A proposed merger between Dominion Energy and NextEra is drawing the ire of the public. Some Virginia legislators are already against the plan but others want to learn more.
Across from the Virginia General Assembly building Tuesday morning, about 50 people gathered to oppose the proposed merger of Dominion and NextEra. They echoed sentiments shared by Fredericksburg-area Delegate Joshua Cole.
“I’m constantly being contacted by constituents in my district talking about how expensive their utility rates are, constituents who are worried about these transition lines going through their district," Cole said.
Back inside the building, Fairfax Delegate Rip Sullivan was still waiting for more information.
“I am eager to hear and watch what happens over the course of the next several months," Sullivan told Radio IQ. "So, I’ve taken no public position yet.”
As a member of the Energy Commission, Sullivan is in a good position to learn more. Among topics for the meeting Tuesday was NextEra’s history of failed merger attempts in Texas and Hawaii. There were a number of factors that ended both efforts, but increased risk to ratepayers was a common thread.
Arguably, the most important voices on the issue are House Speaker Don Scott and Senate President Louise Lucas. In a joint statement sent to Radio IQ, the two said the merger could fundamentally reshape Virginia’s energy and utility landscape and demands, “careful scrutiny, with affordability, reliability and the interests of Virginia ratepayers at the forefront.”
“The SCC is entrusted with reviewing matters like this, and its commissioners are appointed by the GA to do exactly that work,” they added.
Derrick Max is with the conservative-leaning Jefferson Forum. He has faith the State Corporation Commission will properly review the deal, even if the benefits might be controversial, like a promise to keep some employees at least 18 months.
“If it’s in the best interest of the ratepayers to close that Richmond office, close that Richmond office,” Max told Radio IQ.
A decision on the deal is expected mid-January.
As for Tuesday meeting, multiple presentations painted different pictures of what could happen if the merger was approved.
Yale Law School professor Joshua Macey said some of the so-called scandals NextEra faced weren’t worth focusing on. Instead, the large purchase offer, $67 billion to take over Dominion, is usually considered by regulators as an effort to find new efficiencies. But because the companies are regulated utilities, it’s not the same analysis.
“An administrative body determines profits,” Macey said. “They don’t earn higher profits unless the regulators say they can. So why do utilities want to buy other utilities?”
Macey said, “real efficiencies” and the hope to privatize some of those efficiencies can play a part. The second reason is the hope for returns over the cost of capital, or investments in generation and transmission.
“NextEra’s primary reason [for the purchase] is increased capital expenses, but if the cost of equity is set at the cost of capital, the utility should be indifferent,” he said. “It’s only if rates are set too high that utilities should want to buy another utility.”
“This is not a good reason,” he added, before adding aggressive regulation can still address many of the concerns the merger may present.
Ben Weintrau, a Ph.D. candidate at Duke University’s Nicholas School of the Environment, said the merger would change the “scale and complexity of the corporate family.”
“It would bring Virginia’s utility into the same corporate family as NextEra’s competitive business,” he said. “The concern is Virginia ratepayers could end up bearing costs or risks that properly belong to the competitive side of the business.”
Kent Chandler is with the think tank R Street Institute and a former regulator in Kentucky.
“Some consolidation [of companies] can result in access to more and cheaper capital,” Chandler said, suggesting that could be the case for the proposed merger in the Commonwealth. “I’ve seen it be a big benefit for small utilities that had trouble accessing capital compared to larger companies.”
In a statement sent Tuesday afternoon, a Dominion Energy spokesperson defended the merger.
"The company will continue to serve customers from Richmond under local leadership, with full State Corporation Commission oversight, and in accordance with the policies set forth by the General Assembly," the company said, pointing to $1.7 in proposed bill credits that would be distributed to ratepayers if the deal was approved. "Over the longer-term our projects will be more efficient to finance, purchase, and build due to the stronger credit and buying power of the combined company.”
Tuesday’s meeting comes as the chair of the Virginia State Corporation Commission announced she won’t recuse herself from proceedings involving the merger.
Kelsey Bagot once worked as a lawyer for NextEra. And she did recuse herself from involvement in a transmission line case that she directly worked on while with NextEra.
But the Richmond Times-Dispatch reports that Bagot sought advice from independent counsel about removing herself from the current merger review. In a letter to a state senator, Bagot said that counsel advised it was not necessary to recuse.
In the letter, Bagot said she had a duty to impartially consider the proposed merger.
