Updated 2:03 p.m.
Virginia's Dominion Energy said Wednesday it will buy embattled South Carolina electric utility SCANA for about $7.9 billion in stock. Dominion also will assume SCANA's debt, making the deal worth a total of $14.6 billion. Dominion also is offering to cut rates for customers of SCANA's South Carolina Electric & Gas subsidiary, and absorb other costs of a failed nuclear project north of Columbia.
Dominion says it will refund SCE&G customers $1.3 billion, or an average of $1,000 per customer, for what they've already spent building a now-canceled expansion of the V.C. Summer plant in Fairfield County. Payments will come within 90 days after the merger closes, and will vary based on how much consumers spent on electricity.
Meanwhile, Dominion says ratepayers will get an additional 5 percent reduction in future rates, or an average of $7 a month.
Dominion also will write off more than $1.7 billion in costs related to the nuclear project.
Still, the deal is an expansion opportunity for Virginia's largest utility, which already sells electricity and gas in the North Carolina and Virginia and other states.
The deal still needs approval from SCANA shareholders as well as federal regulators and regulators in South Carolina, North Carolina and Georgia. In particular, South Carolina regulators would have to approve Dominion's plan for customer refunds, executives said during a conference call Wednesday morning.
Dominion expects the deal to close in the third quarter of this year.
The merger agreement also would allow Dominion to walk away if lawmakers or regulators require any conditions that would change the deal's economics, Dominion Chairman and CEO Thomas Farrell II said.
The Post and Courier of Charleston reports some lawmakers still want more from SCANA. S.C. House Majority Leader Gary Simrill of Rock Hill told the paper that the House won't change its plans to consider legislation, including taking away the utility's right to keep charging customers for the nuclear project.
And some utility watchdogs say the customer refunds don't go far enough.
SCANA owns SCE&G, which operates electric and gas divisions, as well as PSNC, a gas utility in North Carolina.
Dominion has electricity and gas operations in North Carolina, Virginia, West Virginia and Ohio. It's also the lead developer of the planned Atlantic Coast Pipeline, which will bring fracked gas from West Virginia to Virginia and North Carolina. Altogether, the Richmond, Va.-based company operates in 18 states from the East Coast to California.
DEAL FOLLOWS FAILED NUCLEAR EXPANSION
SCANA and state-owned Santee Cooper began construction began five years ago on two new reactors at the Summer nuclear plant. But cost overruns, construction delays and the bankruptcy of the project's lead contractor led them to abandon the expansion last July.
That came after the utilities had already spent more than $9 billion. Consumers have been paying for the expansion through their monthly bills. South Carolina regulators and lawmakers have been debating who should pay for the project's failure. Wednesday's announcement is "progress," Gov. Henry McMaster 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. But this doesn't resolve the issue. Over seven hundred thousand electric cooperative customers face the prospect of having their power bills skyrocket 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.”
Dominion Chairman and CEO Thomas F. Farrell II said the deal will benefit SCANA shareholders and customers. “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,” he said in a statement.
Farrell told analysts that he's already spoken with McMaster and other South Carolina leaders about the deal. "I'm not going to characterize their reactions. I let them speak for themselves. But I can characterize my reaction, which is I'm pleased with where things stand right now," he said.
SCANA's stock price has fallen about 40 percent since the nuclear project was canceled, making the company a potential takeover target. In November, The State of Columbia reported that SCANA had hired investment bank Morgan Stanley to investigate a possible sale. Charlotte-based Duke Energy had been among those rumored to be interested.
The nuclear project's failure has cost executives of the two companies their jobs. Just last week, Santee-Cooper board chair Leighton Lord resigned, in a letter to the governor. And SCANA's CEO and Chief Financial Officer both stepped down as of Jan. 1.