Virginia Energy Regulatory Updates (May 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: 

  • Environmental advocates file testimony regarding Dominion proposal to increase its environmental rate rider and undertake new capital projects at coal facility – 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 per month bill increase for a residential customer using 1,000 kWh.

On May 24, the Sierra Club filed expert witness testimony recommending that the Commission disallow Dominion’s proposed capital investments. Sierra Club cites the declining utilization and cost effectiveness of the Mt. Storm facility. The witness also criticizes Dominion’s practice of designating Mt. Storm as a “must run” as opposed to an “economic” resource within PJM. An “economic” unit will only be dispatched by PJM if it is the least-cost option available to the market, whereas a must-run unit operates regardless of market prices. If the PJM energy prices fall below the unit’s “operational cost, a must-run unit will not turn off and can incur losses that a utility often seeks to recover from ratepayers.” In Case No. PUR-2018-00195, the SCC denied cost recovery for similar investments at Dominion’s Chesterfield coal facility. In that case, the SCC found Dominion’s decision to continue investments at the Chesterfield facility to be imprudent, considering the declining economics of the units and expected carbon regulations.

The SCC will hold an evidentiary hearing on the petition on July 13.

  • Interested parties respond to Dominion request to suspend RGGI cost recovery rider – Case No. PUR-2022-00070

On May 5, Dominion filed a petition to suspend its rate adjustment clause (“RAC” or “rider”) that recovers costs associated with Virginia’s participation in the Regional Greenhouse Gas Initiative (“RGGI”). RGGI requires carbon-emitting sources to purchase and surrender an allowance for each ton of carbon dioxide emissions. Dominion states that suspension of the RAC “will immediately reduce the typical residential customer bill by approximately $2.39 per month, with greater reductions for higher energy consumers in the residential, as well as commercial and industrial classes.” Dominion states that its petition “is driven by the anticipated withdrawal of the Commonwealth from the RGGI program and the interests of its customers in reducing RAC-related charges.” Dominion proposes to recover approximately $178 million in unrecovered RGGI costs through its base rates. 

On May 19, the Commission Staff and interested parties filed responses. Appalachian Voices filed a response calling Dominion’s proposal to repeal the RGGI RAC “political gamesmanship.” The response asserts that Dominion’s proposal to move RGGI cost recovery to base rates, which would not have an immediate impact on customer bills, “proves that [Dominion] could comply (and always could have complied) with the emissions reduction program without raising customer costs at all.” The Commission Staff’s response did not oppose the petition, but requested more details about how Dominion proposes to charge customers for the unrecovered costs.

  • SCC schedules hearing regarding Dominion request to increase fuel recovery rider – Case No. PUR-2022-00064

On May 5, Dominion 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 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.

The filing 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%.”

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. Dominion recommends that the SCC approve a three-year recovery proposal, which would result in a monthly bill increase of 12.2% for a customer using 1,000 kWh. The SCC will hold an evidentiary hearing on July 6. Interested parties may intervene in the case on or before June 16.

  • SCC hearing examiner recommends approval of new Dominion rate adjustment clause to recover costs associated with nuclear relicensing costs – Case No. PUR-2021-00229 

On October 5, Dominion filed a petition seeking SCC approval of a new rate adjustment clause (“RAC”) related to four of its nuclear units. The petition states that the proposed RAC is intended to recover the costs associated with extending the licenses for four nuclear units at the Surry and North Anna facilities. Dominion also proposes to undertake various capital improvement projects at the units. Dominion states that nuclear energy represents 33% of the company’s total generation portfolio and 90% of its carbon-free generation. Virginia Code Section 56-585.1 A 6 allows Dominion and Appalachian Power to request approval to recover generation facility costs through RACs as opposed to through their base rates. Dominion estimates total project spending of $3.9 billion, $1.2 billion of which would be recovered between 2022 and 2024. Dominion states that the rider, if approved, would increase the monthly bill for a residential customer using 1,000 kWh by $2.11. 

No party opposed Dominion’s proposed investments. On April 22, Dominion, the Commission Staff, and the Attorney General’s office filed a joint stipulation proposing to resolve all issues in the case. On May 20, the hearing examiner filed a report recommending approval of the stipulation and RAC. The hearing examiner also found that “these significant baseload nuclear facilities may become more important to the transmission system as Dominion and the Commonwealth consider planning and operational challenges associated with the retirement of dispatchable natural gas and coal-fired generation facilities scheduled to occur by 2045 under the VCEA.”

