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Farrell says repeal of BLRA would take deal off the table

Staff Report //January 17, 2018//

Farrell says repeal of BLRA would take deal off the table

Staff Report //January 17, 2018//

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Dominion Energy President and CEO Tom Farrell made the legislative rounds at the Statehouse this week, fielding questions about his company’s proposed $14.6 billion acquisition of troubled Cayce-based utility SCANA.

On Tuesday, Farrell told the S.C. Senate that if lawmakers repeal the controversial Base Load Review Act, which allows recovery of the costs of the failed V.C. Summer nuclear reactor project through ratepayers, the deal would be off.

Farrell painted a grim picture of SCANA’s future if the Dominion deal does not go through, saying that the company could face bankruptcy. “Their cost of capital will explode,” he said. “They will become the weakest utility in the United States.”

The BLRA, passed in 2007, allowed SCANA, parent company of project co-owner S.C. Electric & Gas, to request and receive nine rate increases during the decade-long construction of the twin 1,117-megawatt reactors. It continues to allow SCANA to recover costs associated with the project through $27 a month on the average SCE&G customer’s electric bill.

Farrell said Dominion would have to be able to continue to recover costs from ratepayers, though his company’s offer would lower those costs.

The proposed merger is projected to reduce the average SCE&G customer’s rates by 5%, or more than $7, a month. In addition, a write-off of more than $1.7 billion of existing V.C. Summer capital and regulatory assets would eliminate all customer costs related to the project over 20 years. That’s faster than the 50- to 60-year period proposed in a November offer from SCE&G, which would have reduced annual rates by 3.5%.

Farrell also told senators that Dominion is not interested in buying state-owned utility Santee Cooper “in whole.” Santee Cooper, co-owner of the V.C. Summer project, is saddled with $4 billion in related debt — numbers that Farrell said made Dominion decide against bidding for the utility.

Construction stopped on the reactors in Fairfield County in July. SCE&G and Santee Cooper poured $9 billion into the project before abandoning it after contractor Westinghouse filed for bankruptcy in April.

Dominion, based in Richmond, Va., is one of four energy companies Gov. Henry McMaster approached about buying Santee Cooper last year, along with Charlotte-based Duke Energy, Florida-based NextEra Energy and Atlanta-based Southern Co.

Farrell did not elaborate on the Santee Cooper question, citing a confidentiality agreement with the state. He did warn that SCANA’s troubles don’t bode well for either the company or the state.

“Even the threat of bankruptcy could severely hamper any economic developments in the state and would make it impossible for us to complete this combination,” Farrell said. “The same would go for any other company.”

Senators, and their House counterparts who heard from Farrell today, greeted his bleak SCANA scenario with skepticism.

“Since August, five times we’ve heard from SCANA that the actions we take would cause them to go into bankruptcy,” said Sen. Shane Massey, R-Edgefield, co-chair of the V.C. Summer Nuclear Project Review Committee.

Sen. Mike Fanning, D-Great Falls, said Dominion’s proposal to purchase SCANA felt like “having to make a decision with a gun to my head.”

If the BLRA were repealed, Farrell said, SCANA, its shareholders and its creditors would likely challenge the ruling in court, and the state would be left without Dominion’s offer. Members of the Senate and House committees, however, questioned whether the Dominion offer is the best deal ratepayers can receive.

“You can sense the fear and skepticism in the room,” Rep. Russell Ott, D-St. Matthews, told Farrell when he appeared before the House Ratepayer Protection Committee on Wednesday. “I’m afraid of the consequences if we get this thing wrong. Are there any other options?”

Farrell told the House members he knew of no other option and believes his company’s offer is the best deal.

“It’s like an election,” Farrell said. “You have to vote for somebody. You have to look at the alternatives and realize there’s nothing there. There is no satisfying solution, no silver bullet. We are trying to find a balance for our shareholders and ratepayers, but nobody is getting out of this unharmed.”

On Friday, SCANA CEO Jimmy Addison told the S.C. Public Service Commission that the Dominion deal was “the right way to go.” Addison said SCANA’s board approved the proposed merger on Jan. 2. The deal was announced Jan. 3.

The acquisition is subject to regulatory approval from the public service commissions of South Carolina, North Carolina and Georgia, among other bodies. Farrell expressed confidence in receiving that approval and said Dominion expects the stock-for-stock merger to close by the third quarter of 2018.

SCANA petitioned the S.C. Public Service Commission on Friday for expedited approval of the merger.

“There’s a choice that has to be made here,” Farrell told the PSC. “Ratepayers can stick to the status quo or look to the future. (Dominion) brings more to the table than just SCANA alone. It doesn’t solve every problem, but we believe it’s a very good proposal.”

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