Please see our summary below of notable energy regulatory activity at the Virginia State Corporation Commission (“SCC” or “Commission”) during February, 2020. During the last month, among other activity, Dominion Energy (“Dominion”) requested a reduction to its fuel recovery rider due to declining demand for coal; the Attorney General’s Office filed a brief opposing large portions of Dominion’s proposed grid transformation investments; and Virginia’s largest electric cooperative filed testimony supporting a new time-of-use rate for electric vehicle owners.
Keep up to date with the progress of regulatory activity and energy market developments in Virginia at ReisingerGooch.com.
Rate cases, oversight, and resource planning:
- Hearing Examiner recommends approval of APCo’s request to decrease its fuel recovery rider – Case No. PUR-2019-00157
APCo is requesting a decrease to its fuel recovery factor from 2.547 cents per kWh to 2.300 cents per kWh. This decrease would result in a 2.6% ($2.81) decrease to the total bill of a residential customer using 1,000 kWh per month. This reduction “reflects an expected reduction in the average fuel cost for coal-fired generation, gas-fired generation, and market purchases compared to the current period.” APCo forecasts that during the coming year, 82% of its energy supply will be provided by fossil fuels, including coal (67%) and natural gas (15% generation). The SCC held an evidentiary hearing on February 13. No party objected to APCo’s proposal at the hearing. On February 20, the Hearing Examiner entered a report recommending approval of the reduction.
Renewable energy, efficiency, and advanced energy infrastructure:
- Dominion proposes to decrease fuel recovery rider due to declining price of coal, gas, and purchased power – PUR-2020-00031
Under Virginia law, Dominion’s fuel recovery rider – called the “fuel factor” – recovers the costs of traditional fuels such as coal and gas as well as the costs of power purchased from third-party generators. Fuel costs are pass-through expenses and recovered on a dollar-for-dollar basis, with no rate of return applied. Dominion proposes to reduce the current fuel factor by 0.589 cents/kWh. The current fuel factor is 2.325 cents/kWh and the proposed reduced fuel factor would be 1.7357 cents per kWh.
This reduction would result in an annual fuel decrease of $392 million.
Dominion states that the reason for the reduction is forecasted declines in coal, gas, and purchased power costs. Another factor is that Dominion, for the first time, is forecasting that Virginia will join the Regional Greenhouse Gas Initiative (“RGGI”). Dominion states that “[the RGGI] carbon allowance is not directly recovered by the fuel rate, but is a factor in how the Company meets load demand and the ultimate costs incurred.” While RGGI costs are not built into the fuel rate, Dominion states that the carbon price will affect how fossil plants are dispatched and therefore how much coal and gas is required. The Commission has not yet established a procedural schedule for this case.
- Appalachian Power files rebuttal testimony regarding its request for approval of new energy efficiency programs – Case No. PUR-2019-00122
On September 30, the SCC established a procedural schedule for reviewing Appalachian Power’s (“APCo”) request to implement new energy efficiency programs. APCo also requests approve to recover the costs of the program through its existing energy efficiency rate adjustment clause. APCo is proposing an incentive program for new housing construction to meeting Energy Star efficiency standards as well as low-income efficiency programs for both single- and multi-family housing units. APCo estimates that approval of the new programs would increase the monthly bill of a residential customer using 1,000 kWh per month by $0.30. APCo is not seeking to recovery any costs for revenues that may be “lost” due to energy efficiency programs.
On February 18, APCo filed rebuttal testimony responding to the comments of the SCC Staff. The SCC Staff had criticized APCo’s proposal to provide incentives for Energy Star manufactured homes, noting the incentives to provide energy efficiency homes was provided to builders, not directly to customers. An evidentiary hearing will be held on March 3, 2020.
- Parties file post-hearing briefs regarding Dominion’s updated grid transformation plan – Case No.PUR-2019-00154
On September 30, Dominion filed a request for approval of an updated grid transformation spending plan. The plan proposes additional investments in several areas, including advanced metering infrastructure (“AMI”), cyber security, “grid hardening,” and customer data exchange platforms designed to facilitate new rate structures such as time-varying rates. Dominion also states that its grid hardening and grid technology spending will improve reliability while allowing the utility to incorporate more customer-owned solar generation and electric vehicle load. Dominion proposes to invest $600 million over the next three years, including $517 million in capital costs and $83 million in operations and maintenance expenses.
