The proposed blockbuster deal—characterized as a merger between NextEra Energy, FPL’s Juno Beach-based parent company, and Richmond, Virginia-based Dominion—was announced Monday. The all-stock deal would create “the world’s largest regulated electric utility business,” according to the companies.
While Dominion is the smaller of the two, its commercial electricity customers include “the largest concentration of data centers on the planet,” according to MarketBeat.com. The financial publication described Dominion’s “monopolistic control” over the electric grid servicing the area that includes “Data Center Alley” as “the strategic crown jewel of this transaction.” The company’s commercial customers include 450 data centers in Virginia.
John Ketchum, the chairman, CEO and president of NextEra, told stock analysts in a conference call on May 18, “We believe the combined company can become the go-to partner for large load customers.”
Barron’s business magazine described the proposed merger as creating “a new utility giant for the AI age.”
Consumer watchdog group opposes the proposed merger
Public Citizen, the Washington, D.C.-based consumer rights advocacy organization founded by Ralph Nader, has already voiced its opposition to the proposed merger of NextEra and Dominion.
“Bigger is not always better when it comes to serving consumers,” said Tyson Slocum, energy program director at Public Citizen. “This is an outlandish merger that I don’t see offering any benefit to consumers.”
“They will likely (eventually) raise rates as we’ve seen with every other major merger and this one is the biggest,” said Slocum.
Motley Fool and financial news websites have estimated cost of the proposed all-stock deal to merge NextEra and Dominion to be in the $66.8 billion to $67 billion range.
“They’re paying a premium to acquire Dominion,” said Slocum, referring to NextEra. “How are they going to pay for it? Will shareholders take the hit? Not likely. It’s going to be paid for by consumers.”
When FPL acquired Gulf Power a few years ago, former Gulf Power customers in Northwest Florida who paid $129.24 per month in 2021 saw their FPL electric bills rise to $155.61 the following year, according to a Northwest Florida Daily News report in February 2022.
“FPL customers in Northwest Florida today are paying 19% less in real dollars than they were in 2018 before NextEra Energy acquired Gulf Power,” FPL spokesman Andrew Sutton told USA TODAY NETWORK-FLORIDA on May 19. “Since customers in Northwest Florida became part of the FPL family in 2019, reliability has also improved more than 60%.”
Slocum noted that, “Congress, generations ago, deemed utility services as totally unique. They need to be able to serve consumers and not just shareholders. By law, they have to serve the public interest.”
What does the merger mean for FPL customers in Florida?
For now at least, the merger—which still requires approval from federal regulators as well as state regulatory agencies in Virginia and the Carolinas—would not affect electric rates for FPL customers in Florida.
The Florida Public Service Commission, which oversees rates charged by investor-owned electric utility companies serving the Sunshine State, in November approved an agreement with FPL that locks in electric rates through 2029.
Under that agreement, the average monthly bill for FPL customers for 1,000 kilowatt hours is $141.36 in Northwest Florida and $136.64 in the rest of the state. Next year, when FPL plans to begin charging the same rates across Florida, the rate is set to increase to $143.05 a month.
The national average rate is $180 a month, according to ElectricChoice.com, the website for Tyler, Texas-based energy consulting firm Eisenbach Consulting.
“FPL bills are expected to remain well below the national average through at least the end of the decade under the company’s current four-year rate agreement approved by the FPSC,” said Sutton. “FPL, Dominion Energy Virginia.NC, and Dominion Energy SC operate in separate regulatory jurisdictions with separate rate bases. FPL will continue operating as a separate regulated utility just like today.”
Are rates locked in even if Florida gets hit by a hurricane?
Electric rates for FPL customers in Florida are set through 2029, but not if the Sunshine State gets hit by major storms that cause widespread power outages.
“Electric bills in Florida do not include the cost of responding to hurricanes and tropical storms,” said Sutton. “Instead, a temporary surcharge is applied after storms. We are mindful that customers pay these restoration costs, which is why we continue to invest in storm hardening and smart grid technology to avoid many outages, speed restoration and reduce restoration costs. Any storm restoration surcharge must first be approved by the PSC.
“There is no storm surcharge on FPL customer bills currently.”
If Florida has lower than average electric rates, why is my electric bill so high?
Even though Florida has lower rates than the national average, residents pay the ninth-highest electric bills in the country, according to the industry trade publication Utility Dive.
That’s because electric consumption in the Sunshine State is the fourth highest with households using an average of 1,616 kilowatt hours per month, compared with the national average of 875.
The reason? Nearly year-round use of air-conditioning.
Why are NextEra and Dominion looking to merge now?
