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Dominion merger still best course

Dominion merger still best course

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In mandating refunds to customers for the failed nuclear plant in Fairfield County, South Carolina lawmakers insisted their action was justified even if it endangered Virginia-based Dominion Energy’s merger with SCANA Corp., the parent company of S.C. Electric & Gas. Lawmakers said if Dominion is serious about its purchase of SCANA, it ultimately will come to the table with a better offer.

It appears they were right – or at least in that Dominion is trying to salvage the merger in the face of much difficulty in bringing about the best resolution for the nuclear fiasco.

A key to the Dominion offer is an estimated $1,000 refund for the average customer and a reduction in utility rates of about 7 percent. But the company would continue to charge SCE&G electric customers for 20 years for the failed nuclear project. The offer has met with resistance from S.C. leaders insisting there should be no more customer expense for the project.

Against the backdrop of the S.C. Public Service Commission beginning the process of determining SCE&G’s future rates and an expected judicial ruling that the 2007 law allowing SCE&G to charge for the project is unconstitutional, Dominion has put forth a second offer. This one would cut SCE&G electric rates by about $20 a month vs. the estimated $10 a month in the previous plan. But the new plan takes away the $1,000 refund per customer and puts that money toward reducing SCE&G’s nuclear debt.

Dominion also would not seek to charge SCE&G customers for $550 million in debt incurred after March 2015. The state has set March 12 of that year as the date after which it can prove SCE&G deceived regulators about the nuclear project.

By way of perspective, SCE&G has been charging $27 a month per customer for the nuclear project and planned to do so for 50 or more years. Dominion’s initial offer cuts that to $17 a month over 20 years. The new proposal puts the figure at $7.

But if a circuit judge indeed rules the Base Load Review Act is unconstitutional, the Dominion-SCANA merger may be doomed as SCE&G could be forced to repay customers $2 billion for the nuclear reactors and it (or Dominion) be prevented from charging customers any further for the project.

While such a ruling would be cheered politically and even welcomed by customers, it likely would kill the only plan on the table for a rescue of SCANA.

Then the future becomes cloudy – for SCANA/SCE&G and customers. In order to rescue itself from debt, SCANA/SCE&G could declare bankruptcy. Then the future of the state’s largest public utility would land in the hands of a federal judge whose first responsibility over years would be to the utility’s creditors, not its customers.

SCE&G’s future is important to South Carolina. Having a utility that is a vital component in economic development mired in bankruptcy is not the best position to be part of prosperity. The state can gamble further by insisting that no further customer payments for the nuclear project are more important than the Dominion deal or even SCANA or SCE&G bankruptcy, but that is shortsighted.

A merger with Dominion remains the best solution for SCANA and South Carolinians.


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