Virginia Energy Regulatory Updates (August 2023)

Below is our firm’s summary of notable energy regulatory activity at the Virginia State Corporation Commission (“SCC” or “Commission”) during August, 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 approves 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 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 residential customer would experience an average rate 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%. On August 28, the SCC approved a settlement between the utility and the SCC Staff. The SCC’s final order approves a $48 million base rate increase and an ROE of 9.7%.

  • Respondents and SCC Staff file testimony regarding Dominion proposal to refinance outstanding fuel costs – Case No. PUR-2023-00112

On July 3, Dominion Energy Virginia (“Dominion”) filed a request to finance accumulated fuel costs by issuing fuel cost bonds. Dominion projects that its current unrecovered fuel balance is approximately $1.25 billion. Dominion proposes to utilize a special purpose entity in order to issue securitized bonds to finance the unrecovered fuel balance as of June 30, 2023. Dominion states that “the proceeds from these bonds would be used to satisfy the unrecovered fuel balance and reduce the near-term impact to customers from paying these costs over a shorter period of time.” Dominion states that its unrecovered fuel balance “continues to be substantial, largely due to significant marketplace commodity price increases during the prior fuel period.” Dominion states that, if the fuel securitization proposal is not approved, the fuel rider would have to increase substantially, up to $14.72 per month for a typical residential customer.

Several parties and the SCC Staff filed expert witness testimony on August 9. No party requested the SCC to approve or reject the financing proposal. The Attorney General’s expert witness testified that the “slim” potential benefits of securitization “do not appear to justify” approving the plan. The witness noted that, under Dominion’s proposal, customers would have to pay several hundred million in extra financing costs in order to finance the unrecovered fuel balance over ten years. The SCC Staff filed several volumes of expert testimony. The Staff’s accounting witness, Carol Myers, filed testimony identifying the “pros” and “cons” to Dominion and customers associated with securitizing the unrecovered fuel debt. Ms. Myers also proposes an “alternative” recovery option, which would not rely in securitizing the fuel debt but would allow Dominion an extra year to recover the costs through its fuel rider.

The SCC held an evidentiary hearing on the petition on September 6. Pursuant to the statute, the SCC must issue an order approving or rejecting the petition within 4 months, or by November 3.

Renewable energy, efficiency, and new energy infrastructure:

  • SCC approves solar advocates’ request to suspend Dominion interconnection policies – Case No. PUR-2023-00097

On June 1, a group of solar advocates, the Distributed Solar Alliance (“DSA”) filed a petition seeking to enjoin Dominion from implementing its current interconnection standards for small solar facilities. Dominion’s internal policies are separate from the SCC’s interconnection regulations found in the Virginia Administrative Code. The group claims that Dominion’s technology and security requirements are onerous and unreasonably expensive. The DSA petition alleges that Dominion’s new standards, which include expensive fiber communication equipment, “impose substantial new costs on solar developers yet are not required by the Interconnection Rules and [net energy metering rules], nor, prior to mid-2022, were they required by Dominion.”

The SCC approved the DSA’s request for an injunction in an August 30 final order. The order suspends Dominion’s implementation of the disputed disconnection parameters at least until the Commission completes a separate evaluation of its interconnection standards. The order, however, states that the Commission “declines to expand its findings – as part of the instant proceeding – to address the myriad of additional relief that VA-DSA now seeks.”

  • SCC approves updated Dominion demand-side management and energy efficiency proposals – Case No. PUR-2022-00210

On December 13, 2022, Dominion filed a petition for approval of several new energy efficiency and demand-side management programs (designated the Phase XI programs). The petition requests approval of new programs and to continue cost recovery for previously approved measures. Dominion states that the new measures are intended to “‘fill ‘gaps’ in the Company’s existing portfolio of programs as identified by [the Company’s long-term efficiency plan].” The new programs include education measures for high-usage customers, rebates for energy efficient appliances, and a peak time rebate program. The filing also includes a report on the energy savings from previously approved programs.

The petition, if approved, would increase Dominion’s current rate adjustment clause for energy efficiency costs. For a residential customer using 1,000 kWh per month, the current energy efficiency rider results in a $1.60 monthly charge. Dominion’s new petition, if approved, would increase this rider by $0.24 per month.

The SCC published a final order on August 4. The order approves the proposed Phase XI programs. The order includes a $149.5 million cost cap for the Phase XI programs. The order also directs Dominion to file a detailed project management report as part of its next efficiency filing. The SCC directed that the report should explain the actions Dominion is taking to ensure compliance with the VCEA’s energy efficiency targets.

  • Environmental advocates criticize Dominion and Appalachian Power transportation electrification plans – Case No. PUR-2020-00051

On May 1, Dominion and Appalachian Power Company (“APCo”) each filed transportation electrification plans. The plans include discussion of the infrastructure and rate schedule changes that may be necessary to accommodate increased EV load. The utilities’ plans were filed pursuant to a June 2022 Commission directive.

Dominion’s plan estimates that there will be 900,000 EVs operating in its Virginia service territory by 2038. Dominion states that “[t]ransportation electrification will result in new electric demand and energy usage requirements placed on the Company’s electric grid” which may require “new infrastructure costs incurred by the Company.” Dominion, however, states that “through initiatives like managed charging, the increased energy [cost] requirements may be shifted towards times where overall demand is lower, potentially reducing the need for new or upgraded distribution infrastructure.” Dominion’s plan proposes several new rate schedules that would encourage customers to charge EVs during off-peak hours.

APCo’s filing also projects significant EV adoption in its service territory. APCo reports that, as of December 31, 2022, there were 3,655 “light-duty” plug-in vehicles registered in its Virginia service territory. The utility projects as many as 40,000 EVs by 2030. APCo, however, estimates that “no transmission or distribution investments are anticipated to occur until the mid-2030’s that would be a direct result of increased light duty EV adoption.”

Appalachian Voices and the Sierra Club filed comments on the proposals on August 4. In its pleading, Appalachian Voices called both utilities’ plans “deficient” and requested that the Commission order each utility to file additional plans. Appalachian Voices also asserted that the current transportation electrification docket does not satisfy provisions of the federal Public Utility Regulatory Policies Act, which requires the Commission to conduct a “dedicated proceeding” to consider measures to promote greater electrification of the transportation sector, including the establishment of rates that meet various standards to promote EV adoption. Likewise, Sierra Club’s comments assert that “neither filing includes the modeling and analyses clearly required by [the Commission] and neither utility puts forward specific rate designs. educational programs, or investments in charging infrastructure that would benefit ratepayers for the Commission’s review.”