Virginia Energy Regulatory Update (February 2020)

Below is our firm’s summary of notable energy regulatory activity at the Virginia State Corporation Commission (“SCC” or “Commission”) during February, 2021. During the last month, among other activity, the SCC held evidentiary hearings regarding Dominion Energy Virginia’s (“Dominion”) and Appalachian Power Company’s (“APCo”) renewable portfolio standard (“RPS”) compliance filings. The Commission also opened several dockets to evaluate new cost recovery proposals and published a final order regarding Dominion’s 2020 Integrated Resource Plan.

Rate cases, oversight, and resource planning:

Please contact regulatory attorneys Will Reisinger or Matt Gooch should you have any questions about these cases or Virginia’s energy market. ReisingerGooch PLC provides regulatory and transactional counsel to clean energy businesses and public interest organizations.

  • SCC issues final order regarding Dominion’s 2020 integrated resource plan – Case No. PUR-2020-00035

On May 1, 2020, Dominion filed its 2020 Integrated Resource Plan (“IRP”). The IRP represents Dominion’s first attempt to comply with the Virginia Clean Economy Act, which will go into effect on July 1. Per Virginia law, the SCC must review the plan and determine whether it is “reasonable” and “in the public interest.” The SCC conducted an evidentiary hearing between October 27 and October 30. Dominion, Staff and the respondents debated several issues, including the reasonableness of Dominion’s plans to comply with the VCEA and its decision to include uneconomic resources in its IRP.

The Commission issued its final order on February 1. Referencing many of the concerns raised by Staff and respondents, the Commission stated that Dominion’s plan does not satisfy the statutory standard: “The Commission … cannot conclude, based on the record in this proceeding and issues discussed further below, that Dominion’s 2020 IRP, as filed, is reasonable and in the public interest for purposes of a planning document.” The order stated that “the participants in this matter have raised significant issues, the resolution of which may not come into full focus until after gaining actual experience in implementing the Commonwealth’s new policy goals in the context of specific resource proposals.” The order requires Dominion to make several adjustments to its modeling and analyses in its next IRP.

  • Intervening parties file direct testimony regarding Virginia Natural Gas request for $49 million rate increase – Case No. PUR-2020-00095

On June 1, Virginia Natural Gas (“VNG”) filed a request for a base rate increase. VNG is requesting an increase to its total revenues of approximately $49 million. VNG asserts that the proposed rate increase is necessary due to increased operational expenses and investments in safety and efficiency. The increased revenue requirement also reflects a higher rate of return on common equity (“ROE”). VNG is requesting that the SCC authorize an ROE of 10.35% due to the current “highly volatile capital markets.” VNG has retained the same ROE expert witness and economic consulting firm used by Dominion Energy in recent rate proceedings. VNG’s requested rate increase, if approved, would increase the monthly bill of a typical residential customer using 597 CCF per month by $11.20.

On February 16, several intervening parties filed direct testimony. The Attorney General, representing residential gas users, filed direct testimony opposing VNG’s proposed cost allocation. According to the Attorney General’s expert witness, VNG’s proposal would assign an excessive amount of costs to Virginia retail customers. VNG’s facilities are used to serve Virginia retail customers as well as wholesale customers, such as electric utilities. A coalition of industrial gas users also filed direct testimony opposing VNG’s proposed rate design and requested rate of return. An evidentiary hearing will be held on May 11, 2021.

  • Dominion files request for new rate rider to recover costs associated with coal ash remediation – Case No. PUR-2021-00045

On February 26, Dominion filed an application for a new rate rider to recover costs associated with coal ash remediation at several Virginia coal plants. The application was filed pursuant to 2018 legislation, SB 1355, which allows Dominion to seek rate recovery for up to $225 million per year. Dominion’s application requests approval to recover $216 million in environmental costs between December 1, 2021, and November 30, 2022. The rate rider would result in a $2.95 increase to the monthly bill of a residential customer using 1,000 kWh per month. The Commission has not yet established a procedural schedule for this case.

  • SCC approves updated rate rider for Dominion Wise County coal plant – Case No. PUR-2020-00102

On February 24, the Commission approved an updated rate adjustment clause, or rate rider, allowing Dominion to continue recovering the costs of its Virginia City Hybrid Energy Center in Wise County, Virginia. The Commission approved an updated revenue requirement of $192.2 million. The new rates will be in effect between April 1, 2021, and March 31, 2022. The revenue requirement includes a rate of return, or profit, of 9.2%. No party opposed Dominion’s request to continue operating and recovering costs associated with the Wise County facility. The rate rider for the Wise County facility represents the largest single generation charge on a typical customer bill.

During Dominion’s most recent integrated resource planning case, however, both the Attorney General’s Office and environmental respondents questioned Dominion’s proposal to continue operating the Wise County plant. These parties noted the declining utilization rate of the facility. The Attorney General’s witness testified that the continued operation of the utility’s newest coal plant, the Virginia City facility, would result in a negative ratepayer value of $472 million over the next 10 years.

