Virginia Energy Regulatory Updates (November 2021)

Below is our firm’s summary of notable energy regulatory activity at the Virginia State Corporation Commission (“SCC” or “Commission”) during November, 2021. During the last month, among other activity, the SCC approved a historic settlement agreement in Dominion Energy Virginia’s (“Dominion”) 2021 rate case; Dominion requested regulatory approval to construct a 2,600 MW offshore wind facility; and Appalachian Power (“APCo”) requested SCC approval to implement new energy efficiency programs.

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.

To sign up for weekly regulatory updates delivered via email, please send us a note at [email protected].

Rate cases, oversight, and resource planning:

• SCC approves settlement agreement to resolve Dominion triennial review rate case – Case No. PUR-2021-00058

On March 31, Dominion filed its 2021 triennial review of base rates and earnings. This triennial review consists of an evaluation of Dominion’s earnings during 2017, 2018, 2019, and 2020. (Beginning in 2024, Dominion’s triennial review will be conducted every three years.) In a triennial review, the SCC must evaluate Dominion’s reported earnings during these years to determine whether the utility earned above or below its authorized rate of return on common equity (“ROE”) of 9.2%. Virginia law allows Dominion to earn up to 70 basis points (0.7%) above its authorized return without issuing any refunds to customers.

On October 18, Dominion filed a proposed stipulation that, if accepted by the Commission, would resolve all disputed issues in the rate case. The proposed settlement agreement was signed by the SCC Staff and most of the intervening parties. The agreement calls for a total of $330 million in customer refunds; a $50 million going-forward rate cut; a small increase to Dominion’s current ROE; and accelerated recovery of approximately $900 million in costs associated with coal units that were retired early.

The Commission held a hearing on October 25 for the purpose of reviewing the stipulation. On November 18, the Commission published a final order approving the stipulation. In its order, the Commission stated that there was an evidentiary basis to support the terms of the settlement. The going-forward rate reduction will take effect within 60 days, while the customer refunds will appear as credits on customer bills beginning in 2022.

• Environmental advocates file expert witness testimony opposing continued cost recovery for Dominion’s Wise County coal facility – Case No. PUR-2021-00114

On June 8, 2021, Dominion filed an application to update the rate rider, or rate adjustment clause (“RAC”), for the Virginia City coal plant in Wise County. The RAC recovers both capital and operations costs for the coal plant. The filings propose an adjustment, or “true up,” and would reset the RAC revenue requirement going forward. Under Dominion’s proposal the RAC rate will increase a residential customer’s monthly bill by $0.09, based on 1,000 kWh usage. Dominion also requests a bonus ROE of 1.0%. Virginia law authorizes Dominion to receive a bonus ROE for the first 12 years of the plant’s service life. The facility began commercial operation in 2012. (In 2013, the General Assembly eliminated ROE bonuses for most types of generation facilities.)

On November 22, the Sierra Club filed expert witness testimony urging the SCC to deny future cost recovery for the coal facility. Sierra Club’s expert witness recommends that the Commission “disallow future capital spending, totaling approximately $25.3 million, and future fixed O&M expenses, given that the data show anticipated future net losses.” The witness also argues that Dominion’s plan for future capital investments at the coal plant “ignores the fact that the unit has, and is projected to continue to have, negative value to the Company’s ratepayers.” The Sierra Club cited an analysis produced by Dominion showing that the Wise County facility will lose between $357 million and $483 million over the next ten years.

An evidentiary hearing on the application will be held on December 15.

Renewable energy, efficiency, and new energy infrastructure:

• Dominion files application for approval of 2,600 MW offshore wind facility – 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 complex formula to determine whether offshore wind costs will receive this presumption of prudence. The projected costs of 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.”

Dominion proposes to recover the project costs through a new rate adjustment clause specific for this facility. In its application, Dominion states that the monthly bill increase for a residential customer using 1,000 kWh per month would be $1.45. In a separate press release, however, Dominion stated that the facility would result in a $4 monthly bill increase for a residential customer using 1,000 kWh per month.

The SCC has not yet established a procedural schedule for this case. 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 Staff and respondents file direct testimony regarding Dominion 2021 RPS Development Plan – Case No. PUR-2021-00146

On September 15, Dominion filed a petition requesting approval of numerous new clean energy resources. Dominion’s petition requests approval to construct and operate 661 MW of utility-scale solar resources and 70 MW of battery storage, as well as smaller-scale solar facilities. The utility requests approval to recover the costs of the new facilities through a rate adjustment clause designated “Rider CE.” If approved as filed, Rider CE would recover approximately $71 million from customers during the first rate year, increasing the monthly bill for a residential customer using 1,000 kWh by $1.13. Dominion also requests approval to enter into numerous power purchase agreements (“PPAs”) with solar and storage owners. Under such PPAs, Dominion would purchase the electrical output, but would not own and operate the energy facilities.

Dominion’s filing also includes an updated renewable portfolio standard (“RPS”) development plan. The Virginia RPS requires Dominion and Appalachian Power to meet an increasing percentage of their electricity sales from clean energy resources. The law also states that the utilities must procure a certain percentage of their energy requirements from facilities located in Virginia. In its filing, Dominion states that “[the] 2021 RPS Development Plan will (i) support RPS Program compliance; (ii) support carbon dioxide (“CO2”) reductions in the Commonwealth; (iii) promote new renewable energy generation and energy storage resources in the Commonwealth, and the associated economic development; and (iv) result in fuel savings.”

