The $67B Deal Has a Problem in Richmond

On Monday, NextEra Energy and Dominion Energy announced they are combining in an all-stock transaction that would create the world's largest regulated electric utility — 10 million customers, 110 gigawatts of generation, and the most valuable utility franchise in the country (Northern Virginia's data center corridor, in case you have been living off the grid).

The financial press covered the balance sheet. The energy press covered the AI angle. Everyone covered the same story.

Here is the story nobody is covering.

This deal requires approval from five separate regulatory bodies. FERC. The Nuclear Regulatory Commission. The Virginia State Corporation Commission. The North Carolina Utilities Commission. The South Carolina Public Service Commission.

FERC will almost certainly approve it. The NRC will almost certainly approve it. North Carolina and South Carolina will extract conditions and then approve it.

Virginia is the one that could actually stop it.

And Virginia has a situation.

The Virginia SCC has three judges elected by the General Assembly. Judge Kelsey Bagot — sworn in April 2024, former Senior Attorney at NextEra Energy, Inc. — committed in writing at her confirmation to recuse herself from any matter involving her former employer. Senator Russet Perry said that recusal commitment was “absolutely necessary” to secure her vote. That commitment covers this merger in neon lights.

Bagot recuses. That leaves Judges Jehmal Hudson and Samuel Towell.

Under Virginia law, two commissioners constitute a quorum. A 1-1 split deadlocks the petition. No statute prescribes a tiebreaker.

You see where this is going.

The Virginia Utility Transfers Act sets the substantive standard: the Commission must be satisfied that “adequate service to the public at just and reasonable rates will not be impaired or jeopardized.” Not a rubber stamp. The SCC has to be satisfied.

Given that Dominion's last rate case produced an authorized ROE of 9.8% — after the Commission cut Dominion's 10.4% request — and Florida Power & Light currently operates at an authorized ROE of 10.95% (the highest in the contiguous United States), the “just and reasonable rates” question writes itself.

NextEra's offer to make it go away: $2.25 billion in bill credits for Dominion customers across Virginia, North Carolina, and South Carolina, spread over two years after closing. Clean Virginia's math works out to roughly $625 per Virginia customer over two years. One-time. Non-recurring. No rate-case moratorium. No ROE cap.

The last time NextEra offered a one-time bill credit to get a state commission to approve a deal was Hawaii, 2016. The PUC rejected it unanimously, finding the benefits “inadequate and uncertain” and the commitments “too broad and vague.”

The intervenors noticed.