Virginia Energy Regulatory Updates (April 2023)

Below is our firm’s summary of notable energy regulatory activity at the Virginia State Corporation Commission (“SCC” or “Commission”) during April, 2023. Please contact 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, associations, and public interest organizations. The following is presented for informational purposes only and does not constitute legal advice.

Rate cases, oversight, and resource planning:

  • SCC schedules hearing regarding Appalachian Power base rate increase request; utility seeks higher rate of return – Case No. PUR-2023-00002

On March 31, Appalachian Power Company (“APCo”) filed its application for a triennial review of its rates and terms and conditions of service. APCo requests an annual base rate increase of $212 million. The utility also requests a higher rate of return on common equity (“ROE”). APCo asserts that it needs an ROE of 10.6% in order to attract capital on reasonable terms. APCo’s current ROE is 9.2%. Based on its proposed earnings test adjustments, APCo claims that it earned a total return of only 5.39% during the 2020-2022 review period.

The $212 million rate increase, if approved, would increase the monthly bill of a typical residential customer by 15.9%. The utility also proposes to waive its monthly basic customer charge, currently $7.96, for certain low-income customers. A low-income customer eligible for the waiver of the basic customer charge would experience a monthly bill increase of only 10.5%.   

The SCC will hold an evidentiary hearing on the application beginning on August 24. The statute requires the SCC to publish a final order within eight months, or by November 30, 2023.

  • SCC Staff files analysis of Dominion proposal to “reinstate” rate adjustment clause for RGGI compliance costs – PUR-2022-00070

On December 14, Dominion Energy Virginia (“Dominion”) filed a petition to “reinstate” a rate adjustment clause (“RAC”) to recover the costs to comply with the Regional Greenhouse Gas Initiative (“RGGI”). Dominion’s petition reverses the utility’s previous proposal for recovering RGGI compliance costs. In 2022, Dominion requested permission to recover RGGI costs through its base rates as opposed to a separate rider. The Commission approved Dominion’s request to eliminate the RGGI RAC in a June 15, 2022, order. Dominion states that its new petition, if approved, will increase the average monthly bill for a residential customer using 1,000 kWh by $4.64. The application states that the RGGI RAC, if reinstated, would recover approximately $373 million from customers during the next rate year.

On March 21, Appalachian Voices filed expert witness testimony regarding Dominion’s application. The witness, a former SCC staff member, criticized Dominion for scheduling its coal units to run even when it is uneconomic to do so based on PJM market prices. The witness testified that this practice results in unreasonably high RGGI compliance costs. The SCC Staff filed the direct testimony of three witnesses on April 4. The staff recommends a slightly lower revenue requirement based on the actual carbon emissions recorded in 2022. The SCC staff witnesses did not address Dominion’s coal plant scheduling or provide any comments about the reasonableness of the utility’s emissions. The SCC will hold an evidentiary hearing on May 1.

  • SCC Staff files direct testimony and analysis of Virginia Natural Gas rate increase request – Case No. PUR-2022-00052

On August 1, Virginia Natural Gas (“VNG”) filed an application for an increase in its base rates. The application states that the increase is “designed to increase [VNG’s] annual rate base revenue by approximately $69.3 million,” which VNG claims is necessary to allow the utility to “fully recover its cost of service over the rate period and earn not less than a fair rate of return on common equity applicable to natural gas distribution services.” The utility states that the rate increase is necessary due to required investments in its distribution system since its last base rate case. VNG’s application requests that the Commission approve a 10.35% return on equity. VNG states that, if the rate increase is approved, a typical residential customer would experience a monthly bill increase of $12.88 based on annual consumption of 599 cubic feet of natural gas.

The SCC staff filed several volumes of direct testimony on April 28. The SCC staff recommends a total rate increase of only $24.4 million. This rate increase, the Staff asserts, would allow the company to earn a fair and adequate rate of return of 9.5%. The Commission will hold an evidentiary hearing on June 13, 2023.

Renewable energy, efficiency, and new energy infrastructure:

  • SCC approves Dominion solar projects and RPS Development Plan – Case No. PUR-2022-00124

On October 14, 2022, Dominion filed a petition requesting approval of numerous new clean energy resources (the “CE-3 Projects”). Dominion’s filing also includes an updated renewable portfolio standard (“RPS”) development plan. The petition requested approval to construct and operate 474 MW of utility-scale solar resources and 16 MW of battery storage, as well as four smaller-scale solar facilities. The utility requested approval to recover the costs of the new facilities through a rate adjustment clause designated “Rider CE.” Dominion also requested approval to enter into 13 power purchase agreements (“PPAs”) with solar and storage owners. If approved as filed, Rider CE would recover approximately $89 million from customers during the next rate year, increasing the monthly bill for a residential customer using 1,000 kWh by $0.38.

