Virginia Energy Regulatory Updates (July 2022)

Below is our firm’s summary of notable energy regulatory activity at the Virginia State Corporation Commission (“SCC” or “Commission”) during May, 2022. 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.

Rate cases, oversight, and resource planning: 

  • Parties file proposed settlement regarding Dominion fuel rate increase; proposal would allow utility to receive rate of return on fuel expenses – Case No. PUR-2022-00064

On May 5, Dominion filed an application to increase its fuel recovery rate. Dominion states that this increase is necessary to allow it to recover projected fuel expenses as well as an “under recovery” balance that has accrued. In Virginia, fuel costs are pass through expenses. Utilities recover fuel costs such as coal and gas on a dollar-for-dollar basis, with no rate of return applied. Fuel costs are recovered through a rate rider called the “fuel factor.” See Va. Code § 56-249.6. Dominion’s application states that, “[w]hile in most years, this is a relatively routine filing, the dramatic increases in fuel prices as a result of the pandemic, inflation generally, and the war in Ukraine have created a significant fuel cost under-recovery and projections that fuel costs will remain elevated over the next year.” The filing states that in the last year, “gas and coal fuel commodities experienced price increases of approximately 100% and 92%.”

If approved in full, the fuel increase would increase the monthly bill of a residential customer using 1,000 kWh by approximately $24.12, or 19.8%. Dominion presents two alternative recovery periods for the Commission’s consideration. The alternatives would spread the unrecovered costs over either two or three years, thereby mitigating the immediate customer rate increase.

The SCC held an evidentiary hearing on July 6. On July 26, Dominion, the Commission Staff, and a group of industrial customers filed a proposed stipulation to resolve the issues in the case. Under the stipulation, Dominion would be permitted to recover the under recovery balance over a three-year period. Dominion would also be permitted to recover financing costs associated with half of the under recovery balance. Several parties to the case did not sign the stipulation. Those parties may file responses to the proposed stipulation on August 3.

  • SCC approves updated transmission cost recovery rider for Dominion – Case No. PUR-2022-00065

On July 15, the SCC published a final order approving an updated transmission rider for Dominion.  Dominion’s application requested a decrease of $161 million for the next rate year in light of fewer charges billed by PJM. Under Virginia law, Dominion is permitted to recover “costs for transmission services provided to the utility by [PJM]” and “costs charged to the utility that are associated with demand response programs approved by the Federal Energy Regulatory Commission.” Such costs can be recovered outside of base rates through a separate rate rider. No party to the case opposed Dominion’s application. In its final order, the Commission noted that the Company’s transmission costs are “deemed reasonable and prudent” by statute, “including the Company’s return on investment, which is set by FERC; the Commission is without discretion to add to or subtract from these costs.” The updated rider will result in a $3.69 reduction to the monthly bill for a typical residential customer using 1,000 kWh.

  • SCC approves transmission rate increase for Appalachian Power – Case No. PUR-2022-00014

On July 7, the SCC approved a request by Appalachian Power Company (“APCo” or “Company”) to increase its transmission rate rider. APCo requested a $31 million increase to the annual revenue requirement for the transmission rider. Under Virginia law, APCo and Dominion are permitted to recover “costs for transmission services provided to the utility by the regional transmission entity of which the utility is a member” and “costs charged to the utility that are associated with demand response programs approved by the Federal Energy Regulatory Commission” through a separate rate rider. No party to the case opposed the requested increase. The rider increase will increase the monthly bill for a residential customer using 1,000 kilowatt hours per month by approximately $2.88.

  • Interested parties file direct testimony regarding Appalachian Power coal investment plan; utility asserts that rate increase is necessary to keep West Virginia coal plants operational – Case No. PUR-2022-00001 

On March 18, Appalachian Power filed a petition to increase its cost recovery rider for environmental compliance costs. APCo requests Commission approval to increase the revenue requirement for its environmental rate adjustment clause, called the “E-RAC,” to recover $33.6 million in the next rate year. The increase, if approved, would result in a $.80 per month bill increase for a residential customer using 1,000 kWh per month.

APCo’s filing requests cost recovery for several new projects, including measures at its Amos and Mountaineer coal facilities in West Virginia. APCo claims that it needs to install new pollution control equipment at these facilities in order to comply with EPA restrictions on waste water discharges. In particular, the petition seeks cost recovery for “actual and projected capital investment incurred to comply with the EPA’s Steam Electric Effluent Limitation Guidelines,” which the Commission denied in a 2021 order. APCo is seeking Commission approval for these investments again, claiming that the ELG investments are necessary to enable the Amos and Mountaineer plants to continue operations beyond 2028. APCo also seeks cost recovery for costs necessary to comply with the Virginia regulation that established Virginia as a member of the Regional Greenhouse Gas Initiative (“RGGI”). APCo projects that it will continue to incur RGGI-related costs at its Clinch River gas facility located in Russell County.

