Is Dominion Eyeing a Big Move in South Carolina?

Hmmm… Santee Cooper, the state-owned electric utility in South Carolina that lost a bundle through nuclear power overruns, is thinking up putting itself up for sale. One of the four companies sniffing around, according to this report in The State, is Dominion Energy.

Dominion has been beefing up its presence in South Carolina. Since 2014, says The State, the company “has announced plans for a major solar farm in the Lowcountry, built a gas pipeline southeast of Columbia, established a regional headquarters in the Capital City, donated to nonprofit groups and hired State House lobbyists.” The company also has confirmed the possibility that it might extend the Atlantic Coast Pipeline to the Palmetto State, although any extension of the pipeline, which terminates in southern North Carolina, would require another lengthy Federal Energy Regulatory Commission approval process.

Dominion would be “a natural fit to expand its presence in South Carolina’’ because of the investments it already has made in the state, the newspaper quoted securities analyst Travis Miller as saying

(Read the article to see several quotes from a frequent Bacon’s Rebellion comment contributor.)

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5 responses to “Is Dominion Eyeing a Big Move in South Carolina?

  1. Notice who the potential buyers are: Dominion, Duke, Southern Co., and NextEra (an owner of the MVP). They are all large utility holding companies that have become adept at investing in capital intensive projects to create a long-term stream of revenues to benefit shareholders. None are actual utilities, just unregulated for-profit companies whose primary function is to increase shareholder value. There is nothing wrong with that, that is how our economy currently works. But the troublesome aspect is that all of these holding companies rely on the customers of their captive utilities to pay more compared to using other options, in order to provide a revenue stream for these projects.

    These are corporate carnivores circling a dying prey. Santee Cooper would have to take a huge haircut to make this deal interesting to any potential buyer. That leaves billions to be paid by South Carolina ratepayers, US taxpayers, and perhaps shareholders for the debacle created by the failed nuclear plant.

    Santee Cooper is being investigated for failing to properly report the true extent of the cost overruns and schedule delays.

    Southern Company is already struggling with a similar situation with the new Vogtle nuclear units in Georgia. Their financial situation has been weakened as a result.

    This will be a complicated deal. There would have to be a definite amount and timetable for a settlement of the Toshiba/Westinghouse bankruptcy. Nothing has fundamentally changed with the AP1000 reactor situation. Many of Westinghouse’s best people have likely fled to greener pastures. The buyer would be assuming a large risk. That is why the price would have to be really low.

    A new owner would have to negotiate a deal to assume the federal loan guarantees that make nuclear construction possible and get a transfer or increase in the production tax credit currently authorized. Continuing on the same basis did not makes sense to Santee Cooper’s board, so something would have to be substantially different for it to make sense to venture into the uncertain waters of nuclear construction. The only thing certain is that US nuclear plants always come in over budget and behind schedule.

    A deal would also have to be struck with SCANA, the owner of 55% of the project. Completion of the project would not occur until at least 2024, with an estimated total cost of $11.4 billion for Santee Cooper. They have ceased construction saying “We simply cannot ask our customers to pay for a project that has become uneconomical.”

    Dominion energy’s stock is highly regarded, but financial analysts have noted that they are highly leveraged and might be concerned about increasing their debt load.

    I am not privy to any of the details of this deal. Perhaps Dominion is looking to buy Santee Cooper at a bargain basement price, abandon the nuclear project, extend the ACP into South Carolina to fuel new natural gas plants, and use the massive loss as tax protection for Dominion Energy profits. Mergers and acquisitions of ailing companies are often accomplished to obtain cheap tax loss carry-forwards.

    This could use the network of natural gas pipelines Dominion recently purchased from SCANA in South Carolina. It would also make up for the significant declines in the projected need for natural gas in Virginia and North Carolina resulting from the 50% cutback in projected combined cycle units since the ACP was announced.

    Such a scenario would look good from the CEO’s seat. But ratepayers would pay billions extra to benefit the shareholders.

  2. re: ” It would also make up for the significant declines in the projected need for natural gas in Virginia and North Carolina resulting from the 50% cutback in projected combined cycle units since the ACP was announced.”

    Wow – is this because of lower demand for electricity or what?

    • Yes. Either the load growth in Virginia and North Carolina was way overestimated in 2014 to provide justification for the ACP, or the chilly reception of the over-inflated estimates by state regulators (or both) have reduced the amount of new combined cycle units in recent IRPs from both Dominion and Duke.

      Gas-fired peakers, while adding a good bit of capacity to the system, don’t run very often and therefore, do not consume much gas.

      Dominon’s projections are still 3500 MW higher than what PJM forecasts for the DOM Zone.

      • Tom – do you know what the floor level demand is for Virginia?

        this would be how much electricity is required to meet the floor level demand.

        then do we know what the typical peak level demand is?

        in other words – what’s the variance between the floor and the peak?

        thanks

  3. It’s not possible for me to display the load duration curve with this post. You can find it on page 102 (Figure 5.5.5.2) of Dominion’s 2017 IRP.

    I am making a crude approximation, because the axis is labeled every 5000 MW.

    The load that is experienced 100% of the time is about 7,500 MW. This minimum load would occur in the mild weather periods of spring or fall. The baseload during summer and winter peaks would be higher.

    Here are the ranges I have estimated:

    Base load – 7500 – 11,000 MW (60% – 100% of the time)

    Intermediate – 11,000 – 13,500 MW
    (the 5 am- 11pm intermediate load would begin lower than 11,000 MW during mild weather)

    Peak – 13,500 – 17,500 MW (final o- 10% of the load duration)

    Dominion’s 2017 peaks:
    Summer 17,501
    Winter 15,044

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