Virginia Energy Regulatory Updates (December 2021)

Below is our firm’s summary of notable energy regulatory activity at the Virginia State Corporation Commission (“SCC” or “Commission”) during December, 2021. During the last month, among other activity, the SCC held an evidentiary hearing regarding Dominion Energy Virginia’s (“Dominion”) latest solar proposals; Appalachian Power (“APCo”) filed its latest Virginia Clean Economy Act (“VCEA”) implementation plan; and Dominion responded to criticism of its Southwest Virginia coal plant.

Please contact regulatory 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.

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Rate cases, oversight, and resource planning:

• Dominion responds to environmental advocate testimony regarding continued cost recovery for Wise County coal facility – Case No. PUR-2021-00114

On June 8, 2021, Dominion filed an application to update the rate rider, or rate adjustment clause (“RAC”), for the Virginia City coal plant in Wise County. The RAC recovers both capital and operations costs for the coal plant. The filing proposes an adjustment, or “true up,” and would reset the RAC revenue requirement going forward. Under Dominion’s proposal the RAC rate will increase a residential customer’s monthly bill by $0.09, based on 1,000 kWh usage. Dominion also requests a bonus ROE of 1.0%. Virginia law authorizes Dominion to receive a bonus ROE for the first 12 years of the plant’s service life. The facility began commercial operation in 2012. (In 2013, the General Assembly eliminated ROE bonuses for most types of generation facilities.)

On November 22, the Sierra Club filed expert witness testimony urging the SCC to deny future cost recovery for the coal facility. Sierra Club’s expert witness recommends that the Commission “disallow future capital spending, totaling approximately $25.3 million, and future fixed O&M expenses, given that the data show anticipated future net losses.” The witness also argues that Dominion’s plan for future capital investments at the coal plant “ignores the fact that the unit has, and is projected to continue to have, negative value to the Company’s ratepayers.” The Sierra Club cited an analysis produced by Dominion showing that the Wise County facility will lose between $357 million and $483 million over the next ten years.

On December 20, Dominion filed its rebuttal testimony. While admitting that “the economics for VCHEC are currently challenged,” Dominion asserted that the facility provides other benefits to its system and economic value for Southwest Virginia. Dominion also noted that the facility uses a particular type of coal (gob coal) that if not burned could pollute local waterways. An evidentiary hearing on the application will be held on January 6.

•  Dominion files petition to increase rider to recover RGGI-related costs – Case No. PUR-2021-00281

On December 6, Dominion filed a petition to update its rate adjustment clause that recovers costs related to the Regional Greenhouse Gas Initiative (“RGGI”). Pursuant to 2020 legislation, Virginia is now a full member of RGGI. RGGI imposes a cap on carbon emissions from generating facilities in Virginia. The initial cap of 27.1 million tons of carbon emissions declines to 19.6 million by 2030. RGGI requires power plant owners to purchase and hold “allowances” for each ton of carbon emitted. Virginia law allows Dominion and Appalachian Power to recover costs associated with participating in RGGI through new rate adjustment clauses.

Dominion estimates that it will need to obtain approximately 19 million allowances to cover its emissions between September 1, 2022, and August 31, 2023. Dominion estimates an average allowance price of $10.53 per allowance. If approved, the updated RAC would increase the monthly bill for a residential customer using 1,000 kWh by $4.37.

• SCC sets hearing schedule for Dominion petition to recover RPS-related costs – Case No. PUR-2021-00282

On December 6, Dominion filed a petition to update its renewable portfolio standard (“RPS”) rate adjustment clause (“RAC”). The Virginia RPS requires Dominion and Appalachian Power to meet an increasing percentage of their energy sales with clean energy resources. Virginia Code Section 56-585.1 A 5 d allows Dominion and Appalachian Power to recover certain RPS-related costs, such as renewable energy certificate (“REC”) purchases, through a separate RAC. In its petition, Dominion states that the RPS requirements may be met with RECs from a combination of sources, including “Company-owned renewable energy facilities, RECs generated from renewable energy facilities owned by an entity other than the utility with which the Company has entered into a power purchase agreement (“PPA”), long-term REC-only contracts, and market purchases of RECs.” 