On July 29, two intervenors filed competing expert testimony. The West Virginia Coal Association filed expert testimony supporting the proposed rate increase. Meanwhile, the Sierra Club filed testimony urging the SCC to reject the rate increase, saying the investments at the Amos and Mountaineer facilities are not in the public interest. The Sierra Club witness asserted that customers would benefit if APCo retires the units early instead of making additional capital investments. The SCC will hold an evidentiary hearing on September 20.

Renewable energy, efficiency, and new energy infrastructure:

  • SCC approves minimum bill amount for Dominion shared solar program – Case No. PUR-2020-00125

On July 23, 2021, the SCC established a procedural schedule to review Dominion’s minimum bill proposal for the shared solar program established by 2020 legislation. The legislation requires the SCC to promulgate regulations allowing customers of Dominion to participate in a solar subscription program. This program will allow the customers (“subscribers”) to purchase the output from a solar facility or facilities up to 5 MW in size owned by a third party. Per the statute, the minimum bill is “an amount… that subscribers are required to, at a minimum, pay on their utility bill each month after accounting for any bill credits.” The minimum bill is intended to ensure that subscribers still pay necessary costs to maintain the electric distribution system.

Under Dominion’s proposal, customers would continue to pay all standard service charges, but would receive monthly bill credits based on the market value of the solar generated. Under Dominion’s proposal, a minimum bill for a residential customer with a 1,000 kWh subscription would be $74.28. During the evidentiary hearing process, solar advocates proposed a minimum bill based on a fixed monthly amount based on fixed customer charges of $7.58, rather than the volumetric charge proposed by Dominion. The SCC Staff proposed two different methodologies, resulting in a minimum bill of either $10.95 or $55.10.

On July 7, the SCC published a final order approving the Staff alternative minimum bill of $55.10. The SCC found that this minimum bill amount would ensure that participating customers do not avoid any non-bypassable riders or charges. The SCC found that this minimum bill amount “reasonably includes costs the Commission deems relevant to ensure subscribing customers pay a fair share of the generation, transmission, distribution, and fixed costs of providing electric service.” The SCC also found that, pursuant to the statute, low-income customers are exempt from the minimum bill.

  • SCC allows additional comments related to REC certification issues – Case No. PUR-2022-00045

On April 14, the SCC established a new docket to allow interested parties to comment on various issues related to its business rules (“Business Rules”) for renewable energy certificates (“RECs”) registered with PJM’s Generation Attribute Tracking System (“GATS”). Among other issues, the SCC’s scheduling order requested parties to comment on the certification process and requirements for “low-income qualifying” solar facilities. The VCEA requires Dominion to meet a portion of its annual RPS requirements with distributed energy resources, including “low-income qualifying projects,” to the extent they are available. The SCC’s order also invited interested parties to comment on any other issues related to the certification of RECs to be used for VCEA compliance.

On June 8, several parties, including Dominion, Direct Energy, and solar advocates, filed initial comments. On July 26, the SCC published an order authorizing additional comments. The order directs the Commission Staff to file a report on September 22. Interested parties are permitted to file comments regarding the Staff report, or regarding any other matter, on or before October 20.

  • SCC approves Appalachian Power’s VCEA compliance plan – Case No. PUR-2021-00206

On December 30, Appalachian Power (“APCo”) filed 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.

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 authorize the utility 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.

The SCC approved APCo’s application on July 15. In its final order, the SCC found that the proposed PPAs and new generation facilities are needed to allow the company to comply with the VCEA RPS. The SCC also directed APCo, in its next VCEA compliance filing, to implement several adjustments to its modeling. APCo estimated that approval of its application will increase the bill for a customer using 1,000 kWh by $2.37 as compared to rates in effect in 2021.

  • SCC approves Appalachian Power’s latest energy efficiency filing – Case No. PUR-2021-00236

On November 30, Appalachian Power 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. APCo estimated that approval of its application will result in a $0.34 per month increase for a residential customer using 1,000 kilowatt-hours. The SCC approved ACPo’s filing on July 15. In its final order, the Commission also approved APCo’s request to extend the filing date for its next efficiency rider update for two years

  • Dominion files update on participation in 100% renewable energy tariff and request to continue tariff rate – Case No. PUR-2022-00101

On July 1 Dominion filed an update regarding its 100% renewable energy tariff option, Rider Total Renewable Generation (“Rider TRG”). Customers who participate in the voluntary tariff are allocated generation from several solar, hydroelectric, and biomass facilities. According to Dominion, participating customers “pay an amount over standard service that is based on the prevailing market value of retail renewable energy.” This represents a premium of 2.91%, or approximately $3.98 per month for a residential customer using 1,000 kWh. Dominion proposes to keep this premium rate in place.

Dominion states that, as of June 15, 2022, there were approximately 3,481 residential customers and 82 commercial customers enrolled in [Rider TRG].” Dominion estimates that the Company expects that the current TRG Portfolio will be able to meet the 100% renewable energy requirements of approximately 12,000 customers, including residential, commercial, and industrial customers. The SCC has not yet established a procedural schedule for this case.