Virginia Energy Regulatory Updates (March 2022)

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

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Rate cases, oversight, and resource planning:

  • Dominion files annual report on fuel mix and emissions from generation facilities – Case No. PUE-2008-00061

On March 23, Dominion filed its annual report on its fuel mix and emissions during the previous year. SCC regulations state that each electricity provider operating in Virginia, including incumbent electric utilities, “shall report to its customers and file a report with the State Corporation Commission stating to the extent feasible, [its] fuel mix and emissions data for the prior calendar year.”

In its report, Dominion states that, during 2021, “[its] fuel source mix was 40.1% natural gas. 29.3% nuclear. 8.6% coat. 17.0% purchases, 2.7% Hydro. 2.0% renewable, 0.2% oil.” The Company also stated that it achieved its 14% target under the VCEA RPS during 2021.

  • SCC grants Dominion motion to withdraw proposed RGGI cost recovery rider – 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.

On January 10, Dominion filed a motion to withdraw its application, citing statements by then-Governor-elect Youngkin that his administration would remove the Commonwealth from RGGI. On April 1, the SCC published an order granting Dominion’s motion. The order directs Dominion to file a status update regarding its RGGI costs on or before July 1.

  • SCC sets procedural schedule to review Kentucky Utilities petition to increase fuel recovery rider – Case No. PUR-2022-00021

On February 15, Kentucky Utilities, doing business as Old Dominion Power (“KU/ODP”), filed an application to increase its fuel cost recovery rider. Virginia Code Section 56-249.6 allows electric utilities to recover prudently incurred fuel costs through the fuel rider, called the “fuel factor.” Fuel costs are generally recovered on a dollar-for-dollar basis with no rate of return applied.

KU/ODP states that its current fuel recovery rate has not been sufficient to allow the company to recover its actual fuel costs. The company also cites higher projected coal and gas prices. KU/ODP forecasts that coal expenses will increase by 8.7% on a $/kWh basis, while the company forecasts that natural gas costs will increase by 25.4% on a $/kWh basis. KU/ODP’s application, if approved, would result in a monthly bill increase of $3.22 for a residential customer using 1,000 kilowatt-hours. An evidentiary hearing on the petition will be held on June 1. Interested parties may intervene in the case by filing a notice of participation on or before April 27.

  • SCC publishes procedural schedule for case regarding Dominion proposal to increase its environmental rate rider and undertake new capital projects at 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 will hold an evidentiary hearing on the petition on July 13. Interested parties may intervene in the case by filing a notice of participation on or before April 26.

Renewable energy, efficiency, and new energy infrastructure:

  • Respondents file direct testimony regarding Dominion offshore wind proposal – 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 formula to determine whether offshore wind costs will receive this presumption of prudence. The projected costs of the 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.”

On March 25, the Office of the Attorney General and several intervening parties filed direct testimony. The Attorney General’s expert witness testified that the project “is not required to serve [Dominion’s] forecasted system capacity requirements, but can be used, and may be needed, to supply a portion of the Company’s VCEA RPS requirement from 2027 through at least 2035.” The Attorney General’s Office and respondent Clean Virginia both recommended additional SCC oversight of the project considering its size and complexity. Clean Virginia’s expert testified that the Commission should impose a capital cost cap in order to protect consumers from cost overruns, and recommended that the SCC should evaluate the appropriateness of monopoly utility ownership of future offshore wind development. The Nansemond Indian Tribe filed direct testimony commenting on the proposed routing for Dominion’s onshore transmission facilities.  

The SCC will hold an evidentiary hearing on the application on May 17, 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.

  • SCC holds evidentiary hearing regarding administrative charges for Dominion 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. 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. This is a charge that all shared solar customers would be required to pay. In a subsequent order, the SCC determined that a public hearing process should be held to review Dominion’s administrative charge proposal. On February 8, Dominion filed direct testimony further explaining and supporting its administrative charge proposal. Dominion’s proposal is designed to recover costs such as transmission and distribution expenses and other costs to support the multi-family shared solar program. On March 1, Appalachian Voices and the solar industry filed witness testimony opposing Dominion’s proposed charge. The SCC held an evidentiary hearing on March 25.

  • Dominion files annual report on grid transformation investments – SCC Case No. PUR-2021-00127

On June 21, 2021, 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.” 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.

On January 7, the SCC published a final order approving Dominion’s 2021 grid transformation 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.” The final order directed Dominion to file an annual report, no later than March 31, describing the approved projects.

Dominion filed its 2021 annual report on March 31. The report describes the status of the approved projects, the company’s spending to date, and the resulting effects on reliability.

  • SCC Staff files direct testimony regarding Appalachian Power VCEA compliance plan – Case No. PUR-2021-00206

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 Staff filed direct testimony on behalf of four witnesses on March 30. Among other issues, Staff raised concerns with APCo’s modeling of future REC banking and optimization. Staff also raised questions as to whether certain of APCo’s wind resources are actually located within the PJM region, as required by Section 56-585.5 C of the VCEA. An evidentiary hearing will be held on April 21.

  • SCC grants petition for reconsideration filed by Shenandoah Valley Electric Cooperative in rate proceeding – 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.

On March 11, the SCC published a final order approving SVEC’s application in part. The SCC approved the proposed rate increase. With regard to the two contested rate design issues, the SCC approved SVEC’s request to increase its BCC but rejected the utility’s proposal to implement a demand charge for residential customers. On March 22 the Cooperative filed a petition for reconsideration, asking the SCC to suspend its final order and reconsider its decision to deny SVEC’s proposed demand charge. On March 28, the SCC published an order granting reconsideration, which suspends the final order while the Commission considers the matter. Parties may file responses to the petition on or before April 8.