potential benefits to natural gas customers in South Carolina, North Carolina and Georgia and to their communities. And, this agreement protects employees and treats fairly SCANA shareholders, many of whom are working families and retirees in SCANA’s communities. The combined resources of our two companies make all this possible,” Farrell said.
But the Charleston Post and Courier newspaper reports that the sale hinges on keeping a South Carolina law that allows SCANA to keep collecting customer payments for the unfinished reactors. The newspaper reported that South Carolina regulators are considering whether customers of SCE&G should continue paying $37 million a month for the canceled projects.
South Carolina legislators also were to begin considering legislation next week that would cut off payments for the nuclear project, which account for 18 percent of customers’ electric bills, the newspaper reported.
“Had the state of South Carolina and its legislature punished both utilities any more for what they’d done, you’d be looking at potential bankruptcy, which mean customers get nothing,” said C. Ryan Frazier, a Dominion spokesman. “We’re proposing a way for customers to start getting their money back.”
South Carolina Gov. Henry McMaster called the announcement “progress” in a statement Wednesday morning, but not a resolution, since it leaves out Santee Cooper, the other South Carolina utility that had a major stake in the Summer project.
“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,” McMaster said.
“But this doesn’t resolve the issue,” he said. “Over 700,000 electric cooperative customers face the prospect of having their power bills sky rocket for decades to pay off Santee Cooper’s $4 billion in debt from this. The only way to resolve this travesty is to sell Santee Cooper. There is more work to be done, but today, we are headed in the right direction.”
On a conference call with investors Wednesday morning, Farrell said there is reportedly “a lot of interest” at Santee Cooper in a sale.
“And hopefully those people will pursue it,” Farrell said.
Dominion has been among the companies approached to buy Santee Cooper, a state-owned utility that is South Carolina’s largest power producer, providing electricity to more than two million people in the state, but Frazier would not say whether a merger is on the table.
A spokeswoman for Santee Cooper could not immediately be reached.