If approved, the RAC would increase the monthly bill for a residential customer using 1,000 kWh by $1.64. An evidentiary hearing will be held on April 13. Interested parties may intervene in the case by filing a notice of participation on or before February 16.

Renewable energy, efficiency, and new energy infrastructure:

• Appalachian Power files latest VCEA and RPS plan – Case No. PUR-2021-00236

On December 30, Appalachian Power (“APCo”) file its latest Virginia Clean Economy Act implementation plan and petition for approval of new resources. The VCEA requires Dominion 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.

APCo’s filing includes its general plan to comply with the RPS percentage targets. The filing includes six alternative portfolios that comply with the RPS targets based on different resource allocations, such as earlier coal retirements or larger solar investments.

APCo’s filing requests approval of several new solar generation facilities. In particular, APCo requests that the Commission approve APCo’s proposal to acquire one new solar facility and to enter into three power purchase agreements (“PPAs”) for solar energy. APCo also requests approval to acquire two out-of-state energy facilities: a 50 MW solar facility located in West Virginia and a 200 MW wind facility located in Illinois. In total, the petition proposes cost recovery for $6.6 million in new expenditures. APCo’s cost recovery requests, if approved, would increase the bill for a customer using 1,000 kWh by $2.37 as compared to rates in effect in 2021.

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

• Dominion files application to update DSM cost recovery riders; requests approval of new programs – Case No. PUR-2021-00247  

On December 14, Dominion filed an application to update and continue its cost recovery riders for energy efficiency and demand-side management (“DSM”) program spending.

Dominion proposes nine new programs, designated the “Phase X” programs, including measures for residential and commercial customers. Spending on the Phase X programs would include a $140 million cost cap. In its application, Dominion also proposes to spend $2.5 million annually between 2022 through 2026 on a marketing campaign. This marketing campaign, run by a third party, is intended “to raise general customer awareness” of the company’s existing DSM programs.

Dominion states that approval of its application will result in a $0.29 monthly bill increase for a residential customer using 1,000 per month. The SCC has not yet established a procedural schedule for this case.

• SCC approves Rappahannock Electric Cooperative’s proposed EV smart charging tariff – Case No. PUR-2020-00001

On December 17, the SCC published a final order approving a voluntary electric vehicle (“EV”) charging tariff proposed by Rappahannock Electric Cooperative (“REC”). REC is Virginia’s largest electric cooperative, serving 170,000 customers in central and northern Virginia. REC requested approval of the EV charging tariff in order “to encourage off-peak electric vehicle charging.” REC states that the tariff will help the cooperative manage its related capacity costs, load factor, and the upward pressure on residential rates that could occur when charging is done during on-peak hours.  

Customers participating in the tariff would receive a fixed monthly bill credit of $7.00 for the charging of electric vehicles during off-peak hours. REC states that it will use advanced metering infrastructure to ensure that EV’s are being charged primarily between the hours of 9pm and 5am.

The SCC’s order approves the tariff on an experimental basis. REC may offer the tariff between March 1, 2022, and February 29, 2024. The tariff will initially be limited to 200 customers.

• SCC establishes procedural schedule for review of Dominion offshore wind application – Case No. PUR-2021-00142

On November 5, Dominion filed an application for approval of a 2.6 gigawatt wind facility to be located in federal waters off the coast of Virginia Beach. Dominion’s application requests approval for cost recovery for the wind facility and associated transmission and interconnection facilities. Dominion states that the total capital costs for the project would be $9.8 billion. The 2020 Virginia Clean Economy Act includes a provision, Va. Code § 56-585.1:11 C, stating that the costs of an offshore wind facility between 2,500 and 3,000 MW that is proposed by Dominion “shall be presumed to be reasonably and prudently incurred,” provided that certain cost criteria are satisfied. In particular, the Code includes a complex formula to determine whether offshore wind costs will receive this presumption of prudence. The projected costs of offshore wind facility must fall below the per-MWh results of this formula, in order to be “presumed to be reasonably and prudently incurred.” Dominion states that the project costs are “well within this cost governor established by the Commonwealth.”

