Virginia Energy Regulatory Updates (March 2024)

Below is our firm’s summary of notable energy regulatory activity at the Virginia State Corporation Commission (“SCC” or “Commission”) during March, 2024. 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 files 2024 biennial review application; utility seeks $95 million annual rate increase – Case No. PUR-2024-00024

On March 28, Appalachian Power Company (“APCo”) filed its 2024 biennial review application. Under Va. Code 56-585.1, et seq., a biennial review is a base rate case in which the SCC reviews the utility’s earnings during the previous two calendar years. The law allows the SCC to increase or decrease the utility’s base rates or modify any of the utility’s terms and conditions of service. The statute applicable to this case directs the SCC to review APCo’s reported earnings for the 2023 calendar year and determine whether any adjustments are warranted.

In its application, APCo seeks an annual base rate increase of approximately $95 million. APCo asserts that, in calendar year 2023, it earned well below its authorized rate of return. APCo also seeks an increase to its current authorized profit level, or rate of return on common equity (“ROE”). APCo’s current authorized ROE is 9.5%. This ROE was set by the SCC in November 2023. APCo’s current application requests a new ROE of 10.8%. APCo also seeks certain changes to its terms and conditions of service. The rate increase, if approved, would result in a monthly bill increase of $10.22 for a typical residential customer using 1,000 kWh.

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

  • SCC schedules hearing regarding Old Dominion Power request to decrease fuel rider; utility forecasts 23% drop in natural gas costs – Case No. PUR-2024-00026.

On February 20, Kentucky Utilities Company, doing business as Old Dominion Power (“ODP”), filed an application to reduce its fuel rider. The rider, called the “fuel factor,” allows electric utilities to recover all reasonably incurred fuel costs from customers.

ODP states that its current fuel factor resulted in an over recovery from customers during 2023. The utility states that this over recovery was due primarily to lower-than-expected fuel costs. The application projects a 5% increase in coal costs for the next rate year. ODP, however, forecasts a 23% decrease in natural gas costs. The utility projects that its application, if approved, would result in a monthly bill decrease of $9.53 per month for a residential customer using 1,000 kWh.

The SCC approved ODP’s application and its revised fuel factor on an interim basis, effective on April 1. The SCC will hold an evidentiary hearing on July 16.

Renewable energy, efficiency, and new energy infrastructure:

  • SCC approves Dominion request to construct and acquire new solar facilities; approves latest RPS development plan – Case No. PUR-2023-00142

On October 3, 2023, Dominion Energy Virginia (“Dominion”) filed its latest Virginia Clean Economy Act (“VCEA”) compliance filing. The VCEA requires Dominion and Appalachian Power Company to comply with a mandatory renewable portfolio standard and to meet incremental renewable energy and energy storage investment targets. The utilities must file updates on progress towards the VCEA goals each year.

Dominion’s October 3 application requested approval of the Company’s current RPS development plan. The application also requested approval of 772 MW of new solar resources. This includes both proposed utility-owned projects and third-party owned facilities. The VCEA declares such projects to be “in the public interest,” but does not mandate SCC approval. Dominion also requested authority to recover all project costs through a rate adjustment clause.

The SCC held an evidentiary hearing on the application on January 10. On February 15, the hearing examiner assigned to this case filed a report and recommendation. The examiner recommended that the SCC approve all of the proposed third-party owned facilities. The examiner also recommended approval of 329 MW of the resources that Dominion proposes to own. Finally, the examiner found that “Dominion’s general plan for the development of new solar, wind, and energy storage resources appears to be a reasonable planning document” but, “given the elevated costs of solar projects and agreements shown in this case, I recommend that Dominion expand its existing RPS procurement process to accept bids for unbundled renewable energy certificates.” The SCC approved the hearing examiner’s recommendations in a March 29 final order.

