After Dominion’s big overhaul, how much oversight do regulators retain over utility spending?
It’s no secret that the State Corporation Commission didn’t like this year’s big energy bill, the Grid Transformation and Security Act.
SCC staff testified against SB 966 in committee, and their objections played a major role in amendments removing the “double dip” provision that would have let Dominion Energy Virginia get paid twice for infrastructure projects.
Since passage of the bill, the SCC has raised questions about the constitutionality of the law’s provisions favoring in-state renewable energy, and staff have issued broadsides about the costs of the legislation.
Now the commission is mulling the question of how much authority it still has to reject Dominion’s proposals for spending under the bill. Dominion has filed for approval of a solar power purchase agreement (case number PUR-2018-00135) and two offshore wind test turbines it plans to erect in federal waters 24 nautical miles out from Virginia Beach (PUR-2018-00121).
The utility has also requested permission to spend a billion dollars on grid upgrades and smart meters (PUR-2018-00100).
In a Sept. 12 order, the SCC asked participants in the solar and offshore wind cases to brief them on legal issues arising from the legislation.
The SCC has focused in on two new sections of state code. One contained language making it “in the public interest” for a utility to buy, build or purchase the output of up to 5,000 megawatts of Virginia-based wind or solar by Jan. 1, 2024.
The commission noted that part of the provision says such a facility “is in the public interest, and the commission shall so find if required to make a finding regarding whether such construction or purchase is in the public interest.”
The other new code section gives a utility the right to petition the SCC at any time for a “prudency determination” for construction or purchase of a solar or wind project located in Virginia or off its coast, or for the purchase of the output of such a project if developed by someone else.
Together these sections give Dominion a good deal of latitude, but they don’t actually force the SCC to approve a project it thinks is a bad deal for ratepayers. In other words, wind and solar may be in the public interest, but that doesn’t mean every wind and solar project has to be approved.
The SCC asked for briefs on more than a half dozen questions, including what specific elements a utility must prove for the commission to determine a project is prudent and what makes a “prudency determination” different from a “public interest” finding and which one takes precedence.
It also asked whether facilities deemed in the public interest can be determined not to be prudent; whether the commission can consider whether anyone actually needs the energy; and whether costs are reasonable; among others.
Even if the commission decides it has latitude in deciding which wind and solar projects to approve, that doesn’t necessarily spell disaster for the two projects at issue. The SCC could still decide they meet the standard for prudency and approve them.
Oral argument on the issues is scheduled for Oct. 4.
Should approval of smart meters depend on how the meters will be used?
The SCC is also mulling over its authority in the grid modernization docket.
One day after it asked lawyers in the solar and offshore wind cases to weigh in on the meaning of prudency, it issued a similar order asking for input on what the new law means by “reasonable and prudent” in judging spending under the grid modernization provisions. (Yes, the grid-modernization section of the law insists that spending be “reasonable” in addition to “prudent,” begging the question of whether spending can be prudent but not reasonable. Perhaps thankfully, the SCC order does not pursue it.)
The SCC’s questions to the lawyers show an interest in one especially important point: Dominion wants to spend hundreds of millions of dollars of customer money on smart meters, without using them smartly.
Smart meters enable time-of-use rates and customer control over energy use, and make it easier to incorporate distributed generation like rooftop solar. None of these are in Dominion’s plan. Is it reasonable and prudent for Dominion to install the meters anyway, just because they are one of the categories of spending that the law allows?
Or. as the SCC put it:
“If the evidence demonstrates that advanced metering infrastructure enables time-of-use (also known as real-time) rates and that such (and potentially other) rate designs advance the stated purposes of the statute, i.e., they accommodate or facilitate the integration of customer-owned renewable electric generation resources and/or promote energy efficiency and conservation, may the commission consider the inclusion or absence of such rate designs in determining whether a plan and its projected costs are reasonable and prudent?”
Reading the tea leaves at the SCC: Staff comments on Dominion’s IRP
The SCC’s question about smart meters surely indicates how the commissioners feel about the matter: They’d like to reject spending on smart meters, at least until Dominion is ready to use them smartly. If the SCC concludes it has the authority to reject this part of Dominion’s proposal as not “reasonable and prudent,” it seems likely to do so.
It is harder to know where the SCC might land on the solar and offshore wind spending. The SCC’s staff, at least, are skeptical of Dominion’s plans to build lots of new solar generation. In response to Dominion’s 2018 Integrated Resource Plan, commission staff questioned whether Dominion was going to need any new electric generation at all, given the flattening out of demand.
But if it does, according to the testimony of Gregory Abbott, associate deputy director of the public utility division, Dominion ought to consider a new combined-cycle (baseload) gas plant, not solar. (Combined-cycle gas was the one generating source Dominion almost completely ruled out.)
Abbott criticized Dominion’s presentation of the case for solar, though he took note of the technology’s dramatic cost declines. Instead of seeing that as a reason to invest, however, he suggested it would be better to wait for further cost declines, or at least leave the construction of solar to third-party developers who can provide solar power more cheaply than the utility can.
Remarkably, he also suggested Dominion offer rebates to customers who install solar, urging that Dominion’s spending under the grid transformation law “is designed specifically to handle these [distributed energy resources].”
Abbott also seemed supportive of Dominion’s venture into offshore wind. The only offshore wind energy in the IRP is the 12 MW demonstration project known as Coastal Virginia Offshore Wind, or CVOW, but, as Abbott noted, “the company indicated that it will pursue a much larger roll-out of utility-scale offshore wind, beginning in 2024, if the demonstration project shows it to be economic.”
This suggests staff are inclined to support Dominion’s spending on the CVOW project, but for Abbott, it was one more reason Dominion should not invest in solar. He concluded, “If the demonstration project proves that utility-scale offshore wind is economic compared to solar, then it may make sense to get the results of the CVOW demonstration project before deploying a large amount of solar.”
Editor’s note: The views of our opinion contributors are their own and do not necessarily reflect those of the Virginia Mercury.
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