Dominion CEO: SCANA deal off if cost recovery for Summer plant repealed
- The CEO of Dominion Energy told South Carolina lawmakers on Tuesday that he would withdraw his company's proposal to buy troubled utility SCANA Corp. if legislators prevent it from recovering costs via customers for a failed nuclear project.
- Thomas Farrell said the $14.6 billion deal would be off the table if lawmakers retroactively repeal the Base Load Review Act, a controversial 2007 law that allowed SCANA and its partners to recover costs for the now-canceled V.C. Summer nuclear plant. Ratepayers are currently paying $37 million a month for the project.
- Farrell told lawmakers he did not foresee a scenario where the Summer plant would be finished, but warned that SCANA would be "crippled financially" if it is not bought by Dominion.
Farrell's message to South Carolina lawmakers on Tuesday was simple: Dominion is the only show in town.
The CEO of Virginia's largest utility told a special legislative committee investigating the V.C. Summer nuclear debacle that SCANA could face bankruptcy if it does not accept Dominion's acquisition offer.
"Their cost of capital will explode,” Farrell said. “They will become the weakest utility in the United States. I believe that quite firmly."
SCANA has been on shaky ground since its July announcement that it would abandon construction of the V.C. Summer nuclear plant, having already spent $9 billion in ratepayer cash.
The plant was originally estimated to cost less than $12 billion, but mismanagement and problems with reactor design from contractor Westinghouse raised final cost estimates to $25 billion. SCANA now faces multiple lawsuits and an SEC investigation into whether it misled shareholders about the project. Its partner, state-owned utility Santee Cooper, could be sold off to help pay for the plant.
Acquisition by Dominion, a large, diversified utility holding company, could help put SCANA on firmer financial footing. But South Carolina lawmakers from both parties objected to what they saw as an ultimatum, rather than an offer.
“You walk in here this morning, and now I feel like I’ve got a gun to my head,” Sen. Mike Fanning said to Farrell. The Democrat from Great Falls asked utility employees and lobbyists at the hearing to stand in an attempt to illustrate the power of the industry:
"That is what the people of South Carolina, the ratepayers, are up against" says State Senator Fanning as he makes a roomful of utility lobbyists stand. pic.twitter.com/7eD6hPNlkC— Energy & Policy Inst (@EnergyandPolicy) January 17, 2018
"There's no gun here," Farrell replied. “Unfortunately, this is just the circumstances we find ourselves in.”
Under Dominion's merger plan, the combined utility would write off $1.7 billion in costs related to the Summer plant, allowing it to eliminate customer costs for the project over 20 years, instead of the 50-60 years proposed by SCANA. But the whole deal would crumble, Farrell warned, if lawmakers removed Dominion's ability to recover costs for the plant completely.
"If you said what’s in rates today [is fine], but anything else that’s not in rates can’t go into rates, we don’t have qualm with that," Farrell said. "Our concern is the retroactive component that looks back at what rates are today.”
South Carolina's consumer advocate is currently auditing SCANA to see if it could operate without charging customers for the canceled nuclear plant, the Post & Courier reports. If legislators choose that route, Farrell said Dominion would walk away.
"It would be SCANA’s management issue, not ours," he said.
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