Virginia Energy Regulatory Updates (January 2022)

Below is our firm’s summary of notable energy regulatory activity at the Virginia State Corporation Commission (“SCC” or “Commission”) during December, 2021. 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 files petition to increase its environmental rate adjustment clause; requests approval to undertake new projects at two coal facilities – Case No. PUR-2022-00006

On January 25, Dominion filed a petition seeking to update its environmental rate adjustment clause (“RAC”). Under Virginia law, both Appalachian Power and Dominion are permitted to recover environmental compliance costs through a separate rider, or RAC. Dominion’s petition provides an update on previously approved projects at three coal facilities. These projects include upgrades to coal ash storage and handling facilities needed to comply with federal Clean Water Act requirements.  Dominion also requests approval for a new $120 million capital project at the company’s Mt. Storm facility in West Virginia. Dominion states that the project is necessary to comply with federal regulations governing discharges from coal ash ponds. 

The petition, if approved, would result in a $0.70 monthly bill increase for a residential customer using 1,000 kWh. The SCC has not yet set a procedural schedule for this case.

  • SCC hearing examiner recommends approval of proposed settlement agreement in case concerning 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 January 4, Dominion filed a proposed stipulation and recommendation signed by Dominion, Sierra Club, and the Commission Staff. Under the proposed agreement, Dominion would agree to conduct an “analysis of a possible pathway towards economic viability” for the facility within nine months, including options for “repurposing” the site for solar and/or storage resources. Dominion would also “forego life-extension related spending at [the facility] occurring after Rate Years 1 and 2 as presented in this proceeding until the Company has completed and filed the report.” On January 24, the SCC hearing examiner assigned to this case filed his report and recommendation. The hearing examiner found proposed settlement to be reasonable and recommended that the Commission approve it.

  • Citing Governor’s statements, Dominion files motion to withdraw petition to increase rider for 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.

On January 10, Dominion filed a motion to withdraw its filing, citing Governor Youngkin’s statements that “he intends to withdraw Virginia from RGGI.” The motion states that, “[d]ue to the uncertainty surrounding the timeline for the Commonwealth’s participation in RGGI, as well as the compliance requirements and associated costs for the September 1, 2022 through August 31, 2023 rate year, Dominion Energy Virginia seeks leave to withdraw its Rider RGGI update Application without prejudice.” Dominion states that it “intends to file a new updated application to recover its actual and projected RGGI compliance costs informed by these developments at the appropriate time.” The SCC has not yet ruled on this motion.

Renewable energy, efficiency, and new energy infrastructure:

  • Pipeline company files petition for reconsideration of SCC order regarding regulatory approvals; adds new counsel – 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.

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. Chickahominy Pipeline filed a petition for reconsideration on January 11. The pipeline company argues that the Commission erred by concluding that it is a public utility. The company claims that it is merely transporting gas and not offering it for sale. Therefore, the pipeline company says it cannot be classified as a public utility under Code Section 56-265.2. The company also filed a motion to substitute its counsel in the case. 

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.”

  • SCC approves Phase II of Dominion’s grid transformation plan; approves investments in advanced metering infrastructure – SCC Case No. PUR-2021-00127

On June 21, Dominion filed its 2021 grid transformation plan, designated “Phase II” of its 10-year grid transformation program. Dominion states that the primary focus of its 2021 grid plan “leans more heavily into facilitating the integration of [distributed energy resources or “DERs”], while continuing to address the reality that reliability and security are vital to the success of DERs.” Dominion notes that “industry developments in the past year alone will accelerate the proliferation of DERs, from the development targets for DERs set forth in the Virginia Clean Economy Act of 2020 (“VCEA”), to the market opportunities for DERs enabled by FERC Order 2222, to the myriad of commitments and incentives to speed the transition to electric vehicles.” Dominion projects that its distribution system must be able to handle an expected 170,000 electric vehicles in its service territory by 2030.

The 2021 grid transformation plan includes $670 million in proposed capital spending projects, including deployment of advanced metering infrastructure, new cyber and physical security measures, and infrastructure updates necessary to accommodate additional DERs. Dominion’s petition does not include an estimate of the monthly bill impact of its plan for residential customers. Virginia Code Section 56-585.1 A 6 allows Dominion to propose a grid transformation plan on an annual basis. The law also allows Dominion to recover grid transformation investments through a rate adjustment clause.

On January 7, the SCC published a final order approving Dominion’s plan, subject to certain requirements and cost caps. In particular, the Commission approved Dominion’s plan to deploy approximately 1.1 million “smart meters.” The Commission also approved additional spending on physical and cyber security measures as well as investments in customer education. Finally, the Commission’s order referenced Dominion’s process for interconnecting distributed resources. The order referenced certain interconnection delays and other issues related to interconnecting small solar facilities. The Commission stated that it would, “by separate order, open a separate docket to explore utility DER interconnection issues in a comprehensive manner.”

  • SCC sets procedural schedule for reviewing Dominion’s latest energy efficiency filing – 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. An evidentiary hearing on the filing will be held on May 12. Interested parties may intervene by filing a notice of participation on or before February 25.

  • Parties file post-hearing briefs and partial stipulation regarding Dominion 2021 RPS Development Plan – 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. 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.

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.

On January 19, the parties filed post-hearing briefs supporting their respective litigation positions. Additionally, Dominion, the SCC Staff, and most of the parties signed a partial stipulation regarding the modeling Dominion will prepare as part of its next VCEA filing. Under the terms of the stipulation, Dominion also would hold a meeting of interested parties to discuss its modeling.

Based on the statutory timeline, the SCC must publish a final order on Dominion’s filing by March 15. 

  • SCC schedules hearing concerning administrative charges for multi-family shared solar program – Case No. PUR-2020-00124

In 2020, the General Assembly passed legislation requiring the SCC to promulgate regulations for a shared solar program specifically designed for customers living in multi-family housing facilities. Customers of Dominion and Kentucky Utilities, d/b/a Old Dominion Power, are eligible to purchase solar energy under the multi-family program. Under the Dominion shared solar program, customers will be permitted to purchase – or “subscribe to” – a portion of a qualifying solar facility. The customer would thereafter receive a bill credit corresponding to the output from the facility.

The multi-family shared solar program directives are codified in Va. Code § 56-585.1:12. The statute allows utilities to recover “reasonable costs of administering the program.” In a September 2021 filing, Dominion proposed an administrative charge for its multi-family shared solar program. The SCC will hold an evidentiary hearing on March 25. Public witnesses may provide oral testimony on Dominion’s administrative charge proposal during a public hearing on March 22.