The State Corporation Commission
The State Corporation Commission regulates Virginia electric utilities. (Ned Oliver/ Virginia Mercury)

Plans for one of two controversial new natural gas plants planned to be built in Charles City County appear to be faltering, according to a letter sent by Virginia Natural Gas to state regulators Friday. 

In the filing by McGuireWoods attorney Lisa Crabtree, Virginia Natural Gas informed the State Corporation Commission that it would not meet three criteria set by regulators as a condition for their approval of a gas infrastructure expansion by the mandated Dec. 31 deadline. 

All three conditions are related to plans for the development of a 1,060 megawatt combined-cycle natural gas plant in Charles City. The project, known as C4GT, is being developed by Michigan-based Novi Energy to sell power into the regional grid. 

A second natural gas plant, Chickahominy Power Station, is also being planned by another independent developer, Balico, LLC, a mile away from the C4GT site.

While the commission closely vets plans for new generating facilities built by electric utilities — which are paid for by everyone in the utility’s territory — they give less scrutiny to projects developed by independent power producers like NOVI Energy and Balico, where financial risks are borne by project backers instead of ratepayers. In such cases, regulators focus primarily on whether the facility will have any “adverse effect” on electric reliability or be “otherwise contrary to the public interest.” These non-utility developers are “not required to establish that the Facility is required by the public convenience and necessity as a condition of approval,” as State Corporation Commission Hearing Examiner Ann Berkebile wrote in a report on C4GT in 2017.

An expansion plan submitted by Virginia Natural Gas to the State Corporation Commission to meet the needs of the planned C4GT natural gas plant and increase system capacity.

But while the company had little trouble getting approval from the State Corporation Commission for construction, securing a natural gas supply has proved a struggle. 

C4GT has sought to obtain its supply from Virginia Natural Gas, which proposed a $345 million suite of new pipeline sections, a new compressor station and other upgrades called the Header Improvement Project. As a publicly regulated utility with captive ratepayers, though, Virginia Natural Gas has to meet a higher bar in justifying why its customers should pay for projects.  

And despite assertions that the Header Improvement Project is needed to improve reliability as well as to provide gas to two other companies, Columbia Gas of Virginia and Dominion Energy subsidiary Virginia Power Services Energy, regulators have expressed skepticism. 

“The Project is not needed without C4GT,” the State Corporation Commission wrote on June 26 in a ruling that made its approval of the Header Improvement Project contingent on C4GT proving its financial viability. “Put simply,” the commissioners wrote later in their order, “if  C4GT is built, we find that the Project is needed. If C4GT is not built, the project is not needed.” 

Much of the commission’s concern stems from C4GT’s ongoing delays in securing financing. First approved by regulators in 2017 for two years, the project developers later asked for a two-year extension of their certificate because of declining investor interest. This spring, with the COVID-19 pandemic wreaking havoc on global markets, the company asked Virginia Natural Gas to push back the date when it would be required to close on its financing by six months. 

That request led State Corporation Commission staff to urge commissioners to either make their approval of the Header Improvement Project conditional on C4GT’s financial close or deny it altogether. 

The SCC opted for the former course, ruling that they would not approve the project until C4GT’s “financial close is scheduled, certain, and imminent,” the company would allow Virginia Natural Gas to make C4GT-related expenditures, and all agreements between the two were “in full force and effect.” The commission set a deadline for those assurances of Dec. 31. 

The Friday letter from Virginia Natural Gas notified the SCC “that the conditions precedent related to C4GT will not be satisfied on or before Dec. 31, 2020.” 

The utility also stated it plans to file a revised application for the Header Improvement Project within 90 days that does not include C4GT. 

Virginia Natural Gas spokesperson Rick DelaHaya did not respond to specific questions for this story, saying only that the company “provided notice to the Virginia State Corporation Commission of intentions to file an amended application for a Certificate of Public Convenience and Necessity for a revised project that reflects the best solution to meet the needs of VNG, Virginia Power Services Energy and Columbia Gas of Virginia.”