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Questar Corp.'s proposed purchase by Virginia-based Dominion Resources easily passed a major regulatory hurdle when it was approved Monday by the Utah Public Service Commission.
The $4.4 billion merger sailed through without dissent after officials from the state Office of Consumer Services and the Utah Division of Public Utilities agreed that several amendments to the sales agreement will "result in just and reasonable rates and are in the public interest."
Then, after no one from the public criticized the deal announced in February, the commission gave its formal consent.
Final approval awaits a review by Wyoming regulators, but Utah's OK was considered to be the main challenge because most of Questar's 1 million customers are in the Beehive State.
A key ingredient to the uncontested approval was Questar's agreement to withdraw a request to the PSC for a $22 million rate increase.
No other rate hike will be sought until 2019, when the natural-gas company is scheduled to go through a general rate case, said Barrie McKay, Questar's vice president of regulatory affairs and energy efficiency.
"Rates will not go up because of the merger," added Thomas Wohlfarth, Dominion Resources' senior vice president of regulatory affairs. "In the long run, we would expect rates to be lower than they would be" if the merger didn't take place.
He said several provisions were included to keep Questar costs down.
Limits were placed on the expenses Questar customers bear for the combined company's administrative expenses and ongoing operations and maintenance.
Another measure assured that Questar customers would not foot the bill for income-tax changes brought about by the merger, Wohlfarth said, adding that shareholders — not ratepayers — will bear transaction, transition and integration costs.
In addition, Dominion Resources pledged to:
• Invest $75 million into a Questar pension fund.
• Preserve Questar's independence by keeping its headquarters in Salt Lake City and keeping the local management team.
• Maintain the same or better level of customer service provided by Questar.
• Invest in all Questar pipeline repair and replacement projects already in the works.
• Avoid shifting any merger expenses to subsidiaries such as Questar Gas or Wexpro, Questar's natural-gas-exploration and -production arm.
• Write off any severance-related costs as an expense of doing business rather than something ratepayers could reimburse.
• Increase by $1 million per year the amount of charitable contributions that Questar gives out for the next five years.
"What we're saying here is it will be business as usual," Wohlfarth said. "Questar is a great company. We're not going to change anything in the way they provide value to customers. We're not going to make any changes to areas that affect safe, reliable, good service to customers."
Douglas Wheelwright, a technical consultant for the state Division of Public Utilities, said he and a colleague initially were inclined to oppose the proposed acquisition.
But they changed their minds after several of the provisions cited by Wohlfarth "resolved many of our original concerns," he testified Monday, "providing net benefits and adequate protections for Utah customers."
A utility analyst for the state Office of Consumer Services, Gavin Mangelson, concurred that the revisions "will result in just and reasonable rates [for existing ratepayers] and is in the public interest."
Dominion Resources already had a presence in Utah through four solar-power operations in Iron, Beaver and Millard counties.
But the acquisition of Questar adds significantly to its portfolio of interests — 4.8 million electric and gas customer accounts in eight states, 15,500 miles of pipelines for natural-gas transmission and storage, 6,500 miles of electric transmission lines and 20,000 megawatts of electricity-generation capacity.
While Questar has about 1,700 employees, Dominion Resources has 14,700. It reported 2015 earnings of $2 billion on revenues of $11.7 billion.
Wohlfarth and McKay said this merger came together easier than many.
"It's rare where two companies fit as good as we do," Wohlfarth said. "We share core values and a common operating philosophy, including [approaches to] safety, customer service, honesty and ethical business practices."
Added McKay: "It was a refreshing process of discovering that what Dominion is all about is similar to what Questar has been about."