The commission’s approval is the sixth of seven approvals necessary to close the merger, the companies said, adding that the merger has received approval from SCANA’s shareholders, FERC, the Georgia Public Service Commission, the U.S. Nuclear Regulatory Commission, as well as early termination by the Federal Trade Commission of the 30-day waiting period under the federal Hart-Scott-Rodino Antitrust Improvements Act.
The companies said that the merger remains contingent upon approval from the Public Service Commission of South Carolina, with a decision expected by Dec. 21.
According to the North Carolina regulatory order, the companies filed an application for authorization to engage in a business combination transaction (merger) on Jan. 24.
The merger agreement provides that, at closing, SCANA would merge with Sedona Corp., (Sedona) and SCANA would be the surviving corporation. The order added that Dominion Energy is the sole owner of Sedona, which is a South Carolina corporation and wholly owned subsidiary of Dominion Energy formed for the purpose of effectuating the business combination transaction with SCANA.
Upon consummation of the merger, each issued and outstanding share of common stock of SCANA – other than the cancelled shares as defined in the merger agreement – would be converted into the right to receive a 0.6690 validly issued, fully paid and non-assessable shares of common stock of Dominion Energy. The order added that upon consummation of the merger, each issued and outstanding share of Sedona would be converted into and become one validly issued, fully paid, and non-assessable share of common stock of SCANA as the surviving corporation. Thus, the order added, as a result of the merger, Dominion Energy would own all the stock of SCANA.
Following the closing of the merger, the order said:
- Dominion Energy intends to add one member from the SCANA Board of Directors or SCANA’s executive management team to the Dominion Energy Board of Directors
- PSNC would remain a direct, wholly owned subsidiary of SCANA and would continue to exist as a separate legal entity. Dominion Energy intends to manage PSNC from an operations standpoint as a separate regional business
- Dominion Energy intends to maintain Public Service Company of North Carolina’s (PSNC) headquarters in Gastonia, N.C., and to maintain compensation levels for PSNC employees until Jan. 1, 2020
The order also noted that a stipulation among Dominion Energy, SCANA, the Public Staff – North Carolina Utilities Commission (public staff), and Transcontinental Gas Pipe Line Company, LLC (Transco) includes commitments by the companies to:
- Forego recovery of merger-related expenses and hold Dominion Energy North Carolina (DENC) and PSNC customers harmless from the impacts of debt downgrade. Virginia Electric and Power is a wholly owned subsidiary of Dominion Energy that does business in North Carolina as DENC
- Create a regulatory liability of $3.75m representing a refund to PSNC’s customers of 2017 revenues over the course of three years
- Increase PSNC’s charitable contributions over its 2017 contributions by $150,000
- Not file an application for a PSNC general rate case before April 1, 2021
- Maintain current levels of PSNC’s customer service and professional cooperation
- Pursue cost savings opportunities between DENC and South Carolina Electric & Gas (SCE&G)
- Provide for future filing and operation under new or amended affiliate agreements
- Comply with the regulatory conditions and Code of Conduct
Among other things, the order said that the merger, as supplemented by the terms of the stipulation, would result in quantifiable economic benefits for the customers of DENC and PSNC. While the merger would result in potential risks, those risks to North Carolina customers of DENC and PSNC are sufficiently mitigated by the stipulation, the regulatory conditions, the Code of Conduct, and the continued full regulatory authority of the commission, the order said.
For instance, one regulatory condition stipulates that DENC and PSNC would own and control the assets used to serve their respective retail customers, as well as that if DENC or PSNC intends to transfer an asset having a net book value in excess of $10m, they are required to provide the commission with at least 30 days advance notice of the proposed transfer and cannot include the value of the transfer in rates without commission approval.
The order added that the commission concludes that the regulatory conditions effectively address potential risks and concerns related to corporate governance and ring-fencing issues arising from the merger by ensuring the continued viability of DENC and PSNC, as well as insulating and protecting DENC, PSNC, and their retail customers from the business and financial risks of Dominion Energy and the affiliates within the Dominion Energy holding company system, including the protection of utility assets from the liabilities of affiliates.