Below is our firm’s summary of notable energy regulatory activity at the Virginia State Corporation Commission (“SCC” or “Commission”) during November, 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:
- SCC approves APCo rate increase; denies utility proposal to eliminate fixed charges for low-income customers – 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 requested an annual base rate increase of $212 million. The utility also requested a higher rate of return on common equity (“ROE”). APCo asserted 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 claimed that it earned a total return of only 5.39% during the 2020-2022 review period. The $212 million rate increase, if approved, would have increased the monthly bill of a typical residential customer by 15.9%. The utility also proposed to waive its monthly basic customer charge, currently $7.96, for certain low-income customers.
APCo, the SCC Staff and most other parties to the case agreed to proposed stipulation agreement. Under the stipulation, filed on August 22, APCo would receive a smaller annual base rate increase of $127 million. APCo would also receive an ROE of 9.5%, applicable to base rate earnings and rate adjustment clauses. The stipulation also confirmed that Percentage of Income Payment Program customers would be eligible for the low-income customer charge exemption.
No party opposed the stipulation, and the hearing examiner assigned to this case recommended approval in his September 14 report and recommendation. The SCC published a final order on November 30. In its final order, the SCC approved most of the stipulation’s terms. The SCC, however, declined to approve APCo’s proposal to exempt certain low-income customers from paying the basic customer charge. Under the statute, starting in 2024, APCo will have biennial instead of triennial reviews of its rates and terms and conditions of service.
- SCC holds evidentiary hearing regarding Dominion 2023 biennial review – Case No. PUR-2023-00101
On July 3, Dominion Energy Virginia (“Dominion”) filed an application for a biennial review of its rates and terms and conditions of service. The application was filed pursuant to Va. Code § 56-585.1, which was amended by the General Assembly in 2023. The amendments to the statute changed the schedule for rate reviews from a triennial to a biennial basis. The legislation also required Dominion to move at least $350 million of costs that are currently recovered through riders to its base rates. Dominion states that it complied with this requirement by moving “approximately $352 million in annual revenue requirement from Rider R (Bear Garden), Rider S (Virginia City), and Rider W (Warren County) into base rates.” Dominion also states that the elimination of these riders resulted in a reduction of approximately $6.75 to the typical residential customer’s bill as of July 1, 2023 (based on 1,000 kWh usage per month).
As part of the rate case, the SCC will review Dominion’s earnings during 2021 and 2022 to determine whether Dominion earned above or below its authorized rate of return. The SCC will also evaluate whether going forward rate changes are necessary. The legislation dictated that Dominion’s rate of return on common equity (“ROE”) shall be set a 9.7% as part of the 2023 biennial review. Dominion’s current authorized ROE is 9.35%.
Dominion, the SCC Staff, the Attorney General, and several other parties agreed to a proposed settlement agreement, which was filed on November 14. Under the terms of the proposed stipulation, Dominion’s base rates would not be reduced, but Dominion would issue a one-time $15 million rate credit. Dominion estimates that the rate credit would equate to about $2.25 for a residential customer using 1,000 kWh per month. The SCC is not required to approve the settlement. The SCC held a hearing on November 28. Based on the timeline in the statute, the SCC must publish a final order within eight months of the application, or by March 3, 2024.
- SCC authorizes Dominion to “securitize” outstanding fuel costs; Dominion may issue bonds, with a 7.25-year term, to finance deferred fuel balance – Case No. PUR-2023-00112
On July 3, Dominion Energy Virginia (“Dominion”) filed a request to finance its accumulated fuel costs by issuing fuel cost bonds. Dominion projects that its current unrecovered fuel balance is approximately $1.27 billion. Dominion proposes to utilize a special purpose entity in order to issue bonds to finance the unrecovered fuel balance as of June 30, 2023. Dominion states that “the proceeds from these bonds would be used to satisfy the unrecovered fuel balance and reduce the near-term impact to customers from paying these costs over a shorter period of time.” Dominion also states that its unrecovered fuel balance “continues to be substantial, largely due to significant marketplace commodity price increases during the prior fuel period.”