The SCC held an evidentiary hearing on January 28-30. Several parties, including the SCC Staff, opposed various aspects of Dominion’s plan. In particular, the SCC Staff does not support approval of Dominion’s grid hardening, grid infrastructure, or telecommunications infrastructure spending proposals. Staff argued that it cannot verify the estimated reliability or other benefits associated with this spending. These programs account for roughly $210 million of the proposed capital investments. The Attorney General’s expert witness challenged many of the same proposed programs. The SCC Staff and the Attorney General took no position regarding Dominion’s proposal to install smart meters at all customer locations. Sierra Club and two electric vehicle charging companies participated in the case to support Dominion’s proposed smart charging infrastructure program. The parties filed post-hearing briefs on February 28. The SCC, per the statute, must enter a final order on or before March 30.
- Rappahannock Electric Cooperative requests approval of EV Smart Charging Pilot Program – Case No. PUR-2020-00001
On January 2, Rappahannock Electric Cooperative (“REC”) filed a request for SCC approval of an experimental time-of-use (“TOU”) tariff designed to encourage off-peak electric vehicle (“EV”) charging. The pilot would be offered for two years, with a cap of 200 customers during the first year and 400 customers during the second year. REC’s filing notes that wholesale power expenses, including on-peak capacity costs, represent the largest component of its cost to serve customers. Capacity costs are significantly higher during on-peak hours.
Under REC’s proposal, participating customers would receive a bill credit of $0.04 for each kWh consumed from an installed EV charging device during off-peak hours. “Off-peak hours” would be 9pm-5am and 10am-2pm every day of the year. REC estimates that the program will have no adverse impacts on non-participating customers due to the fact that the utility will avoid expensive capacity purchases during on-peak hours. On February 28, REC filed direct testimony regarding the proposal. REC explained the purpose for pilot program and the rationale behind the program’s terms and conditions, including the limitations on charging hours. REC argued that it would under recover costs if EV owners charged their vehicles outside of the off-peak charging windows.
Dominion has also requested approval of a TOU tariff in Case No. PUR-2019-00214. While not an EV tariff, Dominion’s rate schedule would offer lower per-kWh prices for customers that use energy during “of-peak” and “super off-peak” hours.
Competition and markets:
- SCC grants reconsideration regarding Dominion’s proposed market-based rate schedule on experimental basis – Case No PUR-2018-00192
On January 14, the SCC approved Dominion’s request for approval of a revised market-based rate (“MBR”) tariff. In its order granting approval, the Commission specified that the tariff would be approved on a three-year “experimental” basis. The MBR tariff is designed to allow customers the option to buy energy based on PJM wholesale market prices. Dominion says the revised tariff would be an attractive alternative to purchasing energy from competitive service providers (“CSPs”). Dominion states that the revised MBR tariff contains several improvements over the existing MBR tariff, approved in 2016, that will allow more customers to participate. The new tariff also contains features that could encourage customers to reduce energy usage during peak hours. The tariff is available to customers with peak demands at or above 5 MW who otherwise would be eligible to purchase energy from a CSP pursuant to Va. Code § 56-577 A 3.
On February 4, the SCC granted Dominion’s request for reconsideration of one aspect of the SCC’s final order. The SCC’s final order placed a 200MW cap on customer participation. Dominion has requested that the SCC raise the cap to 400MW. There is no deadline for the SCC to enter a final order on reconsideration.
Natural gas rates and infrastructure:
- DEQ files comments regarding Virginia Natural Gas request for approval for $345 million gas infrastructure project – Case No. PUR-2019-00207
On December 6, Virginia Natural Gas (“VNG”) filed a request for SCC approval to undertake $345 million in new infrastructure projects. The capital projects include new compressor stations and approximately 25 miles of pipeline facilities. VNG states that the infrastructure projects are necessary to serve a planned 1,040 MW combined cycle gas facility in Charles City County being constructed by an independent power producer, C4GT, LLC. VNG states that 94% of the infrastructure costs will be borne by C4GT. On February 25, the Department of Environmental Quality (“DEQ”) filed its comments on the proposal. DEQ’s comments describe the potential environmental impacts, permits required, and mitigation proposals.
A public hearing will be held on May 12, 2020. Members of the public may file public comments on or before April 28.