Virginia Energy Regulatory Updates (March 2023)

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

  • Appalachian Power requests $212 million annual rate increase; seeks higher rate of return – Case No. PUR-2023-00002

On March 31, Appalachian Power Company (“APCo”) filed its application for a triennial review of its rates and terms and conditions of service. APCo requests an annual base rate increase of $212 million. The utility also requests a higher rate of return on common equity (“ROE”). APCo asserts that it needs an ROE of 10.6% in order to attract capital on reasonable terms. APCo’s current ROE is 9.2%. Based on its proposed earnings test adjustments, APCo claims that it earned a total return of only 5.39% during the 2020-2022 review period.

The $212 million rate increase, if approved, would increase the monthly bill of a typical residential customer by 15.9%. The utility proposes to waive its monthly basic customer charge, currently $7.96, for certain low-income customers. If the application is approved, a low-income customer eligible for the waiver of the basic customer charge would experience a 10.5% increase.   

The SCC has not yet established a procedural schedule for this case. The statute requires the SCC to hold an evidentiary hearing and publish a final order within eight months, or by November 30, 2023.

  • SCC schedules evidentiary hearing regarding Dominion request to “reinstate” rate adjustment clause for RGGI compliance costs; environmental advocates criticize Dominion’s management of coal facilities – PUR-2022-00070

On December 14, Dominion Energy Virginia (“Dominion”) filed a petition to “reinstate” a rate adjustment clause (“RAC”) to recover the costs to comply with the Regional Greenhouse Gas Initiative (“RGGI”). Dominion’s petition reverses the utility’s previous proposal for recovering RGGI compliance costs. In 2022, Dominion requested permission to recover RGGI costs through its base rates as opposed to a separate rider. The Commission approved Dominion’s request to eliminate the RGGI RAC in a June 15, 2022, order. Dominion states that its new petition, if approved, will increase the average monthly bill for a residential customer using 1,000 kWh by $4.64. The application states that the RGGI RAC would recover approximately $373 million from customers during the next rate year.

On March 21, Appalachian Voices filed expert witness testimony regarding Dominion’s application. The witness, a former SCC staff member, criticized Dominion for scheduling its coal units to run even when it is uneconomic to do so based on PJM market prices. The witness testified that this practice results in unreasonably high RGGI compliance costs. The witness also asserted that the SCC should disallow costs attributable to the dispatch of Dominion’s Wise County coal plant. The SCC will hold an evidentiary hearing on May 1. Interested persons may file comments on or before April 26.

  • SCC approves fuel rate increase for Appalachian Power Company; directs SCC Staff to review coal procurement practices – Case No. PUR-2022-00139

On September 15, 2022, APCo filed an application to increase its fuel recovery rate. In Virginia, fuel costs are pass through expenses. Utilities recover fuel costs such as coal and gas purchases on a dollar-for-dollar basis, with no rate of return applied. See Va. Code § 56-249.6. APCo cites, among other factors for the rate increase, higher natural gas prices and increased demand for coal from European buyers. 

The application states that “the Company proposes to increase the current fuel factor to 4.319 cents/kWh effective November 2, 2022, through October 31, 2023 (the “fuel year”), which is an annual net increase in the revenue of approximately $279 million.” The application also states that in order “[t]o mitigate the impact of this request, the Company proposes to recover its deferred fuel balance as of October 31, 2022 over two fuel years.”

The SCC approved APCo’s request in a March 6 final order. The SCC agreed that “the Company has materially under-recovered its fuel costs over the last year and its forecasted costs for the coming year have risen markedly.” The SCC also approved APCo’s “mitigation proposal” to spread the recovery over two years. This proposal reduces the monthly bill increase for a typical residential customer using 1,000 kWh from $33 to approximately $20. Finally, the SCC directed its Staff to review the reasonableness of APCo’s fuel procurement strategy. Because the SCC already approved the fuel rate increase on an interim basis, effective November 1, 2022, the final order will not result in an additional increase to current rates. 