Dominion proposes to recover the project costs through a new rate adjustment clause specific for this facility. In its application, Dominion states that the monthly bill increase for a residential customer using 1,000 kWh per month would be $1.45. In a separate press release, however, Dominion stated that the facility would result in a $4 monthly bill increase for a residential customer using 1,000 kWh per month.

The SCC will hold an evidentiary hearing on the application on May 17, 2022. Interested parties may intervene on or before February 25, 2022. The SCC must enter a final order on Dominion’s application within nine months, or by August 5, 2022. Dominion expects the 2,600 MW facility to be in service by July of 2025.

• Appalachian Power files petition for approval of new “curtailment service” rider – Case No. PUR-2021-00293

On December 15, Appalachian Power Company (“APCo”) filed a petition requesting approval to implement a new curtailment service rider (designated “Rider CS”). The rider would be available to large standard service customers with maximum demand greater than 1 megawatt. APCo states that Rider CS will encourage  large customers to curtail their usage during periods of high demand, thereby reducing the utility’s energy purchase costs.

APCo states that it is “a winter-peaking utility that plans its capacity around its summer peak, [and therefore] the Company is structurally exposed to market energy in the winter months for a significant portion of its load.” APCo states that, “during periods of high market energy prices, the Company will notify enrolled customers of the option to curtail their energy usage.” “If customers with a curtailable usage greater than one megawatt choose to reduce their energy usage below their average on-peak demand during the event, they will receive a credit.” The credit will be based on PJM day-ahead energy prices. 

APCo asks the Commission to approved Rider CS “as soon as possible” so the company “will be able to realize its resultant benefits during the upcoming months of winter.” The SCC has not yet established a procedural schedule for this case.

• SCC sets procedural schedule for review of Appalachian Power energy efficiency filing – Case No. PUR-2021-00236

On November 30, Appalachian Power Company (“APCo”) filed a petition requesting approval of one new energy efficiency program and to continue cost recovery for several previously approved programs. APCo proposes one new commercial and industrial (“C&I”) program, which would provide incentives for customers to implement voluntary efficiency measures. APCo states that the proposed program “will provide C&I customers with the opportunity to implement non-standard, more complex energy efficiency projects that fall outside of the current offerings.” APCo’s filing also includes a measurement and verification report showing the estimated savings from previously approved efficiency programs.

The petition requests a $2.8 million increase to the current rate adjustment clause revenue requirement. This increase would result in a $0.34 per month increase for a residential customer using 1,000 kilowatt-hours. An evidentiary hearing will be held on May 19. Interested parties may intervene by filing a notice of participation on or before March 2.

• SCC rejects pipeline company’s legal arguments regarding oversight of proposed gas pipeline – Case No. PUR-2021-00211

On September 3, a pipeline company, Chickahominy Pipeline LLC, filed a petition seeking a declaratory judgment that the company does not need SCC approval to construct and operate a proposed 83-mile gas pipeline. The company asserts that the new pipeline is needed to serve a proposed 1,650 MW gas plant in Charles City County. Chickahominy Pipeline is an affiliate of Chickahominy Power, a separate limited liability company that received SCC approval to construct and operate the proposed gas plant in 2018.

As a general matter, most public utility facilities, including power plants, transmission lines, and intrastate pipelines, must receive a certificate of public convenience and necessity (“CPCN”) from the SCC under Va. Code § 56-265.2 prior to construction. When deciding whether to issue a CPCN, the SCC can consider factors such as whether the project is needed and its potential impacts on the environment. The pipeline company, however, argues that it does not need a CPCN for the proposed pipeline because the sale of gas between Chickahominy Pipeline and Chickahominy Power would constitute “transactions involving private parties over which the Commission has no authority to require regulatory approval.”

