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Virginia SCC to Take Long Look at Dominion-CNG Merger

Virginia SCC to Take Long Look at Dominion-CNG Merger

Virginia's State Corporation Commission (SCC) said it plans to use the full 180 days allowed by Virginia law before ruling on Dominion Resources' merger with CNG. The announcement was made just two weeks after CNG cited fewer potential regulatory problems as a main reason for selecting the Dominion bid over a hostile offer from Columbia Energy Group (See Daily GPI, May 13). If the SCC takes the full 180 days, a decision would not be reached until Nov. 17.

The SCC said the hold-up is due to the potential combination of Virginia Natural Gas (VNG), a CNG subsidiary serving 220,000 customers in various parts of the state, and Virginia Power, a Dominion subsidiary serving two million people in central, northern and eastern Virginia. The SCC said it will explore how the merger will affect VNG's ability to provide adequate service to its customers at "just and reasonable rates."

"The decision was made due to the size and scope of the entities involved," said Ken Schrad, a spokesman for the SCC. "You're dealing with the largest provider of power in the state and the third-largest gas provider. The process is definitely a hurdle for the two companies, but it is too early to tell if they will clear it or not."

Schrad pointed to a large merger in another industry, Bell Atlantic's pending combination with GTE, as an example of the SCC's scrutiny. "There was a case of two large companies seeking to combine. The SCC took the 180 days to rule on that one, and ruled against the merger. Right now the two companies are delayed and back at the drawing board."

Dominion and CNG, however, remained confident that their timetable of having complete regulatory approval by the year's end will not be tested. "We accounted for this and as far as we can see, the merger is right on schedule," said Hunter Applewhite, a Dominion Resources spokesman.

In related news, Applewhite said the company was exploring the option of selling Dominion Capital, the company's financial services arm, to help pay for the $6.4 billion purchase. "Its very preliminary right now, but it has been discussed," Applewhite said. "Being primarily an energy company, we see Dominion Capital as a non-core asset." The financial services company employs 1,000 people. Its subsidiaries include two lending companies, a mortgage company and a merchant bank. For 1998, Dominion Capital contributed $58.7 million or 30 cents/share to Dominion Resources' net income.

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