Virginia Energy Regulatory Updates (September 2022)

Below is our firm’s summary of notable energy regulatory activity at the Virginia State Corporation Commission (“SCC” or “Commission”) during September, 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. The following is presented for informational purposes only and does not constitute legal advice.

Rate cases, oversight, and resource planning: 

  • SCC approves Dominion fuel rate increase; denies recommendations from consumer and environmental advocates – Case No. PUR-2022-00064

On May 5, Dominion filed an application to increase its fuel recovery rate. Dominion states that this increase is necessary to allow it to recover projected fuel expenses as well as an “under recovery” balance that has accrued. 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. See Va. Code § 56-249.6. Dominion’s application 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%.”

The SCC approved the fuel rate increase on September 16. In its order, the SCC approved a stipulation signed by Dominion and the SCC Staff. Under the terms of the stipulation, Dominion would be allowed to recover the $1 billion deferral balance over a three-year period. Dominion also voluntarily agreed to waive 50% of the financing costs necessary to carry the deferral balance. This means Dominion will waive recovery of approximately $27.5 million of carrying charges. Both the Attorney General’s Office and Appalachian Voices, citing past precedent, had urged the SCC to deny recovery of 100% of the carrying charges.

The order will result in a monthly bill increase of $14.93 for a typical residential customer using 1,000 kWh of electricity. Because the SCC approved a fuel rate increase on an interim basis effective July 1, customers will not experience an additional increase.

  • Appalachian Power Company, citing higher coal prices, files request for 16% fuel rate increase – Case No. PUR-2022-00139

On September 15, Appalachian Power Company (“APCo”) 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. APCo cites, among other factors for the rate increase, higher natural gas prices and increased demand for coal from European buyers.  

The application states that “the Company proposes to increase the current fuel factor to 4.319 cents/kWh effective November 2, 2022 through October 31, 2023 (the “fuel year”), which is an annual net increase in the revenue of approximately $279 million.” The application also states that in order “[t]o mitigate the impact of this request, the Company proposes to recover its deferred fuel balance as of October 31, 2022 over two fuel years.” APCo proposes to recover financing charges associated with the deferred fuel balance through a separate rate rider. The SCC has not yet established a procedural schedule for this case.

  • Environmental advocates file expert testimony criticizing Appalachian Power’s 2022 Integrated Resource Plan – Case No. PUR-2022-00051

On April 29, Appalachian Power Company (“APCo”) filed its 2022 Integrated Resource Plan (“IRP”). In Virginia, an IRP is a document representing a utility’s plan to comply with its load obligations over the next 15 years. APCo states that its plan “is not a firm commitment to specific resource additions or other courses of action over the period of the plan, as the future is uncertain” but that the plan “provides the basis for a short-term course of action and strives to maintain optionality in meeting APCo’s resource obligations in order for the Company to take advantage of market opportunities and technological advancements.” APCo states that its 2022 IRP includes updated modeling of commodity prices, distribution and transmission constraints, and renewable energy costs.

On September 2, environmental advocates Appalachian Voices and the Sierra Club filed expert witness testimony criticizing APCo’s filing. Appalachian Voices filed testimony from a former SCC staff member criticizing APCo’s process for dispatching its coal units. The witness also claims that APCo’s capacity market price forecasts are unreasonably high, thereby overstating the value of APCo’s existing coal and gas units. The Sierra Club filed expert testimony criticizing APCo’s plan to continue running two West Virginia coal facilities – the Amos and Mountaineer units – until 2040. The SCC will hold an evidentiary hearing on the IRP on October 25.

  • Dominion files 2022 update to its Integrated Resource Plan; updated plan incorporates new offshore wind facility and exit from RGGI – Case No. PUR-2022-00147

On September 1, Dominion Energy filed an update to its most recent Integrated Resource Plan. In Virginia, an IRP is a document representing a utility’s plan to comply with its load obligations over the next 15 years. Dominion and Appalachian Power are required to file IRPs every three years. The utilities must file updates to their IRP in the interim years when there are significant changes to the most recent complete IRP.