On December 22, the SCC entered a final order denying the petition. The SCC rejected the pipeline company’s legal arguments, finding that the entity is subject to regulation as a “public utility” and is therefore subject to the Code’s CPCN requirements.

• SCC holds hearing regarding Dominion 2021 RPS Development Plan and new solar proposals – Case No. PUR-2021-00146

On September 15, Dominion filed a petition requesting approval of numerous new clean energy resources. Dominion’s petition requests approval to construct and operate 661 MW of utility-scale solar resources and 70 MW of battery storage, as well as smaller-scale solar facilities. The utility requests approval to recover the costs of the new facilities through a rate adjustment clause designated “Rider CE.” If approved as filed, Rider CE would recover approximately $71 million from customers during the first rate year, increasing the monthly bill for a residential customer using 1,000 kWh by $1.13. Dominion also requests approval to enter into numerous power purchase agreements (“PPAs”) with solar and storage owners. Under such PPAs, Dominion would purchase the electrical output, but would not own and operate the energy facilities.

Dominion’s filing also includes an updated renewable portfolio standard (“RPS”) development plan. The Virginia RPS requires Dominion and Appalachian Power to meet an increasing percentage of their electricity sales from clean energy resources. The law also states that the utilities must procure a certain percentage of their energy requirements from facilities located in Virginia. In its filing, Dominion states that “[the] 2021 RPS Development Plan will (i) support RPS Program compliance; (ii) support carbon dioxide (“CO2”) reductions in the Commonwealth; (iii) promote new renewable energy generation and energy storage resources in the Commonwealth, and the associated economic development; and (iv) result in fuel savings.”

On November 16, respondents and the SCC Staff filed direct testimony. Respondent Appalachian Voices filed testimony criticizing Dominion for, among other things, failing to conduct long-term, least-cost VCEA planning. Solar advocates also filed direct testimony, which supported approval of the proposed solar projects, but recommended improvements to Dominion’s process for evaluating and procuring resources in the future. The Staff filed testimony from multiple witnesses who evaluated Dominion’s proposed solar additions, its RPS Development Plan, and the utility’s commodity and REC price forecasts. The Commission held an evidentiary hearing between December 14 and 16.

• Solar advocates challenge electric cooperative’s rate design proposals – Case No. PUR-2021-00054

On March 16, 2021, Shenandoah Valley Electric Cooperative (“SVEC” or “Cooperative”) filed an application for an increase in rates. SVEC’s application proposed to increase its annual revenue requirement by a total of $5.3 million. SVEC proposes to recover 90% of the proposed revenue increase ($4.8 million) through an increase to the Cooperative’s Basic Consumer Charge (“BCC”). The BCC is the fixed monthly charge that all customers must pay, regardless of how much energy they use. The Cooperative also proposed to implement a $0.10/kW demand charge. The SCC held an evidentiary hearing on October 6 at which the Cooperative, the Commission Staff, and respondents presented testimony and argument. At the hearing, several SVEC residential customers testified in opposition to the Cooperative’s proposal to increase its BCC. A solar advocacy organization, Solar United Neighbors of Virginia (“SUN-VA”), opposed the Cooperative’s proposed BCC increase and the proposed demand charge.

The parties filed post-hearing briefs on November 12. Among other things, SUN-VA’s brief argued that it would be unreasonable for the Cooperative to recover 90% of the proposed revenue increase through fixed charges. SUN-VA argued that this approach is both regressive and contrary to Virginia’s energy policy because it means customers have less control over their energy bills. SUN-VA argued that this approach to cost recovery would discourage future investments in energy efficiency and rooftop solar, and “would penalize those customers who have already made such investments.” Frederick County, a respondent in the case, filed a brief also expressing concerns about the Cooperative’s proposed increase to its BCC. The County noted that  that “shifting more of their electric bills from a volumetric charge to a fixed charge” results in “consumers [having] less ability to control their electricity costs.” The Cooperative filed a post-hearing brief supporting its rate design proposals and opposing SUN-VA’s expert witness testimony.

There is no statutory deadline for the Commission to enter a final order in this case.