  • Appalachian Power files 2022 Integrated Resource Plan – Case No. PUR-2022-00051

On April 29, Appalachian Power Company filed its latest integrated resource plan (“IRP”). An IRP shows the utility’s plan to meet forecasted demand over the next 15 years. APCo projects its overall retail sales to remain relatively constant between 2022 and 2036, while the residential class is projected to decline slightly. APCo states that its plan “strives to maintain optionality in meeting APCo’s resource obligations in order for the Company to take advantage of market opportunities and technological advancements.” The IRP shows that the utility intends to “continue the operation of, and ongoing investment in, its existing fleet of generation resources including the base-load coal units at Amos and Mountaineer, the natural gas combined-cycle (Dresden) facility, [and] combustion turbine (Ceredo) units.” The IRP also states that APCo “will continue to evaluate the benefits and viability of the continued operation of its two gas-steam units at Clinch River.”

Pursuant to Va. Code Section 56-599, the SCC must review APCo’s IRP and determine whether it is reasonable and in the public interest. The SCC will hold an evidentiary hearing on October 25. Interested parties can intervene in this case on or before August 5. 

  • SCC denies Shenandoah Valley Electric Cooperative’s request to implement demand charges for residential and church service customers – 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 proposed to recover 90% of the requested 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. 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 reverse its decision to deny the proposed demand charge. On April 8, SUN-VA filed a response in opposition to SVEC’s petition. On May 4, the SCC published an order affirming its final order and denying SVEC’s request for reconsideration.

Renewable energy, efficiency, and new energy infrastructure:

  • SCC holds evidentiary hearing regarding Dominion offshore wind proposal; respondents, citing risks, urge SCC to require consumer protections – Case No. PUR-2021-00142

On November 5, Dominion filed an application for approval of a 2.6 gigawatt wind facility (the Coastal Virginia Offshore Wind or “CVOW project”), which would 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. Dominion states that the project costs are “well within this cost governor established by the Commonwealth.” Dominion and the SCC Staff project that the CVOW rider, if approved, would increase a typical residential customer bill by $14.21 by 2027.

The SCC held an evidentiary hearing between May 17 and May 19. While no party opposed approval of the application, several intervenors raised concerns regarding the costs and risks borne by Dominion’s ratepayers. The Attorney General’s Office, Walmart, Appalachian Voices and Clean Virginia urged the Commission to require additional consumer protections should the Commission approve the CVOW project. In particular, the Attorney General’s expert testimony urged the Commission to impose a “performance guarantee” and a capital cost cap. A performance guarantee would protect consumers in the event the wind facility does not generate as much electricity as forecasted. Dominion projects that the CVOW project will achieve a capacity factor of 42% when operational. Clean Virginia’s expert witness recommended that the Commission require an independent monitor to oversee the construction phase of the project. The Virginia Department of Energy (“DOE”) filed a letter noting that the cost effectiveness of the project will be determined by its capacity factor. DOE recommended that the Commission “include additional reporting requirements and a performance guarantee in the event that it approves the project.”

The SCC must enter a final order on Dominion’s application within nine months, or by August 5.

  • SCC holds evidentiary hearing regarding Dominion energy efficiency filing – Case No. PUR-2021-00247 

On December 14, Dominion filed an application to update and continue its cost recovery rider 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 bill increase for a residential customer using 1,000 per month.

The SCC held an evidentiary hearing on the filing on May 12. No party opposed approval of Dominion’s application. Several parties, however, raised concerns about Dominion’s proposal to recover the costs of a voltage optimization program through its DSM rider. Environmental advocates also urged the Commission to require Dominion to measure progress towards the VCEA savings targets based on “net” as opposed to “gross” savings. Measuring gross savings would include energy savings not attributable to Dominion’s energy efficiency programs. Environmental advocates also urged the Commission to authorize a new administrative process that would allow Dominion to modify its energy efficiency programs in certain circumstances without seeking SCC approval.

  • SCC opens docket to consider changes to interconnection regulations for distributed energy facilities – Case No. PUR-2022-00073

Based on the statutory timeline, the SCC must enter a final order on or before August 14.

On May 24, 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 asks 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.

Interested parties may file comments on or before August 1.