Virginia Energy Regulatory Updates (April 2024)

Below is our firm’s summary of notable energy regulatory activity at the Virginia State Corporation Commission (“SCC” or “Commission”) during April, 2024. 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 evidentiary hearing regarding Appalachian Power Company’s 2024 biennial review application; utility seeks $95 million annual rate increase – Case No. PUR-2024-00024

On March 28, Appalachian Power Company (“APCo”) filed its 2024 biennial review application. Under Va. Code 56-585.1, et seq., a biennial review is a base rate case in which the SCC reviews the utility’s earnings during the previous two calendar years. The law allows the SCC to increase or decrease the utility’s base rates or modify any of the utility’s terms and conditions of service. The statute applicable to this case directs the SCC to review APCo’s reported earnings for the 2023 calendar year and determine whether any adjustments are warranted.

In its application, APCo seeks an annual base rate increase of approximately $95 million. APCo asserts that, in calendar year 2023, it earned below its authorized rate of return. The utility states that the rate increase is necessary due to several factors, including higher vegetation management expenses, carrying costs on deferred fuel balances, and increased operations and maintenance expenses. APCo also seeks an increase to its current authorized profit level, or rate of return on common equity (“ROE”). APCo’s current authorized ROE is 9.5%. This ROE was set by the SCC in November 2023. APCo’s current application requests a new ROE of 10.8%. APCo also seeks certain changes to its terms and conditions of service. The rate increase, if approved, would result in a monthly bill increase of $10.22 for a typical residential customer using 1,000 kWh.

The SCC will hold an evidentiary hearing on September 10.

  • SCC schedules hearing regarding Dominion proposal to sell 50% share of Coastal Virginia Offshore Wind project to investment firm – Case No. PUR-2024-00045

On March 28, Dominion Energy Virginia filed a petition for approval to sell a 50% interest in the Coastal Virginia Offshore Wind project (“CVOW”) to a third-party investor, Stonepeak Member (“Stonepeak”). A 2023 statute, codified at Va. Code § 56-585.1:11(G), allows Dominion to request SCC approval to “establish an offshore wind affiliate for the purpose of securing a noncontrolling equity financing partner for the [CVOW project], and such offshore wind affiliate may be permitted to construct, own, or operate such project … or a portion thereof.” The SCC approved Dominion’s request to construct and operate the 2,600 MW CVOW project in 2022.

Dominion states that Stonepeak has agreed to fund 50% of the capital costs of the project. Dominion states that Stonepeak has invested in conventional and renewable generation assets including “over 9 gigawatts of power including the 376 MW Formosa 2 offshore wind farm in Taiwan and a 6.6 gigawatt development pipeline of fixed and floating offshore wind through an investment in Synera Renewable Energy.” Dominion states that the transaction, if approved, “will strengthen [Dominion’s] balance sheet, improve its credit profile, and enhance its access to capital, all of which is beneficial to customers.” Dominion states that, “[f]rom an operational standpoint … [Dominion] will continue to develop and operate the Project and will maintain control of the governance of the offshore wind affiliate, subject to customary minority rights.” Dominion states that the transaction, if approved, will not “materially change” the company’s billing or cost recovery for the CVOW project.

The SCC will hold an evidentiary hearing on the application on August 27.

  • Utilities, environmental groups, and consumer advocates submit proposals regarding incentives for electric utility performance – Case No. PUR-2023-00210

On December 12, 2023, the SCC published an order establishing a proceeding to consider performance incentive metrics for electric utilities. In its order, the SCC noted that the 2023 General Assembly amended the electric utility code at Va. Code § 56-585.1(A)(2)(c). The statute provides that “[t]he Commission may increase or decrease the utility’s combined rate of return for generation and distribution services by up to 50 basis points based on factors that may include reliability, generating plant performance, customer service, and operating efficiency of a utility.” The statute also provides that “[a]ny such adjustment to the combined rate of return for generation and distribution services shall include consideration of nationally recognized standards determined by the Commission to be appropriate for such purposes.”

On April 1, Dominion Energy, Appalachian Power Company, the Attorney General, Clean Virginia, and the Southern Environmental Law Center filed separate performance incentive proposals. A group of solar advocates also urged the Commission to consider distributed resource interconnection efficiency when evaluating utility performance. The SCC Staff will hold a virtual stakeholder meeting to discuss the performance incentive proposals on May 23. 

