On Tuesday, Virginia lawmakers heard from utility regulation experts on the potential impact of the proposed merger between Dominion Energy and NextEra Energy. If approved, the merger would create the largest electric utility in the country.
In the days preceding this week’s Commission on Electric Utility Regulation meeting, legislators asked State Corporation Commission Chair Kelsey Bagot, a former attorney for NextEra Energy, to clarify if she planned to recuse herself from presiding over the $67 billion merger between Dominion and her former employer.
On Monday, Bagot replied that she saw no reason to do so.
Commission won’t step back from merger case
Bagot resigned from her position as a senior attorney for NextEra following her appointment to the SCC, where she took office in April 2024. She had worked for the Florida utility for two years prior.
In an Aug. 12 letter, Sen. Scott Surovell, D-Fairfax, stated “several members of the General Assembly and other third parties that have raised questions about your continued participation as a commissioner in this matter due to your prior employment by NextEra Energy especially in light of your prior recusal in a prior NextEra Energy case.”
In a response letter dated Aug. 17, Bagot wrote that her previous NextEra-related recusal during her SCC tenure concerned a high-voltage transmission line that would stretch from Leesburg to Winchester as the state’s segment of the Mid-Atlantic Resiliency Link.
Bagot had provided legal counsel for the project in 2023, she wrote, which prompted her to notify the commission at the outset that she would recuse herself from that specific case.
Bagot explained that she consulted independent counsel concerning the NextEra-Dominion merger and whether her previous employment would violate the Canons of Judicial Conduct. Following those conversations, she said, she did not feel a recusal would be necessary.
“As has been demonstrated by long-standing historical Commissioner practice, mere work history with a regulated entity has not served as a categorical basis requiring recusal,” Bagot wrote.
Experts testify about potential merger’s risks while residents rally
At Tuesday’s meeting, a slate of energy regulation policy experts shed light on possible impacts of the deal, which Dominion has said is necessary for the companies to purchase energy infrastructure equipment in bulk, bringing down the price and benefitting their credit ratings.
The combined companies would be responsible for 10 million customers and 110 gigawatts of power – with 130 GW of power demand in the pipeline waiting to be connected to the grid.
Part of the merger deal includes a $2.25 billion shareholder-funded bill credit for customers that will be distributed across Dominion’s coverage states. This would equate to about $10 a month for the average Virginia residential customer.
“If approved, our Virginia customers will benefit from $1.78 billion in NextEra Energy shareholder-funded bill credits,” a Dominion representative said in a statement Tuesday. “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.”
The experts told the Commission on Electric Utility Regulation members there’s no guarantee that rates will not increase once the bill credit runs out.
Lawmakers also heard from experts about NextEra’s past attempts to acquire utilities in other states.
In Hawaii, NextEra attempted to acquire Hawaiian Electric Companies but regulators determined the merger wouldn’t be in the public interest.
In Texas, NextEra also considered merging with the utility Oncor but regulators said it did not have tangible benefits for ratepayers and it would put them at substantial risk of taking on NextEra’s debt, which currently totals over $110 billion.
Surovell asked Yale Law School Professor Joshua Macey, who presented to the board about potential risks posed by the merger, if NextEra considers Dominion a strategic acquisition because of the data center expansion in the commonwealth that is driving energy demand.
Macey responded by explaining a capital bias by utilities called “gold plating,” where companies with a high return on investment percentage approved by regulators would have incentive to potentially overbuild.
“You want the utility’s return on equity to equal its cost of capital,” Macey said. “This might provide evidence that rates in Virginia are too high.”
About 50 Dominion customers and community advocates rallied outside the Virginia General Assembly building before the CEUR meeting began.
Speakers including Melissa Thomas said they believe the merger is driven by the proliferation of data centers in Dominion’s coverage area – the company currently serves over 400 – which are driving the companies’ quest to build more energy infrastructure.
“We do not need any more data centers in Virginia. And what is next —– more gas plants next to the data centers,” Thomas told the crowd. “Do we need more polluting gas plants here? We need clean energy, affordable energy.”
Legislators request special session, Spanberger to intervene in case
A bipartisan group of lawmakers has asked Spanberger to call a special legislative session to pass a measure allowing the SCC review process of the merger to be extended. Commissions have less than six months to approve or reject the project.
So far, the governor has not responded to that request. Lawmakers have also not convened a special session on their own, which each chambers’ leadership is legally permitted to do.
Gov. Abigail Spanberger and Chief Energy Officer Josephus Allmond officially filed notice to intervene in the SCC case for the merger on Monday.
Becoming an official intervenor, an unusual step by a sitting governor, will allow Spanberger to cross examine witnesses in the case and have access to confidential information about the possible merger.
“As Governor, I remain skeptical of the benefits this merger would deliver to Virginia — particularly if those benefits come at the expense of affordability, existing jobs, or meeting our homegrown clean energy goals,” Spanberger said in a statement on Monday.
The public testimony portion of the merger case will begin Nov. 5 and continue on the 9th and 10th. The evidentiary portion of the hearing will be Nov. 17. A decision must be made by Jan 11.
For the merger to succeed, North Carolina and South Carolina’s utility regulatory boards will have to approve it, in addition to Virginia regulators, as well as the Federal Energy Regulatory Commission, the Nuclear Regulatory Commission, the U.S. Department of Justice and the Federal Trade Commission.
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