Renewable energy, efficiency, and new energy infrastructure:

  • SCC hearing examiner recommends approval of portions of Dominion RPS Development Plan; parties file comments and objections to examiner’s findings – Case No. PUR-2022-00124

On October 14, Dominion filed a petition requesting approval of numerous new clean energy resources (the “CE-3 Projects”). Dominion’s filing also includes an updated renewable portfolio standard (“RPS”) development plan. The petition requests approval to construct and operate 474 MW of utility-scale solar resources and 16 MW of battery storage, as well as four smaller-scale solar facilities. The utility requests approval to recover the costs of the new facilities through a rate adjustment clause designated “Rider CE.” Dominion also requests approval to enter into 13 power purchase agreements (“PPAs”) with solar and storage owners. If approved as filed, Rider CE would recover approximately $89 million from customers during the next rate year, increasing the monthly bill for a residential customer using 1,000 kWh by $0.38.

A Commission Hearing Examiner conducted an evidentiary hearing on January 31. The Examiner filed his report and recommendation on March 1. The Examiner found Dominion’s RPS development plan to be reasonable, noting that the plan “leaves open multiple potential compliance options.” The Examiner recommended approval of all proposed PPA projects and a majority of the proposed Dominion-owned facilities. However, the Examiner concluded that two Dominion-owned projects would be “significantly uneconomic” and should be rejected. The Examiner recommended that the Commission deny cost recovery for a 3MW distributed solar facility and a 16MW battery storage facility.

The parties filed comments and objections regarding the Hearing Examiner’s report on March 14. Dominion filed comments defending the cost effectiveness of its proposals. The Attorney General’s Office, while not opposing any specific project, argued that the SCC is not required to approve any of Dominion’s proposed facilities. The Attorney General noted that some of Dominion’s proposed solar facilities are projected to be more costly than offshore wind. Appalachian Voices, represented by the Southern Environmental Law Center, criticized Dominion’s modeling and its analysis of third-party purchase options. Appalachian Voices argued that that Dominion could have entered into additional solar power purchase agreements at a lower cost for customers. The statute requires the SCC to publish a final order on or before April 14.

  • Appalachian Power Company files 2023 VCEA RPS Plan – Case No. PUR-2023-00001

On March 15, Appalachian Power Company (“APCo”) filed its latest Virginia Clean Economy Act implementation plan and petition for approval of new resources. The VCEA requires Dominion Energy 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 multiple alternative portfolios that comply with the RPS targets based on different resource allocations, such as earlier coal retirements or larger solar versus wind energy investments. APCo’s filing requests approval of several new solar facilities. In particular, APCo requests that the Commission authorize the utility to acquire one new solar facility located in Ohio and to enter into six power purchase agreements (“PPAs”) for solar energy. APCo also proposes to adjust the rate adjustment clause for its VCEA projects. This adjustment would result in a small decrease for a typical residential customer. The SCC has not yet established a procedural schedule for this case. 

  • Environmental advocates file expert testimony regarding Dominion 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. 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.

Appalachian Voices filed expert testimony evaluating Dominion’s long-term efficiency plan on March 29. The Appalachian Voices witness concluded that Dominion is not on track to meet its statutory energy efficiency requirements. The Virginia Energy Efficiency Council also filed testimony supporting the new programs and providing recommendations for improving Dominion’s future savings measurement and reporting. The SCC will hold an evidentiary hearing on May 17.

On March 31, Dominion filed its annual report regarding previously approved grid transformation investments. The report shows the amounts the utility has spent to date on particular projects. The report also describes the results, based on performance metrics approved by the Commission Staff, of the approved projects. The report, for example, provides data regarding the frequency and duration of outages; the number of distributed energy resource interconnections; and the number of customer service issues resolved with new technology.

Dominion also filed an update on its previously approved battery energy storage system (“BESS”) pilot program. The report describes the actual costs of several BESS projects as well as lessons learned from their deployment.

On February 13, the SCC published orders for notice and comment regarding proposals by three electric cooperatives to modify their community solar programs. The three cooperatives – Rappahannock Electric Cooperative, A&N Electric Cooperative, and the Northern Neck Electric Cooperative – are each seeking changes to their previously approved community solar tariffs. Each cooperative received approval to offer a community solar tariff in 2018 on a temporary basis. The cooperatives propose to make their community solar programs permanent and to modify the monthly charges for participating customers. Interested parties may file written comments and/or request an evidentiary hearing on or before May 12.