Virginia Energy Regulatory Update (May 2020)

Please see our summary below of notable energy regulatory activity at the Virginia State Corporation Commission (“SCC” or “Commission”) during May, 2020. During the last month, among other activity, the SCC entered several orders related to the COVID-19 health emergency; the Commission approved new energy efficiency programs for Appalachian Power Company (“APCo”); and Dominion Energy Virginia (“Dominion”) filed its 2020 Integrated Resource Plan and issued its first request for proposals for new wind and solar energy following the passage of the Virginia Clean Economy Act.  

Please contact regulatory attorneys Will Reisinger or Matt Gooch should you have any questions about these cases or Virginia’s energy market.

Keep up to date with regulatory activity and energy market developments in Virginia at ReisingerGooch.com.

COVID-19 emergency directives and logistical orders:

• SCC asks for comment regarding whether to extend emergency order regarding disconnections during state of emergency – Case No. PUR-2020-00048

On March 16, the SCC issued an order prohibiting utility disconnections for nonpayment for a 60-day period in light of the COVID-19 emergency. The SCC’s order prohibits all regulated utilities – including over 60 electric, gas, water, and sewer companies – from terminating utility service for nonpayment. The order applies to all investor-owned and cooperative utilities. This order was later extended to be effective through June 14.

On May 26, the SCC entered an order asking for comments regarding whether the order should be extended. The Commission stated that the moratorium “is not sustainable” and could result in costs being “unfairly shifted to other customers.” The order also stated that the moratorium could have “negative impacts on small, less-capitalized utilities and member-owned electric cooperatives,” which “could impact vital services to all customers of such utilities.” The Commission’s order asked for comment regarding whether the current moratorium should be continued, and if so, for how long. Members of the public may file comments on or before June 5.

Rate cases, oversight, and resource planning:

• Dominion files 2020 Integrated Resource Plan – Case No. PUR-2020-00035

On May 1, Dominion filed its 2020 Integrated Resource Plan (“IRP”). In Virginia, an IRP is not a commitment to build any particular resource, but represents a utility’s general plan for meeting customer demand over the next 15-year period. The IRP represents Dominion’s first attempt to comply with the Virginia Clean Economy Act (“VCEA”), 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.”

Dominion’s IRP includes four alternative plans – plans A, B, C, and D. Plan A represents a “least-cost” plan and is for comparison purposes only. According to Dominion, Plans B and C represent the most viable pathways to comply with the requirements of the VCEA and the 2018 Grid Transformation and Security Act. Dominion’s preferred approach is Plan B. Each of the alternative plans (except for Plan A) include major investments in new renewable resources, including over 5,000 MW of offshore wind and between 32,000 and 40,000 MW of new solar resources during the extended 2020-2045 planning period. Dominion, however, cautions that the significant solar buildout could be challenging considering the amount of land required for utility scale facilities.

On May 14, Dominion filed several updates and corrections to the IRP. First, Dominion, after consulting with the SCC Staff, provided a modified version of its Plan B that incorporates lower solar capacity factors. This updated planning scenario assumes that the company’s solar facilities will operate with a capacity factor of 19% as opposed to 25%. Dominion also corrected its planning scenarios to include 9,500 (not 9,700 MW) of natural gas generation. Finally, Dominion clarified that its carbon output projections apply to its entire generating fleet, not just facilities located in Virginia. The SCC will hold an evidentiary hearing on October 27. Interested parties can intervene on or before August 4.

• Dominion issues new RFP for onshore wind, solar and storage resources

On May 1, in conjunction with publication of its 2020 Integrated Resource Plan, Dominion announced a new RFP for onshore wind, solar, and storage resources. Dominion is soliciting bids for up to 1,000 MW of solar and onshore wind resources and up to 250 MW of storage resources. Dominion is seeking proposals for asset purchases (i.e., Dominion would acquire and own the facility) and power purchases (i.e., Dominion would purchase power from facilities owned by third parties). The RFP states that special consideration may be given to projects that will provide economic benefits in Virginia, including projects that utilize Virginia goods and services or that are located in minority communities. Notices of intent to bid are due on May 18.

• SCC holds public hearing regarding Dominion’s proposed fuel recovery charge – 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.

On May 13, the SCC Staff filed direct testimony finding Dominion’s proposed fuel rate and commodity price forecasts to be reasonable. Staff’s consultant also analyzed Dominion’s fuel needs and existing commodity procurement strategy. The report concluded that Dominion’s existing “firm transport portfolio appears appropriate to reliability serve [Dominion’s] fleet.” The report cited the increased capacity provided by the Transco interstate pipeline, which completed a major expansion project in 2018. Finally, while noting that near-term gas prices have “collapsed,” the Staff consultant cautioned that declining oil production and instability among OPEC members could cause prices to rise again. (Oil production affects natural gas supplies because gas is also extracted as part of the oil production process.)

