Virginia Energy Regulatory Updates (November 2022)

Below is our firm’s summary of notable energy regulatory activity at the Virginia State Corporation Commission (“SCC” or “Commission”) during November, 2022. 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:

  • Consumer advocates object to APCo base rate increase recommended by SCC hearing examiner – Case No. PUR-2020-00015

On November 17, an SCC hearing examiner published a report recommending a $28.4 million base rate increase for Appalachian Power (“APCo”) customers. This base rate increase, if approved by the commissioners, would result in an increase of $8.55 per month for a residential customer using 1,000 kWh. Separately, APCo is seeking a fuel rate increase that would result in a $20 per month increase for a typical residential customer. See Case No. PUR-2022-00139.

The examiner issued his report as part of a remand proceeding to implement a directive from the Virginia Supreme Court. The Court, in a 5-2 opinion, held that the SCC made errors in its final order in APCo’s 2020 triennial review case. In particular, the Court held that APCo should have been permitted to record approximately $88 million of costs associated with coal facilities that retired early as an expense during the triennial review period. Had APCo been allowed to record the $88 million in this way, the utility’s “earnings” during the review period would have been low enough to trigger a rate increase pursuant to the ratemaking statute. The Court’s opinion directed the SCC to conduct further proceedings consistent with its ruling.

The examiner adopted a proposal by the SCC Staff that is intended to allow APCo to receive the base rate increase it would have received but for the SCC’s error. The Virginia Poverty Law Center (“VPLC”) filed objections to the examiner’s proposal to allow APCo to implement a new rider to recover so-called “uncollected revenues.” VPLC argued that the new rider would effectively increase the price on kilowatt-hours already purchased by customers, constituting unlawful retroactive ratemaking. The Attorney General’s Office also argued that the examiner failed to consider evidence of a new depreciation schedule for one of APCo’s largest generation facilities, the Amos coal facility in West Virginia. This facility was previously expected to be retired in 2032, but APCo now projects that it will run until 2040. With a longer service life, the Attorney General argues, the depreciation expenses incorporated in base rates should be lower. According to the Attorney General, “this is a major issue for this case, and it [represents] approximately 40% of APCo’s $65 million rate increase proposal.” There is no deadline for the SCC to adopt a final order.

Renewable energy, efficiency, and new energy infrastructure:

  • SCC holds oral argument regarding potential settlement in offshore wind case – Case No. PUR-2021-00142

On November 5, 2021, 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 SCC approved the project in its August 5 final order. The order approved the project subject to certain consumer protections, including new reporting requirements during the construction phase and a capacity factor “performance standard.” The performance standard is designed to ensure that Dominion’s ratepayers are held harmless in the event the facility does not achieve the 42% capacity factor projected by Dominion. Dominion filed a petition for reconsideration of the performance standard on August 22. In its petition, Dominion calls the performance standard “unlawful” and “untenable.” On September 20, the Attorney General’s Office, Appalachian Voices, Clean Virginia, and Walmart filed pleadings opposing Dominion’s petition.

On October 28, the Attorney General’s Office filed a proposed stipulation signed by the Attorney General, Dominion and several respondents. The agreement would define how the CVOW project’s performance would be measured. The agreement also includes capital cost sharing provisions, meaning that Dominion shareholders would be required to absorb a portion of cost overruns above a certain amount. Under the agreement, Dominion shareholders would absorb 50% of project costs between $10.3 billion and $11.3 billion and 100% of any expenses between $11.3 billion and $13.7 billion. The filing states that the signatories believe the stipulation to be “in the public interest” and “if adopted on an expedited basis, its terms will allow the CVOW Project’s development to continue on schedule.” The SCC held a hearing to review the proposal on November 21. There is no deadline for the SCC to reach a decision.

  • Dominion files request to increase rider for pending offshore wind facility – Case No. PUR-2022-00187

As part of its final order approving Dominion’s proposed offshore wind project in Case No. PUR-2021-00142, the SCC approved a new rate adjustment clause, Rider OSW, to recover construction costs over the next year. Rider OSW has been in effect since September 1 and is projected to recover $78 million from customers during its first year. On November 1, Dominion filed an application to update Rider OSW to increase the revenue requirement from $78 million to $271 million for the next rate year. Dominion states that the projected capital costs for the CVOW project have not changed.

Meanwhile, the SCC is still considering a settlement agreement proposed by the Attorney General, Dominion, and several respondents. The agreement would define how the CVOW project’s performance would be measured. The agreement also includes capital cost sharing provisions, meaning that Dominion shareholders would be required to absorb a portion of cost overruns above a certain amount. There is no deadline for the SCC to rule on the proposed settlement agreement.

  • Dominion files report on “pathways for economic viability” for Wise County coal plant – Case No. PUR-2021-00114

On February 8, 2022, the SCC published a final order approving an increase to the rate rider for Dominion’s coal plant in Wise County, Virginia. As part of the final order, the SCC also approved a  stipulation signed by Dominion, the Sierra Club, and the Commission Staff. Under the stipulation, Dominion agreed to conduct an “analysis of a possible pathway towards economic viability” for the facility within nine months, including options for “repurposing” the site for solar and/or storage resources. Dominion also agreed to “forego life-extension related spending at [the facility] … until the Company has completed and filed the report.” During the case, a Sierra Club expert witness 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.  

On November 9, Dominion filed a report describing potential “Pathways for Economic Viability” at the coal plant. The report states that “[Dominion] steadfastly supports continued operation of the facility,” citing the plant’s economic impact in Southwest Virginia. The report also claims that the Wise County facility currently benefits the environment by burning waste coal material called “gob.” Dominion identifies several potential energy projects – including solar, battery storage, or small modular nuclear reactors – that could be developed on the site.

  • SCC schedules hearing regarding Dominion’s 2022 VCEA RPS Development Plan; utility requests approval of new solar and storage projects – Case No. PUR-2022-00124

On October 14, Dominion filed a petition requesting approval of numerous new clean energy resources. 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 15.7 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.

The Virginia RPS requires Dominion and Appalachian Power to meet an increasing percentage of their electricity sales from clean energy resources. Both utilities must file updated VCEA plans each year. The SCC will hold an evidentiary hearing on January 30.

  • Appalachian Power files update on previously approved efficiency programs – Case No. PUR-2021-00236

On November 30, Appalachian Power Company (“APCo”) filed a report regarding previously approved energy efficiency programs, including residential and commercial measures. APCo reported spending approximately $15.6 million between September 2021 and August 2022. The report also provides estimated kilowatt-hour savings that are attributable to the approved measures. APCo is permitted to recover the costs of approved efficiency programs through a rate adjustment clause that is updated annually.