The Commission published a final order on April 14. The SCC approved Dominion’s application, including the RPS development plan and all proposed projects and PPAs. The SCC also agreed with Dominion on a disputed legal issue. The SCC held that the VCEA places a limit on new third-party owned solar energy. Several parties, including Appalachian Voices, Walmart, and the Attorney General, had argued that Dominion could obtain cheaper energy from third-party solar facilities. These parties urged the SCC to find that the Code does not limit Dominion’s consideration of third-party resources.

  • SCC Staff files analysis of Appalachian Power request to modify its renewable energy tariff – SCC Case No. PUR-2022-00212

In December, Appalachian Power Company filed an application to modify its 100% renewable energy tariff, Rider WWS (Rider Wind, Water, and Sunlight). Rider WWS is a voluntary tariff through which customers can purchase 100% renewable energy from resources owned by APCo. In its filing, APCo states that it needs to raise the Rider WWS premium based on current market energy prices. The filing states that “the market costs for RECs that were used to calculate the original premiums [under] Rider WWS have changed significantly” since the original application was filed. APCo proposes to raise the Rider WWS premium to $0.021/kWh, up from $0.00425/kWh. This results in a $21 monthly premium for a residential customer using 1,000 kWh. Finally, APCo proposes to review and adjust REC prices twice annually. These bi-annual REC price reviews would be handled administratively by the SCC Staff.

The SCC Staff filed a report and analysis of APCo’s application on April 14. The Staff found that APCo’s proposed REC premiums are reasonable and reflect current market data. The Staff, however, did not take a position on whether APCo’s proposal for bi-annual adjustments to the REC premium should be approved.

  • SCC approves Dominion’s Grid Transformation Plan update – Case No. PUR-2022-00140

On August 16, 2022, Dominion Energy Virginia (“Dominion”) filed an application to continue its cost recovery rider for previously approved grid transformation investments. The SCC approved ten grid transformation programs in 2021. Dominion states that three of the approved programs experienced cost overruns totaling approximately $700,000. On February 21, the SCC Staff filed direct testimony analyzing Dominion’s application. The Staff found Dominion’s cost overruns to be reasonable.

The SCC published an order approving the application on April 27. The SCC approved a total annual revenue requirement of approximately $14.3 million. The SCC estimated that the new revenue requirement will decrease the monthly bill for a residential customer using 1,000 kWh by $0.88.

  • SCC schedules hearing regarding Appalachian Power Company’s 2023 VCEA RPS Plan – Case No. PUR-2023-00001

On March 15, Appalachian Power Company (“APCo”) filed its latest Virginia Clean Economy Act implementation plan and petition for approval of new resources. The VCEA requires Dominion Energy and APCo to meet increasing renewable portfolio standard (“RPS”) percentage targets. The law also requires both utilities to propose minimum amounts – in megawatts – of new solar, onshore wind, and storage resources by 2035. Both utilities must petition the Commission for approval of such resources based on a schedule set forth in the Code.

The filing includes multiple alternative portfolios that comply with the RPS targets based on different resource allocations, such as earlier coal retirements or larger solar versus wind energy investments. APCo’s filing requests approval of several new solar facilities. In particular, APCo requests that the Commission authorize the utility to acquire one new solar facility located in Ohio and to enter into six power purchase agreements for solar energy. APCo also proposes to adjust the rate adjustment clause for its VCEA projects. This adjustment would result in a small decrease for a typical residential customer. The SCC will hold an evidentiary hearing on June 28. Interested parties can intervene by filing a notice of participation on or before May 19. 

  • Dominion proposes to expand time-of-use rate schedule; SCC invites comments – Case No. PUR-2019-00214

On March 24, 2023, Dominion filed an application to expand its previously approved time-of-use (“TOU”) rate schedule. The TOU rate schedule is a voluntary program that allows customers to pay lower per-kWh rates during “off-peak” and “super off-peak” hours. The rate schedule was approved as an “experimental” tariff in 2020 and limited to 10,000 customers. Dominion’s application requests approval to expand the tariff to 20,000 customers. Dominion states that it reached the 10,000 customer cap in January 2022. Dominion states that expanding the cap “will lead to more data to better develop and inform a system-wide rate to be proposed in a future biennial review.” Dominion also notes that over 650,000 customers now have advanced metering infrastructure that would allow them to participate in the TOU program.

On April 24, the SCC published an order inviting responses to Dominion’s application. Interested parties may file a response to the application on or before May 10.