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With their scale, financial wherewithal and 130-gigawatt (GW) pipeline of new large-load customers, the planned combination of electric utility and wholesale power giants NextEra Energy and Dominion has the potential to substantially accelerate the buildout of new natural gas-fired power plants and gas transmission infrastructure and, with that, the need for incremental gas production to support it all. There’s a caveat, though, namely that NextEra’s Florida Power & Light (FPL) so far is sticking to its plan to phase out all of its gas-fired generation within the next 20 years. In today’s RBN blog, we discuss how we view the likely impact of the NextEra/Dominion merger, focusing primarily on the near- and midterm.
Many of you have already heard or read about the deal, so we’ll keep our summary to a short paragraph. NextEra Energy, corporate parent of regulated utility FPL and wholesale power developer NextEra Energy Resources, on May 18 announced an agreement to merge with Dominion in an all-stock deal valued at more than $66 billion. NextEra shareholders will hold a 74.5% stake in the combined company and shareholders of Dominion, which has 3.6 million electric customers of its own in Virginia, North Carolina and South Carolina (plus a half-million gas customers in South Carolina), will hold a 25.5% stake. The massive deal is expected to close in 12 to 18 months; the duration is tied in part to the fact that it needs to be reviewed and approved by four state public service commissions. (Oh, and while a single entity will be formed, NextEra and Dominion will retain their names and operate out of dual headquarters in Florida and Virginia, respectively.)
In announcing the agreement, John Ketchum, NextEra’s chairman, president and CEO, said “To really put our size and scale into perspective, consider this: The combined company's enterprise value would make us the third-largest company in the energy sector in America, behind ExxonMobil and just barely behind Chevron, and bigger than the next two largest power companies combined.”
To get a handle on the merger’s significance to data centers, power development and U.S. gas consumption — the primary focus of our analysis today — let’s briefly describe the three biggest elements of the two parent companies:
- NextEra Energy’s (NEE) FPL subsidiary is the largest electric utility in the U.S., with more than 6 million customers, the vast majority of them on the Florida peninsula and a much smaller number in the state’s panhandle. FPL also is the nation’s #1 end-use consumer of natural gas; the utility’s 37-GW-plus generation fleet includes more than 20 GW of combined-cycle plants and 3 GW of combustion turbines (CTs) that likely consume an average of 1.5 to 2 Bcf/d in the warmer, more humid months of the year when air conditioning demand is highest. FPL’s pipeline supply contracts add up to some 2.2 Bcf/d, equal to the demand of an LNG export terminal. Its pipeline contracts represent about half of all the gas consumed in Florida.
- NEE’s NextEra Energy Resources (NEER) unit is the U.S.’s largest developer, owner and operator of independent power facilities, almost all of which sell their output to utilities and others under long-term power purchase agreements. NEER’s current generation portfolio tops 36 GW, with wind farms accounting for about 60% of the total, followed by solar (28%), nuclear (6%), natural gas (4%, or about 1.5 GW), and biomass and other renewables (2%). The subsidiary also has more than 5 GW of battery storage capacity.
- Dominion, finally, owns three regulated utilities: Dominion Energy Virginia, Dominion Energy North Carolina and Dominion Energy South Carolina. The North Carolina utility serves the northeastern corner of the state and operates in conjunction with its much larger Virginia counterpart. Their installed capacity totals more than 23 GW, including 8.4 GW of utility-owned gas-fired plants. Dominion Energy South Carolina, in turn, has about 6 GW of existing capacity, nearly half of it fueled by gas.
There are three more things we should note here — all of which will play into what we’ll be discussing in a moment. One is that Dominion Energy Virginia serves the largest concentration of energy-intensive data centers on the planet (see Sweet Virginia). Another is that FPL and the Dominion utilities have locked up a substantial share of the existing and planned pipeline capacity serving the lower half of the East Coast. Yet another is that NextEra in the past couple of years has entered into several agreements — with gas-plant provider GE Vernova, utility giants Entergy and Xcel Energy, and mega-tech companies Google and Meta, among others — aimed at quickly advancing the development of power projects to support massive data center plans across the U.S.
Before we get into some details, Figure 1 below puts the size and ambitions of NextEra and Dominion into perspective. The short green bar to the right illustrates the capacity of Dominion’s (stock symbol D) existing generation fleet (about 30 GW), while the blue bar shows NextEra’s (stock symbol NEE) 80 GW and the black bar shows the pro forma company’s combined 110 GW. The tall green bar to the far left shows what the companies see as the potential size of NextEra/Dominion’s fleet in 2032, by which time they expect to add another 115 to 150 GW of capacity, most of it from solar, battery storage and gas-fired projects (and maybe some nuclear). NextEra’s Ketchum, who will serve as the merged company’s CEO, noted that the expected addition of about 130 GW of capacity over the next six years is “more than three times the total installed capacity of the entire state of New York.”
