“Bill credits”. “Robust employee protections”. “Enhanced charitable giving”. NextEra and Dominion are already playing defense on their announced merger.
NextEra and Dominion are two of the largest investor-owned utilities in the US.
NextEra’s market cap is $180B as I write this. Dominion’s is $60B.
📈 If they combine, they would form the third-largest energy company in the US, falling behind only ExxonMobil and Chevron.
But the road to approval may not be so easy.
At a time when many consumers are seeing power bills climb, the optics of a new behemoth trying to capture incremental profits will be a real challenge for consumers and regulators.
With that said, the merits of the combination are real.
A larger utility with a stronger balance sheet will have a lower cost of capital.
⚡ The economics of massive power infrastructure projects are sensitive to the cost of deploying all that capital in advance of revenue.
That means a combined NextEra and Dominion will be able to do more and larger projects, and they’ll be able to do these projects at lower cost.
That’s particularly valuable when we’re short on power infrastructure.
The advantages of the deal are easy to point to.
But if we’re going to celebrate size for the sake of size, what’s the limit?
Should we just have a single utility across the US? It would have the largest balance sheet and access to the largest pool of expertise.
Should we nationalize that single utility? It’s hard to beat the US government when we talk about how low cost of capital can get.
If you believe in markets, clearly there should be some limit to how large we want these utilities to get, both in terms of promoting competition and avoiding regulatory capture.
These are the kinds of questions regulators are going to debate.
NextEra and Dominion aren’t leaving things to chance.
They know consumers, labor organizations, and local communities may have real reservations here.
📣 That’s why you see mentions of “bill credits”, “robust employee protections”, and “enhanced charitable giving” all in the initial press release.
Just how large do we want our power utilities to become?
We’re about to watch a serious debate unfold with 12-figure implications.