On November 16, respondents and the SCC Staff filed direct testimony. Respondent Appalachian Voices filed testimony criticizing Dominion for, among other things, failing to conduct long-term, least-cost VCEA planning. Solar advocates also filed direct testimony, which supported approval of the proposed solar projects, but recommended improvements to Dominion’s process for evaluating and procuring resources in the future. The Staff filed testimony from multiple witnesses who evaluated Dominion’s proposed solar additions, its RPS Development Plan, and the utility’s commodity and REC price forecasts.

An evidentiary hearing will be held on December 14.

• Appalachian Power files request for approval to purchase 5 MW solar facility – Case No. PUR-2021-00066

On November 18, Appalachian Power Company (“APCo” or “Company”) filed a petition for approval to purchase a 4.875 MW solar facility located in Amherst County, Virginia. APCo’s filing requests a “prudency determination” pursuant to Va. Code § 56-585.1:4 H. This Code section allows Dominion and APCo to request SCC approval before purchasing renewable energy projects or entering into power purchase agreements.

APCo states that the solar facility would be operational by 2023 and will help the Company comply with its mandatory renewable portfolio standard targets. APCo also states that the Virginia Clean Economy Act requires the Company to propose at least 200 MW of new solar projects, located in Virginia, by 2023. Because the facility’s capacity would be less than 5 MW (AC), APCo asserts that the project will be exempt from some of the Department of Environmental Quality’s permitting requirements. APCo states that, provided that cost recovery is also approved by the West Virginia commission, “the increase to retail rates in Virginia would only be 0.01%.”

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

• Solar advocates challenge electric cooperative’s rate design proposals – 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.

The parties filed post-hearing briefs on November 12. Among other things, SUN-VA’s brief argued that it would be unreasonable for the Cooperative to recover 90% of the proposed revenue increase through fixed charges. SUN-VA argued that this approach is both regressive and contrary to Virginia’s energy policy because it means customers have less control over their energy bills. SUN-VA argued that this approach to cost recovery would discourage future investments in energy efficiency and rooftop solar, and “would penalize those customers who have already made such investments.” Frederick County, a respondent in the case, filed a brief also expressing concerns about the Cooperative’s proposed increase to its BCC. The County noted that  that “shifting more of their electric bills from a volumetric charge to a fixed charge” results in “consumers [having] less ability to control their electricity costs.” The Cooperative filed a post-hearing brief supporting its rate design proposals and opposing SUN-VA’s expert witness testimony.

There is no statutory deadline for the Commission to enter a final order in this case.

• Interested parties file comments regarding five electric vehicle charging tariffs proposed by Dominion – Case No. PUR-2021-000151

On July 23, Dominion filed an application for approval of five new electric vehicle (“EV”) charging tariffs. Three of the tariffs are intended to be used by residential and commercial customers who charge EVs at their home or business. The other two tariffs would establish rates charged by Dominion and utility-owned public charging facilities. Dominion states that it “does not currently own or operate any charging stations available to the public, but the Company intends to provide this service in the future to fill any identified gaps in charging availability, such as on secondary highways or in disadvantaged communities.” Dominion’s application states that “as of December 31, 2020, there were approximately 25,500 EVs registered in Virginia, approximately 76% of which were registered in the Company’s service territory.” Dominion’s application also notes that the General Assembly has declared that investments in EV infrastructure are “in the public interest.”

On November 4, several interested parties filed comments on Dominion’s. The parties were generally supportive of the proposal, provided that Dominion makes certain changes to the tariffs. The Sierra Club and National Resources Defense Council, in a joint filing, requested that the Commission hold an evidentiary hearing to review the tariffs.

• Environmental advocate files notice of appeal regarding SCC decision on Dominion’s RGGI cost recovery rider – Case No. PUR-2020-00169

On November 9, 2020, Dominion filed a petition to establish a new rate adjustment clause to recover the costs associated with participation in 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. 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. Dominion estimates that it will need to spend approximately $168 million to purchase allowances from the RGGI auction in 2021.

The Commission held an evidentiary hearing on April 28. Environmental and consumer advocate Appalachian Voices argued that Dominion’s RGGI allowance procurement strategy is fundamentally flawed, and could result in Dominion significantly over-procuring RGGI allowances. Appalachian Voices argued that Dominion should have performed least-cost planning when developing its RGGI plan, including  an analysis of alternative scenarios such as retiring underperforming coal plants. Both Appalachian Voices and the Attorney General’s Office criticized Dominion’s proposal to apply its general rate of return of 9.2% to allowances that are banked, including excess allowances that are not needed for a particular year.

The Commission approved Dominion’s application on August 4. On August 24, Appalachian Voices filed a petition for reconsideration or clarification of the final order, noting that the Commission did not explicitly require Dominion to conduct least-cost planning as part of its RGGI filings. Appalachian Voices argued that “[w]ithout least-cost planning, the Commission cannot know whether these costs are truly ‘necessary,’” as the statute requires. After the Commission declined to modify its final order, Appalachian Voices filed a notice of appeal to the Virginia Supreme Court on November 29. Appeals of Commission decisions are “of right,” meaning the Virginia Supreme Court must hear the case.

• Appalachian Power files petition for approval of new efficiency programs and to continue cost recovery rider for previously approved programs – Case No. PUR-2021-00236

On November 30, Appalachian Power Company (“APCo”) 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. This increase would result in a $0.34 per month increase for a residential customer using 1,000 kilowatt-hours. The SCC has not yet established a procedural schedule for this case.