Dominion states that the 2022 update is “an interim update meant for use as a long-term planning document based on a “snapshot in time” of current technologies, market information, and projections, and should be viewed in that context, not as a decision to pursue any specific project or action.” Dominion also notes that the updated IRP “is being filed amidst significant disruptions in global commodity markets and supply chains across the economy, as well as significant federal tax policy changes.” Dominion’s updated IRP includes five alternative planning scenarios, including a least-cost plan and a low-carbon plan. Each alternative scenario includes 2,600 MW of offshore wind resources recently approved by the SCC. Each alternative plan also assumes that Virginia exits the Regional Greenhouse Gas Initiative before January 1, 2023.

Renewable energy, efficiency, and new energy infrastructure:

  • Dominion reaffirms objections to performance requirement in offshore wind case; states that the project is “at a crossroads” – 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 total lifetime revenue requirement for the project would be over $21 billion, including a shareholder rate of return of approximately $7.2 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. If the CVOW project fails to achieve this performance metric, based on a three-year rolling average, the utility must provide credits to its customers for replacement power and renewable energy certificate costs. 

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. The parties generally opposed Dominion’s legal arguments, noting that the SCC has approved similar performance standards in the past.

Dominion affirmed its legal arguments in a September 29 filing. Dominion suggested that the performance standard, as currently ordered, could result in total penalties of $500 million over the life of the project. Dominion repeated its intention to cancel the CVOW project if the performance standard is not modified, stating that as of now the project “is at a crossroads.” There is no deadline for the SCC to decide this issue.

  • SCC Staff files Staff Report regarding potential changes to interconnection regulations for distributed energy facilities – Case No. PUR-2022-00073

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.

Several interested parties, including electric utilities, solar developers, and non-profit organizations, filed comments on August 1. A September 19 Staff Report identifies the major common issues identified by the parties, including concerns about cost apportionment, delays in the utility study process, and technology requirements for facility upgrades. The report states that “[g]iven the large number of issues raised by the parties, Staff is unsure that all issues can be addressed simultaneously within the same docket.” The report suggests that the Commission could either make selected changes to existing regulations, open new regulatory docket(s) to address specific issues, and/or create new stakeholder working groups.

  • SCC Staff provides recommendations related to REC reporting and certification issues – Case No. PUR-2022-00045

On April 14, the SCC established a new docket to allow interested parties to comment on various issues related to its business rules (“Business Rules”) for renewable energy certificates (“RECs”) registered with PJM’s Generation Attribute Tracking System (“GATS”). Among other issues, the SCC’s scheduling order requested parties to comment on the certification process and requirements for “low-income qualifying” solar facilities. The VCEA requires Dominion to meet a portion of its annual RPS requirements with distributed energy resources, including “low-income qualifying projects,” to the extent they are available. The SCC’s order also invited interested parties to comment on any other issues related to the certification of RECs to be used for VCEA compliance.

On June 8, several parties, including Dominion, Direct Energy, and solar advocates, filed initial comments. On July 26, the SCC published an order authorizing additional comments. On September 22, the Commission Staff filed a report, including recommendations for how to validate low-income projects. Interested parties are permitted to file comments regarding the Staff report, or regarding any other matter, on or before October 20.

 Competitive market activity

  • Competitive supply advocates object to continued operation of Dominion renewable energy tariff – Case No. PUR-2022-00101

On July 1 Dominion filed an update regarding its 100% renewable energy tariff option, Rider Total Renewable Generation (“Rider TRG”). The SCC approved Rider TRG in July 2020. Customers who participate in the voluntary tariff are allocated generation from several solar, hydroelectric, and biomass facilities. According to Dominion, participating customers “pay an amount over standard service that is based on the prevailing market value of retail renewable energy.” This represents a premium of 2.91%, or approximately $3.98 per month for a residential customer using 1,000 kWh.

Dominion states that, as of June 15, 2022, there were 3,481 residential customers and 82 commercial customers enrolled in Rider TRG. Dominion estimates that the current TRG Portfolio will be able to meet the 100% renewable energy requirements of approximately 12,000 customers, including residential, commercial, and industrial customers.

On September 28, a group of competitive energy advocates filed comments objecting to continued operation of Rider TRG. In its comments, the Retail Advancement League (“REAL”) argued that the Rider TRG rate no longer represents the market value for renewable energy. REAL requested an order from the SCC that Rider TRG should be closed to future customers. The group also argued that the tariff should not prevent customers from purchasing generation from competitive suppliers. Under current law, if a utility offers an SCC-approved renewable energy tariff, most customers lose their rights to shop for electricity. Dominion may respond to the REAL comments on or before November 2.