An evidentiary hearing was held on May 27. The SCC has authorized an additional opportunity for public witness testimony via telephone on June 9 at 10:00am. In order to testify, members of the public must register with the SCC by June 5 by providing their names and contact information, using the SCC’s website, emailing the SCC at [email protected], or by calling 804-371-9141.

• Appalachian Power files annual report showing customer subscriptions in its 100% renewable energy tariff – Case No. PUR-2017-00179

On May 7, APCo filed its annual report showing customer participation in its 100% renewable energy tariff, Rider WWS (“wind, solar, and sunlight”). APCo reports that 181 residential customers and 11 non-residential customers had subscribed as of 12/31/2019.

Rider WWS was approved by the SCC in 2019 and found to constitute a tariff consisting of “energy provided 100% renewable energy” pursuant to Va. Code § 56-577 A 5. This finding means that competitive renewable energy suppliers are no longer able to offer renewable energy products to APCo customers. The SCC approved Rider WWS over the objections of consumer and environmental groups, who argued that the tariff was contrary to the public interest in part because of its limitation on competition for renewable energy.

• SCC approves Dominion experimental TOU rate proposal – Case No. PUR-2019-00214

On May 20, the SCC entered a final order approving, on an experimental basis, Dominion’s proposed time-of-use (“TOU”) rate schedule. Under this rate schedule, participating customers would be charged higher rates during on-peak hours, and lower rates during “off peak” and “super off peak” hours. Dominion states that time-varying rates “can provide more accurate price signals to customers that are better aligned with cost causation than standard rates and that, through improved price signals, such rate structures can incentivize behavioral changes in customers taking service under time-varying rates.” Under Dominion’s proposal, residential TOU customers would be charged the same basic customer charge as non-TOU customers and would pay all applicable transmission, distribution, and rider charges based on their usage. The TOU rate schedule will only be available to customers who have smart meters installed. Dominion proposes to limit the TOU rate schedule to 10,000 customers. Under Dominion’s TOU proposal, customers would be charged higher rates during summer on-peak hours (weekdays from 3pm-5pm) and significantly lower rates during off-peak and “super off-peak” hours.

The SCC’s order allows the tariff go into effect on or after January 1, 2021. The SCC, however, emphasized that Dominion must provide more data to justify future TOU rate options. The SCC stated that, “having found the Company’s proposal meets the minimum requirements of the statute [to be offered as an experiment], the Commission further finds – and emphasizes – that much more data and detail will be necessary to determine the type and structure of a TOU rate design that will serve the public interest on a significantly wider scale.” The order states that “as information regarding the actual implementation of this experiment becomes available, the Company shall file proposed modifications thereto designed to strengthen the robustness and efficacy of this experimental program.”

Renewable energy, efficiency, and new energy infrastructure:

• SCC approves Appalachian Power request to implement new energy efficiency programs – Case No. PUR-2019-00122

On May 21, the SCC approved APCo’s request to implement three new energy efficiency programs. The SCC also approved APCo’s requested cost recovery; costs of the new programs will be recovered through the utility’s existing energy efficiency rate adjustment clause. The approved programs include an incentive program for new housing construction projects to meet Energy Star efficiency standards as well as low-income efficiency programs for both single- and multi-family housing units. The SCC found that the low-income programs were in the public interest, notwithstanding the fact that they did not pass three of the four cost-effectiveness tests identified in the Code. (The Code provides that an energy efficiency program designed to serve elderly or low-income customers may be “in the public interest” even it does not pass the cost-effectiveness tests typically used to evaluate such programs.)

In its order, the SCC noted its “awareness of the ongoing COVID-19 public health crisis, which has had negative economic effects that impact all utility customers.” The order stated that, while the Commission “[is] sensitive to the effects of rate increases, especially in times such as these … [we] must follow the laws applicable to any rate case, as well as the findings of fact supported by the evidence in the record.” APCo estimated that the updated rider will increase the monthly bill for a typical residential customer using 1,000 kWh per month by approximately $0.30. APCo must file its next rider update filing on or before September 20, 2020.

• Respondents file post-hearing briefs regarding Dominion energy efficiency application – Case No. PUR-2019-00201

On December 3, 2019, Dominion filed a request for approval of eleven new energy efficiency and demand response initiatives and to continue several other programs. The new programs include incentives and rebates for residential EV charging infrastructure, home energy retrofits, multi-family housing efficiency assistance, and residential and small business efficiency kits. Dominion also requests approval to extend its AC cycling program. The new program spending would be recovered through an updated cost recovery rider. The program spending is expected to increase the monthly bill for a residential customer using 1,000 kWh per month by $0.34.

On March 20, several parties filed direct testimony, including the Virginia Energy Efficiency Council (“VAEEC”), Appalachian Voices, and Walmart. VAEEC’s witness recommended approval of all proposed programs, noting that the new are “particularly beneficial as they expand the number of opportunities for energy savings for different end users and customer classes.” Appalachian Voices recommended that Dominion should be directed to expand its multi-family efficiency programs and also develop a “strategic plan” for achieving the General Assembly’s efficiency objectives between 2021 and 2028. On March 27, the SCC Staff filed direct testimony. Staff does not oppose approval of the new programs, but notes several concerns with the savings estimates used by Dominion.