Several parties and the SCC Staff filed expert witness testimony on August 9. The Attorney General’s expert witness testified that, based on elevated interest rates and bond yields, the potential benefits of securitization “do not appear to justify” approving the plan. The witness noted that, under Dominion’s proposal, customers would have to pay several hundred million in extra financing costs in order to finance the unrecovered fuel balance over ten years. The Staff’s accounting witness, Carol Myers, also filed testimony identifying the “pros” and “cons” to Dominion and customers associated with securitizing the unrecovered fuel debt.
The SCC published a financing order on November 3. The order authorizes Dominion to establish a special purpose entity to issue fuel bonds with a term of 7.25 years. Prior to the bond issuance, however, Dominion must certify to the Commission that the financing will provide net present value benefits to customers based on interest rates in effect at that time.
Renewable energy, efficiency, and new energy infrastructure:
- SCC schedules hearing regarding Dominion request to increase offshore wind rider – Case No. PUR-2023-00195
On August 5, 2022, the SCC approved Dominion’s request to construct a 2,600 MW wind facility off the coast of Virginia. The final order also approved a new rate adjustment clause, designated Rider OSW, to recover initial development costs. On November 1, 2023, Dominion filed an application to increase the Rider OSW revenue requirement for the next rate year from $271 million to $486 million. Dominion states that the higher revenue requirement will result in a monthly bill increase of $3.89 for a residential customer using 1,000 kWh per month. Dominion states that it expects to begin onshore and offshore construction in the first quarter of 2024. In its application, Dominion also states that its estimate for the capital costs of the project remains approximately $9.8 billion.
The revised rate, if approved, will be effective for the rate year extending from September 1, 2024, to August 31, 2025. The SCC published a procedural schedule for this case on November 21. The SCC will hold an evidentiary hearing on the application on May 8. Interested parties may intervene in the case on or before February 2.
- Solar advocates challenge hearing examiner’s ruling authorizing Dominion to implement interconnection standards for small generators – Case No. PUR-2023-00069
On May 2, the SCC published an order initiating a review of its existing regulations governing the interconnection of small electric generators and storage facilities. The order directs the SCC’s Division of Public Utility Regulation to solicit comments from interested parties and provide recommendations for changes to the regulations. On September 15, 2023, Dominion filed a motion requesting interim authority to require certain technology installations at net energy metering facilities. In a separate proceeding, Case No. PUR-2023-00097, the SCC granted a request from the solar industry to block Dominion from implementing certain technology requirements while the interconnection regulations are under review.
In its September 15 motion, Dominion acknowledges the Commission’s directive in Case No. PUR-2023-00097. The, motion, however, requests interim authority to “(1) continue to require either a fiber optic or cellular-based direct transfer trip (“DTT”) communication system, at the customer’s election, when one of two criteria are met…and (2) require installation of a Distributed Generation Panel (“DG Panel”) under certain conditions…” A group of solar companies filed a response in opposition to Dominion’s motion on September 28. The solar advocates call Dominion’s motion “premature” and without credible support. The Commission held an oral argument on the motion on October 18. On November 6, the hearing examiner assigned to this case issued a ruling granting Dominion’s request. The ruling, however, permits customers to challenge Dominion’s requirement of DTT and/or a DG panel.
On November 16, the solar advocates filed a motion to certify the hearing examiner’s ruling to the Commission. The SCC’s rules allow parties to request certification of material issues for resolution by the full Commission. The solar advocates assert that the hearing examiner’s ruling is “unprecedented” in that it effectively imposes new interconnection standards without evidentiary support. The motion requests a stay of the ruling while the appeal is pending.
- SCC schedules hearing regarding rate increase to Dominion’s “Rider U” – Case No. PUR-2023-00172
On October 3, Dominion filed an application to update its rate adjustment clause that recovers undergrounding costs (designated “Rider U”). Rider U recovers costs associated with Dominion’s Strategic Undergrounding Program (“SUP”). Dominion states that Phase Seven of its SUP is designed to underground 383 miles of distribution lines at a capital cost of $258 million. Dominion is permitted to recover these costs through a separate rate rider pursuant to Va. Code § 56-585.1(A)(6). The application, if approved, would increase the bill of a residential customer using 1,000 kilowatt hours per month by approximately $2.18 as compared to current rates.
The SCC will hold an evidentiary hearing on April 17.