Its FPL subsidiary is already the nation’s largest electric utility company. The acquisition of Dominion will make NextEra the third-largest energy company in the United States, behind only ExxonMobil and Chevron, based on market capitalization value, which is expected to grow to $249 billion, up from approximately $188 billion today.
That could greatly improve NextEra’s ability to meet the growing demand for electricity, which Ketchum told stock analysts “is increasing unlike anything we’ve seen in generations.
“Today, energy infrastructure projects are larger and more complex than ever before. Practically every corner of America needs power solutions. Not someday, but right now. Speed-to-power is critical, so too is maintaining affordability and reliability for customers.”
Meeting that demand, said Ketchum, “requires us to enhance our customer value proposition that starts with scale. Not for the sake of size, scale must translate into capital and operating efficiency, which simply put, enables us to buy, build, finance and operate more efficiently.
“That’s exactly what we fully expect combining NextEra Energy and Dominion Energy would do. … Combined, we’d be No. 1 in America in total power generation, the world’s leader in renewables and energy storage, America’s No. 1 (natural) gas generator, and second-largest nuclear generator. The list goes on and on. When you add it all up, you see this as a unique situation where one plus one equals three.”
The merger is expected to be completed in the next 12 to 18 months. When that happens, it would likely boost adjusted earnings per share of the combined company upon completion of the deal by 9% through 2032, according to NextEra officials.
NextEra is already gearing up to service data centers
“Hyperscale data centers have not yet arrived in Florida, but our PSC(Public Service Commission)-approved large load rate structure ensures they will have to pay their own way if and when they do arrive here,” Sutton said. “Floridians will not subsidize them.”
NextEra on March 20 confirmed that it won approval from the federal government to develop up to 10 gigawatts of natural gas-powered electricity-generation plants in Texas and Pennsylvania.
The deal was personally approved by President Donald J. Trump, according to NextEra, which will build and operate the power-generation facilities that would be jointly owned by the U.S. and Japan. The planned hubs are expected to serve large-scale users including data centers and advanced manufacturing.
“We’ve had a lot of success … with the data center hubs,” Ketchum told stock analysts on May 18. “We’ve talked about what’s happening with the two federal hubs that we’ve already been awarded in Texas and Pennsylvania. That same data center hub philosophy is being brought to Florida. We could look at those same build-out opportunities in Virginia, for example, as well as a way to accommodate large load coming on.
“There are just so many different ways this combination will help a company that is involved in every part of the energy value chain. … There’s not capability that we don’t have. There is no company in America that looks like us.”
That is the “strategic logic behind this transaction,” said Ketchum who also repeatedly stressed, “this has to be done in a way that doesn’t compromise affordability for our general body of customers.”
The merger would double the number of nuclear plans NextEra owns
In addition to Dominion’s 3.6 million residential electricity customers and its commercial customers, the company owns and operates four nuclear plants in Virginia, Connecticut and South Carolina.
NextEra currently owns and operates four nuclear plants of its own, including two in Florida (Jensen Beach and Florida City), as well as one each in Seabrook, New Hampshire, and Two Rivers, Wisconsin.
NextEra also owns a fifth nuclear plant in Iowa, near Cedar Rapids, that was shut down in 2020. The company recently announced plans to restart that plant, which is expected to become fully operational by 2029.
Where will the combined company be based and what will it be called?
The combined company will be called NextEra Energy, but will continue to do business in its respective markets under the names currently being used: FPL in Florida and Dominion Energy in Virginia and the Carolinas.
The company will have dual headquarters: one in Juno Beach, where NextEra and FPL are currently based, the other in Richmond, Virginia, where Dominion currently has its corporate offices. It will also maintain an “operational headquarters” for Dominion Energy South Carolina in Cayce, South Carolina.
Ketchum will become chairman and CEO of the combined company, while Robert Blue, currently chairman, CEO and president of Dominion Energy, will become president and CEO of regulated utilities and a member of the combined company’s board of directors.
The combined public company’s common stock shares will trade on the New York Stock Exchange under the ticker symbol NEE.
Clayton Park is a journalist for the USA TODAY NETWORK FLORIDA. He covers everything from insurance, utilities and home prices to groceries, gas and auto prices as the Florida consumer pocketbook reporter. If you have news tips, please send them to cpark@usatodayco.com. You can get all of Florida’s best content directly in your inbox each weekday by signing up for the free newsletter, Florida TODAY, at https://news-journalonline.com/newsletters.
This article originally appeared on Pensacola News Journal: NextEra–Dominion merger targets data center power boom
Reporting by Clayton Park, USA TODAY NETWORK – Florida / Pensacola News Journal
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