Renewable energy, efficiency, and new energy infrastructure:

  • Appalachian Power files 2024 RPS development plan – Case No. PUR-2024-00020

On April 25, Appalachian Power Company filed its annual Virginia Clean Economy Act (“VCEA”) Renewable Portfolio Standard (“RPS”) development plan. The VCEA requires APCo to meet an increasing clean energy resource standard. The law, at Va. Code § 56-585.5(D), requires APCo to file an annual plan explaining its proposal to satisfy the VCEA’s renewable energy procurement requirements. The plan includes five alternative modeling scenarios. The alternative scenarios assume different levels of solar, wind, natural gas, and capacity market resources. APCo also requests cost recovery for certain solar projects that were abandoned due to escalating costs. The application states that, if approved, APCo’s RPS rider would increase by approximately $0.05 per month for a residential customer using 1,000 kWh.

The SCC has not yet established a procedural schedule for this case.

  • Consumer and environmental advocates object to Dominion’s proposed metric for measuring progress towards energy savings targets – Case No. PUR-2023-00217

On December 11, 2023, Dominion Energy Virginia (“Dominion”) filed its 2023 demand-side management (“DSM”) update. Dominion’s application requests approval to continue cost recovery for previously approved DSM programs. Dominion also requests approval to offer several new programs, designated the “Phase XII” programs. The Phase XII programs include incentives for homebuilders to construct energy efficiency buildings and incentives for consumers to install smart thermostats. Dominion proposes a cost cap of $102.4 million for Phase XII.

Dominion also proposes to measure its compliance with the Virginia Clean Economy Act (“VCEA”) energy savings targets based on a “gross savings” as opposed to a “net savings” metric. The VCEA, at Va. Code § 56-596.2, states that “each investor-owned incumbent electric utility shall implement energy efficiency programs and measures to achieve” annual energy savings targets identified in the statute. Measuring energy savings on a “net” as opposed to “gross” savings basis would mean that only savings attributable to utility efficiency programs count towards the VCEA targets. Dominion filed a “Legal Memorandum” addressing these issues on December 11. The memorandum argues that the General Assembly, when enacting the VCEA, intended the use of gross savings. Dominion also asserts that customers would be required “to pay for significantly more DSM Programs and measures over the next several years under a net savings scenario than they would [under a gross savings scenario].” Several parties, including the Southern Environmental Law Center (“SELC”) and the Attorney General’s Office, filed responses in opposition to Dominion’s legal memorandum on April 9. The SELC pleading argues that “gross savings cannot be the proper metric because it includes free rider savings, which are not achieved by the utility’s programs.”

The SCC will hold an evidentiary hearing on May 21.

  • SCC hearing examiner recommends approval of Washington Gas Light biogas supply project – Case No. PUR-2023-00220

On December 4, Washington Gas Light (“WGL”) filed an application for approval of a biogas supply infrastructure project and associated cost recovery rider. WGL proposes to construct and operate an 8-mile pipeline that would transport biogas from a landfill in Prince William County to WGL’s distribution system. WGL proposes to purchase the gas, which it characterizes as “renewable natural gas” (“RNG”). WGL states that the project “offers the prospect of significant anticipated environmental, reliability, and customer benefits, and the additional benefit of diversifying Washington Gas’s gas supply with Virginia-sourced RNG.” The application also estimates that the project “will facilitate an approximately 30% decrease in greenhouse gas emissions caused by the Prince William County Landfill Project.”

WGL estimates that the project will initially result in a small ($0.07 per month) bill increase for a typical residential gas customer. The application is filed pursuant to a 2022 statute, the Virginia Energy Infrastructure Act, codified at Va. Code § 56-625. The SCC held an evidentiary hearing on March 19. On April 15, the hearing examiner assigned to this case filed her report and recommendation. The examiner recommended approval of the biogas supply project, finding that it will be “in the public interest and will result in a decrease of methane or carbon dioxide equivalent emissions.” The examiner also found that the project’s pipeline constitutes an ordinary extension” and does not require separate approval under the Utility Facilities Act. The examiner’s findings are advisory only to the Commission. 

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