  • SCC approves Appalachian Power solar PPA proposal – Case No. PUR-2023-00212

On January 11, Appalachian Power Company filed a petition for approval of three new solar power purchase agreements (“PPAs”). The three projects are all located in Virginia, in Tazewell, Charlotte, and Mecklenburg Counties. The petition is filed under Va. Code § 56-585.1:4(H). This Code section allows utilities to request pre-approval before entering into solar or wind power contracts with third parties. APCo states that the energy from the PPAs will be used to help satisfy the utility’s annual renewable portfolio standard requirements. APCo also states that the PPAs will support economic development in Virginia and will reduce the utility’s exposure to PJM market volatility.

The petition does not include an estimated rate impact for APCo’s customers. Under Virginia law, utility power contract expenses are generally recovered like fuel costs, with no rate of return for the utility. The SCC held an evidentiary hearing on March 6. On March 13, the hearing examiner assigned to this case filed a report and recommendation urging the SCC to approve the application. The examiner noted that the projects were procured through a reasonable RFP process and will support APCo’s renewable energy obligations under the Virginia Clean Economy Act. The examiner also recommended that, in future procurements, APCo should utilize more up-to-date energy and capacity price forecasts when evaluating RFP results. The SCC approved the hearing examiner’s recommendations in a final order issued on March 27.

  • Dominion requests SCC approval to sell 50% share of Coastal Virginia Offshore Wind project to investment firm; utility seeks to improve balance sheet and credit rating – Case No. PUR-2024-00045

On March 28, Dominion Energy Virginia filed a petition for approval to sell a 50% interest in the Coastal Virginia Offshore Wind project (“CVOW”) to a third-party investor, Stonepeak Member (“Stonepeak”). A 2023 statute, codified at Va. Code § 56-585.1:11(G), allows Dominion to request SCC approval to “establish an offshore wind affiliate for the purpose of securing a noncontrolling equity financing partner for the [CVOW project], and such offshore wind affiliate may be permitted to construct, own, or operate such project … or a portion thereof.” The SCC approved Dominion’s request to construct and operate the 2,600 MW CVOW project in 2022.

In its petition, Dominion states that Stonepeak has agreed to fund 50% of the capital costs of the project. Dominion states that Stonepeak has invested in conventional and renewable generation assets including “over 9 gigawatts of power including the 376 MW Formosa 2 offshore wind farm in Taiwan and a 6.6 gigawatt development pipeline of fixed and floating offshore wind through an investment in Synera Renewable Energy.” Dominion states that the transaction, if approved, “will strengthen [Dominion’s] balance sheet, improve its credit profile, and enhance its access to capital, all of which is beneficial to customers.” Dominion states that, “[f]rom an operational standpoint … [Dominion] will continue to develop and operate the Project and will maintain control of the governance of the offshore wind affiliate, subject to customary minority rights.” Dominion also asserts that the transaction, if approved, will not “materially change” the company’s billing or cost recovery for the CVOW project.

  • Dominion files update on EV charging rates and tariffs – Case No. PUR-2021-00151

On March 28, Dominion filed a bi-annual update on electric vehicle charging tariffs and rates. Dominion reports that it does not have any company-owned charging stations in service to date. Dominion also reports that 16 residential customers are enrolled in the company’s residential charging tariff. No customers are currently enrolled in the company’s fleet tariff for commercial and industrial customers. Dominion states that “charging infrastructure is in the design and engineering phase” for several commercial and industrial customers who will subscribe to charging tariffs in the future.

  • Dominion Energy publishes annual report on its fuel mix and emissions – Case No. PUE-2008-00061

On March 28, Dominion Energy Virginia filed its annual report regarding its fuel mix and emissions data for 2023. Dominion reported that, during 2023, the fuel mix for Dominion-owned facilities was as follows: 37.2% natural gas, 30.1% nuclear, 25.5% market purchases, 5.1% coal, 2.2% renewable, 0.4% hydro, 0.0% oil, and -0.7% storage. Dominion states that it generated 68.7 million megawatt-hours of energy and complied with a 20% renewable portfolio standard target in 2023. Dominion also provided data regarding the emissions of sulfur dioxide and nitrogen oxides from its facilities.

