Last Friday, acting against their own better judgment, members of the State Corporation Commission approved Dominion Energy Virginia’s $300 million offshore wind pilot project even though they candidly admitted it “would not be deemed prudent [under this Commission’s] long history of utility regulation or under any common application of the term.”
The SCC approved the deal to build the 12-megawatt Coastal Virginia Offshore Wind Project 27 miles off the coast of Virginia Beach even though the electricity produced by its two wind turbines would cost 9.3 times more than a similar wind project in Massachusetts, and 13.8 times more than the same amount of electricity generated by a new solar power plant.
That would be reason enough to nix the deal. But it gets worse. Much worse.
“In its factual findings, the Commission determined that the company’s proposal puts ‘essentially all’ of the risk of the project, including cost overruns, production and performance failures, on Dominion’s customers,” according to an SCC press release.
Dominion claims it couldn’t find any other companies to bid on this $300 million, no-risk project. The utility must not have been looking very hard.
The SCC also acknowledged that there was no guarantee the offshore wind project would produce any economic benefits for Dominion ratepayers. “The economic benefits specific [to the project] are speculative, whereas the risks and excessive costs are definite and will be borne by Dominion’s customers,” the commission noted in its 20-page final order.
The final order also stated that if the pilot project is “successful” (success in this case meaning that it generates renewable electricity that will cost 14 times more than what could be produced by a solar facility), building out a full-scale wind farm off the Virginia coast would cost Dominion’s customers an additional $1.8 billion, which would amount to an enormous rate hike for overpriced power.
It’s the SCC’s job to protect Dominion customers from a rotten deal that dumps “essentially all” of the risks on the same people who will be forced to pay much higher prices per kilowatt hour for the electricity generated by these offshore wind turbines. Yet knowing full well what a bad deal this is, the SCC inexplicably went ahead and approved it anyway.
The commission cited the Grid Transformation & Security Act of 2018, which requires public utilities to develop 5,000 megawatts of renewable energy from “one or more solar or wind generation facilities located in the Commonwealth or off the Commonwealth’s Atlantic shoreline” prior to January 1, 2024. An added provision states that projects “utilizing energy derived from offshore wind with an aggregate capacity of not more than 16 megawatts are in the public interest … and in determining whether to approve such facility, the Commission shall liberally construe the provisions of this title.”
However, the law also states that the “Commission shall so find if required to make a finding regarding whether such construction or purchase is in the public interest.”
In this case, the commission clearly determined that this project was not in the public interest, laying blame for its faulty decision at the feet of the General Assembly. “The commission’s standard analysis of prudency as a purely factual matter must be subordinated in large measure to the public policy established by the General Assembly,” the final order stated.
The SCC claims that the law required it to override the results of its own fact-finding and prudency determination and approve a project that “is not currently expected to demonstrate potential economic, fuel diversity, emissions reductions, or other advantages over other renewable alternatives,” but whose costs per kilowatt hour “are significantly more expensive than other renewable and non-renewable resources.”
But does the law require approval of a particular offshore wind project, no matter how flawed, simply because the legislature deemed offshore wind energy in general to be in the public interest?
Does the law require the utility to proceed without competitive bidding, or to agree that Orsted, the Danish project developer, would not have to assume any of the financial risks involved?
Does the law require that Dominion customers get stuck with all of the costs and all of the risks, even after Dominion admitted “it does not have detailed information on construction costs for other recent offshore wind projects to confirm the reasonableness of the CVOW Project”?
Does the law require that the project go forward even when, according to Dominion’s own analysis, “it appears unlikely that the cost of offshore wind facilities will become competitive with solar or onshore wind options in the foreseeable future”—and won’t be competitive for the next 25 years “under any scenario”?
To quote Mr. Bumble from Oliver Twist: “If the law supposes that, the law is an ass.”
More likely, the SCC commissioners are using the law to shield themselves from well-deserved criticism for shirking their duty to protect Dominion’s captive ratepayers from such cockamamie schemes. The SCC blew it on this one, big time.
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