Staff at the Virginia State Corporation Commission have recommended against the proposed $67 billion merger between Dominion Energy and Florida-based NextEra Energy — unless both companies commit to dozens of binding conditions first.
The possible deal, which impacts Dominion’s business in Virginia and the Carolinas and requires state and federal government oversight, would create the largest electric utility in the United States. In Virginia, a three-person panel of commissioners will evaluate all testimony in the merger case.
Commission staff are responsible for reviewing all of the facts and providing their own, independent recommendations to the three presiding commissioners. Staff members do not hold decision-making authority. Other respondents, including Gov. Abigail Spanberger and Clean Virginia, have filed thousands of pages of testimony.
Carol Myers, of the Commission’s Division of Utility Accounting and Finance, wrote in the 201-page testimony that the Dominion–NextEra proposal fails to satisfy the Utility Transfers Act.
That state law governing the merger has a simple enough hook: The utilities must prove that “adequate service to the public at just and reasonable rates will not be impaired or jeopardized.” In other words, the combined company must continue to provide reliable electricity without charging ballooning, unjustified prices.
Myers wrote that the joint petition, as filed, fails to prove that this merger meets the standard, because “the proposed Merger would expose [Dominion Energy Virginia] to the additional financial and business risks of NextEra’s unregulated, competitive businesses.”
She also wrote that the commitments put forward by the companies — which include time-limited job protections and customer bill credits, the creation of 600 new jobs in Virginia and promises to build a new office tower and maintain Dominion’s current leadership — don’t do enough to ensure that adequate utility service would be maintained after the merger.
The list of 57 conditions presented by Myers includes 25 that were included in the companies’ proposals. Collectively, they have committed to holding ratepayers harmless for merger costs, contributing $100 million to energy workforce development programs, and maintaining Dominion Energy Virginia as a separate legal entity — all of which staff also included in their list of conditions.
Staff also included the companies’ second bill credit proposal, which sees residential customers using 1,000 kilowatt hours in a month receiving $10. That would be applied monthly for four years — accomplished in part by refusing bill credits to data centers. However, testimony was clear that SCC staff don’t see this as a “persuasive reason to approve the Merger,” only recommending its use because it helps ensure data centers “pay their fair share.”
But Myers wrote that the deal should require certain “ring-fencing” measures to protect Dominion’s finances in the case that NextEra faces bankruptcy. That involves setting up a “bankruptcy-remote special purpose entity” — a holding company which would directly own Dominion Energy Virginia, insulating its assets.
Staff asked the utilities if they had considered such an entity, to which they replied it was unnecessary and would prevent Dominion from improving its credit. That’s a key part of the pitch — improving Dominion’s credit rating results in lower borrowing costs for big investments, which are paid for by ratepayers over the long term. Dominion will need to make immense transmission and generation investments to serve data center demand in Northern Virginia.
Staff argued the expected benefits to Dominion’s credit rating are outweighed by the risk that NextEra’s diverse business portfolio would bring. Similar ring-fencing measures were credited in part with killing a proposed NextEra acquisition of Texas utility Oncor in 2017.
They also said the commission should require Dominion Energy Virginia to expand its post-merger board of directors by four people who would be unaffiliated with NextEra.
And staff said commissioners should put in writing that NextEra Energy Transmission, a NextEra subsidiary, will not own future transmission projects in Dominion’s Virginia service territory.
They also recommended extending some workforce protection requirements to 10 years post-merger.