At Dominion wind hearings, continued disputes over ratepayer protections
Credit: Parties clash over proposed agreement to settle case | By Sarah Vogelsong | Virginia Mercury | May 20, 2022 | www.virginiamercury.com ~~
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After two and a half days of testimony in Richmond, consumer protection advocates continue to disagree with Dominion Energy over whether regulators should require further safeguards for ratepayers as the utility seeks approval for its plans to build a massive wind farm off the coast of Virginia Beach.
“There is no blank check for this project,” said Joseph Reid, an attorney from McGuireWoods who represented Dominion in the case before the State Corporation Commission, on Tuesday.
But Senior Assistant Attorney General Meade Browder told the SCC that the office’s Division of Consumer Counsel remains concerned that customers face significant risks from the Coastal Virginia Offshore Wind project.
“Our position is that approval should come with meaningful protections that mitigate the risk to ratepayers, who are currently set up to bear the financial risk if the CVOW project proves to be more costly to construct and operate than is projected or if the performance of the project does not meet the level projected by the company,” he said.
If built, CVOW will be the largest wind farm in the United States, producing 2.6 gigawatts of power – more than what is generated by the state’s nuclear units and its largest gas plant combined – from 176 turbines sunk into the Atlantic Ocean 27 miles off Virginia Beach.
The project is both a key component of Dominion’s plans to decarbonize its fleet by midcentury in line with the Virginia Clean Economy Act and, with an estimated price tag of $9.65 billion, the most expensive endeavor the utility has undertaken to date. If approved by regulators, the average residential customer, defined as someone who uses 1,000 kilowatts of power every month, would see their monthly bill initially rise by $1.45. SCC staff have estimated that figure could rise to $14.21 by the time the project enters operation in 2027.
Throughout this week’s hearings, Dominion argued that a negotiated agreement known as a stipulation between the utility, SCC staff, the Sierra Club and the Nansemond Indian Tribe provides sufficient protections for ratepayers.
Under that agreement, which is subject to regulatory approval, the project’s current price tag of $9.65 billion would be found to be “reasonable and prudent.” If costs exceeded that threshold, Dominion would have to go back to the commission for its approval to recover the excess.
Dominion would also agree to report any cost overruns or timeline delays within 30 days of becoming aware of them and to provide explanations for any shortfalls in the project’s expected performance.
But the Office of the Attorney General, Walmart, environmental and economic development nonprofit Appalachian Voices and advocacy group Clean Virginia contended that more concrete commitments are needed to ensure ratepayers are protected if plans go awry.
“We would love for everything that the company promises and that is being adopted in the stipulation to in fact occur. What we would like is for there to be additional protections put in place if material changes happen in the course of construction,” said Carrie Grundmann, an attorney for Walmart.
Most debated during this week’s hearings were proposals for a performance guarantee and for specific timelines Dominion would have to follow in seeking regulatory approval for potential cost overruns.
Under a performance guarantee, Dominion would be required to demonstrate that the wind farm was operating at a certain level, calculated using a three-year rolling average. If performance fell below that threshold, company shareholders would have to bear the costs of replacing shortfalls in the facility’s energy production.
Other proposals called for the imposition of a cost cap on the project, similar to one instituted by the SCC in its approval for the Virginia City Hybrid Energy Center in Wise County in 2008. Clean Virginia asked the SCC to require the use of an independent monitor.
Energy consultant Scott Norwood, testifying for the Office of the Attorney General, said Wednesday that provisions like performance guarantees and cost caps have been used to protect customers from the cost of wind projects in states like Texas, Louisiana, Arkansas and Oklahoma.
“These provisions have also been recognized by the utility owners of the projects,” he said. “They’re not so rare or uncommon that it has to be ordered by the commission. The companies have come in proposing protections.”
Dominion officials insisted the stipulation provides enough assurance to customers, and that in the case of a delay or overrun, the utility would bring details of the new circumstances to the SCC for its review. An “arbitrary” performance guarantee, Dominion Senior Vice President of Project Construction Mark Mitchell said Wednesday, “could put the company at risk.”
The stipulation has been “carefully crafted to preserve the commission’s discretion to deal with this in a manner as it sees fit,” attorney Reid said Wednesday.
Company officials and lawyers also repeatedly expressed confidence throughout the hearings that cost overruns and delays were unlikely. Mitchell described “thorough” and “conservative” approaches to construction planning and the incorporation of contingencies into the project schedule.
Vishwa Link, another McGuireWoods attorney representing Dominion, emphasized that “since 2007, the company has been successfully contracting, proposing, constructing and operating many large, new never-before-done-by-the-company generation projects.”
But Grundmann and others questioned the utility’s resistance to proposals for further guardrails.
“If your level of confidence as to your budgeting, estimating and timeline is so high, why have such opposition to additional customer protections?” she asked.
Mitchell replied: “I think we have adequate customer protections in the stipulation.”
As proceedings concluded midday Thursday, SCC Judge Judith Jagdmann asked all parties to file closing briefs by June 17. Among the questions she asked them to consider were what limits might exist on the commission’s legal authority to adopt consumer protections such as cost caps and performance guarantees in the case.
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