An evidentiary hearing was held via Skype on April 29 in which attorneys made opening statements and conducted limited cross examination of witnesses. The parties filed post-hearing briefs on May 22. 

All respondents supported approval of the eleven new proposed programs. VA-EEC, Appalachian Voices, and the Virginia Poverty Center all recommended that the SCC direct Dominion to develop a strategic plan to ensure the company is on track to meeting the efficiency targets enacted by the 2018 Grid Transformation and Security Act and the 2019 Virginia Clean Economy Act.

• SCC authorizes pre-registrations for expanded renewable energy PPA Pilot programs – Case PUR-2020-00081

On May 7, the SCC entered an order authorizing pre-registrations for the expanded renewable energy power purchase agreement (“PPA”) pilot program established by the General Assembly. In 2013, the General Assembly enacted a pilot program whereby customers in Dominion’s service territory could purchase renewable energy from non-utility companies, provided the renewable energy facilities are located on the customer’s premises. In 2020, the General Assembly expanded this pilot program to increase the capacity size of the program in Dominion’s and APCo’s service territory and to include Kentucky Utilities, an investor-owned electric utility serving customers in southwest Virginia. The new law will go into effect on July 1. The SCC is currently accepting pre-registrations for projects in Dominion’s and APCo’s service territory only.

In a separate docket, Case No. PUE-2013-00045, the SCC published updated guidelines and notice procedures for renewable energy developers who seek to participate in the program.

• SCC holds that pumped storage generation qualifies as “renewable energy,” notwithstanding recent legislative changes – Case No. PUR-2020-00072

Constellation NewEnergy Inc. (“Constellation”), a competitive service provider (“CSP”), requested a judgment from the SCC that pumped storage generation qualifies as “renewable energy” under Va. Code § 56-576 and may serve as the basis for renewable energy contracts signed pursuant to Va. Code § 56-577 A 5. Code Section 56-577 A 5 allows CSPs to sell 100% renewable energy to retail customers of Dominion. The Code defines renewable energy as energy that is “derived from … falling water.” Dominion argued that pumped storage does not qualify as renewable energy because other sources of energy (whether renewable or non-renewable) are always necessary to pump the water to a higher point.

The SCC agreed with Constellation that energy generated from a pumped storage hydroelectric facility is renewable energy, “because it is derived from water that falls from a higher point to a lower point.” The SCC recognized that the Virginia Clean Economy Act changed the definition of renewable energy to exclude pumped storage. Therefore, after the law goes into effect on July 1, CSPs may not enter into new contracts to serve customers with pumped storage energy under Va. Code § 56-577 A 5.

Competition and markets:

• Respondents file objections to Hearing Examiner’s recommendation regarding approval of Dominion’s proposed green tariff – Case No. PUR-2019-00094

On November 21 and 22, the SCC held an evidentiary hearing regarding Dominion’s pending 100% renewable energy tariff, Rider TRG. Rider TRG customers would pay a premium of 0.421 cents per megawatt-hour to purchase the tariff’s renewable energy, which would increase a 1,000 kWh monthly bill by $4.21. The generation for Rider TRG would be sourced from solar, hydroelectric, and biomass generation facilities as well as from Dominion’s Virginia City coal plant. (Dominion estimates that the coal mixture burned at this plant will consist of 90% coal and 10% biomass wood waste by 2023.) If the SCC approves Rider TRG – and finds that it constitutes a 100% renewable energy tariff pursuant to Va. Code § 56-577 A 5 – Dominion customers would no longer have the option to purchase renewable generation from competitive suppliers.

On April 20, the Hearing Examiner assigned to the case entered a report recommending approval of the application. The Hearing Examiner found that Rider TRG satisfied the statutory standard to qualify as a “renewable energy tariff.” The Hearing Examiner also recommended that the Commission should approve the application with a six month “sunset provision,” meaning that Dominion must sign up at least 15,000 residential customers within six months in order to continue offering the tariff.

On May 11, the parties filed comments and objections regarding the Hearing Examiner’s findings. All respondents except for the Attorney General filed objections opposing approval of the tariff. The respondents generally argued that approval of the tariff would be contrary to the public interest, noting the lack of customer interest and the legal implications of approval. Walmart also opposed Dominion’s decision to include the Virginia City coal plant in its proposed renewable energy offering, noting that there is “never a moment in any day when [the plant] produces energy without coal.” There is no deadline for the SCC to enter a final order.

Natural gas rates and infrastructure:

• SCC holds hearing regarding Virginia Natural Gas request for approval for $345 million gas infrastructure project; authorizes additional public comment period – 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.   

An evidentiary hearing was held on May 12. The SCC has authorized an additional opportunity for public witness testimony via telephone on June 8 at 10:00am. In order to testify, members of the public must register with the SCC by June 4 by providing their names and contact information, using the SCC’s website, emailing the SCC at [email protected], or by calling 804-371-9141.