by Steve Haner

Dominion Energy Virginia and NextEra Energy are expected to file the necessary Virginia application for the sale of Dominion to the Florida company soon, probably in early July. Under present Virginia law, the State Corporation Commission will have six months to say yea or nay.

Readers should first understand this is an acquisition more than a merger. Dominion is being sold to the larger entity. It is a voluntary sale, assuming Dominion’s stockholders approve it.  

Last week the legislative Energy Commission of Virginia got a briefing on the proposal from Dominion President Ed Bain, who basically stuck to data slides and talking points already on the record. Then it heard from a veteran lawyer and economist with deep experience in this kind of proposal. If you have any real interest in what his coming, read these notes he shared. They are less than a dozen pages in bullet format, easy to follow. (Links to the company sales pitch were included in this earlier post.)

Scott Hempling is an attorney and economist now teaching at Georgetown University after a long career in the power generation industry. He served for a while as an administrative law judge for the Federal Energy Regulatory Commission and has been an expert witness or consultant on a host of previous merger or acquisition debates.

The six-month statutory deadline for a decision by the SCC is also causing quite a bit of angst in many circles. That would have the case be decided before the General Assembly is back for the 2027 session, assuming Dominion files in early July. To its credit, the SCC is not waiting for the application and is already hitting the companies with questions. 

Some tidbits from Hempling’s notes to whet your interest (emphasis added):

A utility monopoly market is not a competitive market. In a utility monopoly market, a utility’s market position—its monopoly position—comes not from merit; it comes from the state government… Year after year after year, the utility keeps that role. That exclusive role provides the utility with a relatively predictable stream of government-established earnings. That stream of predictable earnings—from customers of a monopoly service—is attractive to the acquirer. That stream of earnings from the utility’s monopoly market position is what the acquirer is acquiring…

The acquirer wants control of the utility’s predictable earnings. It wants to buy customers—customers who will always need utility service, customers who can buy that service only from the local utility because of the state government’s decision to protect the utility from competition…

The acquirer then can use the target’s monopoly position as a platform from which to increase its earnings, in several possible ways…

When the two companies bring their transactions to commissions for approval, they talk of customer benefits. But those benefits were not the reason for the transaction. Claims of customer benefits serve regulatory strategy, not transactional purpose. They are post-hoc justifications. We know this because the (Securities and Exchange Commission) proxy statements make no mention of customer benefits…

One can theorize about positive results from utility mergers, such as realizing economies of scale and scope, and strengthening both companies financially. But after 40 years of utility mergers, no one has shown that any of these nearly 100 transactions have improved utility performance for customers. There is no proof that larger utility holding systems operate more cost-effectively than the preexisting arrangements. There is no proof that a utility monopoly that already has ample access to capital has better access to capital when acquired by a larger company.

That’s a taste. Take the five or ten minutes to read it all. It is one person’s informed opinion, certain to be disputed in many places, but useful for those of us seeing this kind of issue for the first time. The law the SCC is applying does not require there be proof customers will benefit before such an acquisition can be approved, but merely requires it not be detrimental to customers, that “adequate service to the public at just and reasonable rates shall not be impaired…”