  • Kentucky Utilities requests increase to its fuel recovery rider – Case No. PUR-2021-00034

On February 16, Kentucky Utilities Company, doing business as Old Dominion Power (“KU/ODP”), filed a request to increase its fuel recovery rider. The fuel recovery rider, called the “fuel factor,” recovers a utility’s costs to obtain fuel such as coal and natural gas. Purchased power costs are also treated as fuel costs pursuant to the fuel factor statute, Va. Code § 56-249.6. KU/ODP is projected an increase in coal and gas prices in 2021, as compared to the utility’s most recent estimates. KU/ODP’s requested increase would result in a total bill increase of $1.63 per month for a residential customer using 1,000 kilowatt-hours.

KU/ODP is an investor-owned electric utility providing service in the counties of Wise, Lee, Russell, Scott and Dickenson in southwest Virginia. The Commission has not yet established a procedural schedule for this case.

Renewable energy, efficiency, and new energy infrastructure:

  • SCC holds evidentiary hearings regarding Dominion and Appalachian Power RPS development plans – Case No. PUR-2020-00134

On July 10, 2020, the SCC entered an order establishing two new dockets to evaluate plans by Dominion and Appalachian Power to comply with Virginia’s mandatory renewable portfolio standard (“RPS”) program. The Virginia Clean Economy Act, which became effective on July 1, established a mandatory RPS that applies to both utilities. The RPS requires Dominion and APCo to meet an increasing percentage of their electricity sales from renewable resources. The VCEA also states that the utilities must procure a certain percentage of their energy requirements from facilities located in Virginia. Each filing includes proposals to add large amounts of new solar generation over the next decade. Dominion’s plan requests approval to add almost 500 MW of new solar, including utility-owned and third-party-owned facilities.

The SCC held an evidentiary hearing to review APCo’s plan on February 3. A hearing on Dominion’s plan was held between February 17-23. Although no parties opposed Dominion’s request to add approximately 500MW of new solar to its portfolio, the SCC Staff and intervening parties litigated a number of issues. The SCC Staff and Attorney General argued that Dominion should be subject to a “performance guarantee,” whereby ratepayers are held harmless in the event the company’s solar facilities do not generate as much energy as projected. In both cases, several parties, including environmental advocates and the solar industry, argued that the utilities should be required to consider unbundled REC purchases as part of future RPS compliance. The solar industry also urged the Commission to require the utilities to consider larger deployments of Virginia distributed solar generation as part of its RPS compliance strategy.

The SCC must review each filing and determine whether it is “reasonable and prudent.” Based on the statutory timeline, the SCC must enter a final order on Dominion’s and APCo’s RPS filings no later than April 30 and May 2, respectively.

  • Interested parties file direct testimony regarding Dominion’s VCEA non-bypassable charge rider proposal – Case Nos. PUR-2020-00164

On October 5, Dominion filed a proposed rider to recover costs associated with the Virginia Clean Economy Act’s (“VCEA”) renewable energy provisions. The VCEA states that the utilities may recover the costs of compliance with the VCEA’s renewable portfolio standard (“RPS”), and the law’s other renewable generation requirements, through a “non-bypassable” cost recovery rider. A “non-bypassable” charge rider is one that is paid by customers that take generation service from competitive service providers (“CSPs”), not the customer’s incumbent utility. The riders would apply to all customers who take service from CSPs, except for certain customers that meet exemption criteria in the Code.

On February 19, several interested parties filed direct testimony regarding Dominion’s proposed non-bypassable rider. Direct Energy, a CSP, and Walmart both urged the Commission to take into account the benefits provided by shopping customers. Walmart also urged the Commission to ensure that CSP customers are not assigned any generation costs that are necessary to serve Dominion’s capacity needs. Such costs, according to Walmart, should be borne by all customers. The SCC will hold an evidentiary hearing on March 26.

  • Appalachian Power requests new rate rider for Grayson County broadband expansion – Case No. PUR-2020-00259

On January 28, Appalachian Power (“APCo”) filed a petition requesting a new rate adjustment clause associated with its efforts to expand broadband service in Grayson County, Virginia. 2019 legislation, codified in Va. Code § 56-585.1:9, authorizes APCo to offer broadband services in areas without a broadband provider. APCo states that its broadband expansion efforts will benefit its customers because it will use the fiber infrastructure to improve the quality and reliability of electric service in Grayson County while providing a communications platform for grid improvements, such as advanced metering infrastructure. The Commission approved APCo’s broadband expansion proposal in March of 2020, but did not approve any proposal for cost recovery. 

APCo’s petition requests an annual revenue requirement of $4.9 million for the rate year beginning December 1, 2021. If approved, APCo’s new rate rider will result in a $0.54 increase to the bill of a residential customer using 1,000 kWh per month. The Commission will hold an evidentiary hearing on July 7.