For the first time, regulators reject Dominion Energy planning document, invite utility to refile

December 7, 2018 2:35 pm
Dominion Energy's downtown Richmond building. (Ned Oliver/Virginia Mercury)

Dominion Energy, Virginia’s largest electric utility and a major U.S. energy company, is headquartered in Richmond. (Ned Oliver/Virginia Mercury)

The State Corporation Commission, which regulates Virginia utilities, has shot down for the first time ever a long-range plan filed yearly by Dominion Energy and intended to outline how the company will meet its electric service obligations.

“The commission finds, based on the record of this proceeding and applicable statutes, that the company has failed to establish that its 2018 IRP, as currently filed, is reasonable and in the public interest,” the commission wrote in an order filed today. “The commission further finds that the company shall correct and refile its 2018 IRP subject to the provisions of this order.”

The commission said Dominion failed to comply with a previous order that required the company to include detailed plans for implementing the mandates of the sweeping new grid modernization law the influential utility pushed through the General Assembly last year, which allows it to use hundreds of millions of dollars in overearnings on a suite of eligible projects instead of issuing customer refunds.

The planning was supposed to include a “least-cost” option, but Dominion’s least-cost plan included a pricey offshore wind demonstration project that the commission has gnashed its teeth about but grudgingly approved.  The wind project and other resources included “were not selected by the company’s modeling on a least-cost basis, but rather were forced into each of the company’s alternative plans.”

That modeling left out “highly-efficient” natural gas generation, the commission said.

“Forcing in higher-cost resources and excluding other lower-cost resources results in a more expensive least-cost plan,” the order says.

The plan also failed to include modeling for some of the legislative mandates, including nearly $870 million in energy-efficiency programs, battery storage and expensive undergrounding of distribution and transmission lines, among others.

“By omitting certain mandates, the IRP as filed does not provide the analysis and back-up data needed to assess the cost of these mandates for commission review and for statutorily required reporting to the General Assembly,” the order says.

For nearly a decade, the Dominion has filed the nonbinding plans with the commission yearly, laying out various scenarios for meeting electric demand over the next 15 years. Environmental and consumer groups have long charged that Dominion inflates its load forecast — the amount of electricity it will need to deliver — in order to justify building new electric infrastructure on which it earns a substantial return.

The time around, after putting Dominion on notice last year that it needed to fix its load forecasting, which is perennially found to be exaggerated when compared with actual demand growth, the commission apparently put its foot down.

“Notably, the company’s peak load and sales forecasts are higher than those of PJM, the regional transmission entity of which the company is a member, and the entity that sets the company’s capacity obligation within the PJM capacity market,” the order says, noting that PJM projected a 15-year growth rate of .9 percent for the “Dominion Zone.”

The company’s forecast was 1.4 percent.

“The record further reflects that the load forecasts contained in the company’s past IRPs have been consistently overstated, particularly in years since 2012, with high growth expectations despite generally flat actual results each year,” the commission said, adding that it has “considerable doubt regarding the accuracy and reasonableness of the company’s load forecast for use to predict future energy and peak load requirements.”

The commission ordered Dominion, rather than using its internal forecast, to switch to PJM’s.

Though the IRP is a nonbinding planning document, accuracy is important because “legally-mandated costs are likely to be borne by customers in one form or another, so it is essential that an IRP provide the public and policymakers with projected costs for such mandates that are as accurate as possible,” the commission wrote.

Ken Schrad, a spokesman for the commission, said the SCC has in past reviews included instructions for future IRP filings but has never before directed Dominion to refile the plan.

Will Cleveland, an attorney with the Southern Environmental Law Center who has argued utility regulation cases before the commission, called the order a “strong statement” that “shows a level of scrutiny that is crucial for Virginia as it moves forward with energy plans that truly serve the public interest, both economically and environmentally.

“In rejecting the company’s inflated forecast of electricity demand, in particular, the order reaffirms what SELC has argued for years about Dominion’s flawed planning process and calls into question the need for proposed projects like the Atlantic Coast Pipeline,” Cleveland said.

Dominion was also dinged by the commission for using higher capacity factors — the measure of how much electricity a facility generates on average compared to its total rated “nameplate” capacity after taking into account weather, night-time and other variables — for its solar facilities than on-the-ground evidence indicates they can achieve.

“While the company models an approximately 26 percent capacity factor for future solar (photovoltaic) resources, the company’s resources have experienced actual capacity factors of approximately 20 percent on average over the past five years,” says the order, which directs Dominion to cut its solar capacity factor projections to 23 percent.

“In reaching this decision, the commission carefully considered and weighed all of the evidence regarding the causes of the actual solar capacity factors and evidence supporting technological efficiency improvements of solar resources over time.”

A Dominion spokesman did not immediately respond to a request for comment on the order.

“By acknowledging Dominion’s refusal to accurately forecast Virginia’s electricity needs, the State Corporation Commission has taken an important step in protecting ratepayers from rampant cost overruns associated with the high quantity of unneeded fracked-gas pipelines and plants that Dominion said it needed to meet its inflated load forecasts,” said Kate Addleson, director of the Sierra Club’s Virginia chapter.

Addleson noted a footnote in the SCC order, which directed Dominion to “include a reasonable estimate of fuel transportation costs, including interruptible transportation, if applicable, associated with all natural gas generation facilities in addition to the fuel commodity costs” as the company continues to push construction of its contentious, 600-mile Atlantic Coast Pipeline.

“The State Corporation Commission also acted in the best interest of Virginians by requiring Dominion to include fuel transportation costs for fossil fuel infrastructure in their modeling, including those associated with the Atlantic Coast Pipeline,” she said.

This article has been updated to add additional reaction to the SCC’s order.

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Robert Zullo
Robert Zullo

Robert spent 13 years as a reporter and editor at weekly and daily newspapers and was previously editor of the Virginia Mercury. He was a staff writer and managing editor at Worrall Community Newspapers in Union, N.J., before spending five years in south Louisiana covering hurricanes, oil spills and Good Friday crawfish boils as a reporter and city editor for the The Courier and the Daily Comet newspapers in Houma and Thibodaux. He covered Richmond city hall for the Richmond Times-Dispatch from 2012 to 2013 and worked as a general assignment and city hall reporter for the Pittsburgh Post-Gazette from 2013 to 2016. He returned to Richmond in 2016 to cover energy, environment and transportation for the Richmond Times-Dispatch. Contact him at [email protected]