  • Electric utilities file bi-annual updates regarding efforts to secure funding under the federal Infrastructure Investment and Jobs Act and Inflation Reduction Act – SCC Case No. PUR-2022-00180

On November 3, 2022, the SCC published an order seeking comments regarding the federal Infrastructure Investment and Jobs Act. The Act, enacted in 2021, provides financial assistance to support electric utility investments in advanced generation, transmission, and distribution technologies. The SCC directed utilities to submit comments addressing potential “funding opportunities that may assist them in providing utility service in the Commonwealth, actions such utilities can take or have already taken to access such funding opportunities, including the status of any such funding applications, and Commission actions or proceedings that may assist or facilitate utilities’ access to these funding opportunities.”

After considering comments from utilities and interested parties, the SCC published an order directing bi-annual update filings on September 1 and March 1 each year. The order requires the utilities to provide updates on efforts to secure funding under the Infrastructure Investment and Jobs Act and the 2022 Inflation Reduction Act. Appalachian Power Company, Kentucky Utilities, and the Association of Electric Cooperatives filed updates on March 1. APCo reported that it received funding for grid resilience and hydroelectric maintenance projects and provided the status of pending grant applications. Dominion Energy filed its report on March 5. Dominion reported that it had been selected for awards related to electric vehicle charging and smart grid deployment. 

  • SCC hearing examiner recommends approval of Dominion grid transformation plan update – Case No. PUR-2023-00136

On August 1, 2023, Dominion filed a petition to adjust its grid transformation rider. The rate adjustment clause, designated “Rider GT,” allows Dominion to recover costs associated with grid transformation projects. Dominion’s petition seeks cost recovery for 18 new and previously approved grid transformation investments, including “hardening,” cyber security, and off-peak charging investments and various distributed energy integration measures. The General Assembly has designated such investments to be “in the public interest.” Dominion states that the adjusted rider “will incrementally increase the typical residential customer’s monthly bill, based on 1,000 kWh per month, by $2.95 compared to the current Rider GT.”

The SCC held an evidentiary hearing on February 27. On March 18, the hearing examiner assigned to this case filed his report and recommendation. The examiner recommended approval of Dominion’s requested revenue requirement, including cost overruns on certain projects. Dominion had requested to increase the cost cap on four previously approved projects by a total of approximately $6 million. The examiner, however, recommended that the SCC examine Dominion’s history of cost overruns. The examiner recommended that, for any future project cost overruns, Dominion should be required to provide an updated cost/benefit analysis. The examiner’s recommendations are advisory only to the Commission.

  • Solar advocates, utilities, and interested parties file additional comments regarding distributed interconnection matters – Case No. PUR-2022-00073

On May 24, 2023, the SCC opened a docket for the purpose of evaluating its current regulations governing the interconnection of distributed energy resources (“DERs”). DER interconnection is governed by Chapter 314 of Title 20 of the Virginia Administrative Code. DERs generally include solar and storage facilities with a rated capacity of 20 MW or less. The SCC’s Order for Comment asked interested parties to address several issues, including “the primary obstacles (e.g., sources of delay or cost) to the interconnection of DER on the distribution system” and whether there are “best practices” in place in other jurisdictions that the Commission should consider.

Several interested parties, including electric utilities, solar developers, and non-profit organizations, filed comments on August 1, 2023. The SCC also directed the Staff to conduct a working group to analyze these issues. The Working Group filed a report with recommendations on January 18. On February 21, the SCC published an additional order inviting comments.

Several interested parties filed comments on the Working Group Report on March 22. The solar industry comments urged the SCC to conduct an evidentiary hearing regarding certain technology standards required by Dominion. In its comments, Dominion took issue with several of the recommendations contained in the January 18 Working Group report. Dominion reiterated its support for the direct transfer trip (“DTT”) communications requirement for DER interconnections.

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