Virginia regulators approve offshore wind settlement

New settlement outlines responsibility for construction cost overruns

By: - December 15, 2022 6:11 pm

Turbines from Dominion Energy’s Coastal Virginia Offshore Wind project off Virginia Beach. (Sarah Vogelsong/Virginia Mercury)

Virginia utility regulators have accepted a settlement over ratepayer protections tied to Dominion Energy’s Coastal Virginia Offshore Wind Project.

The State Corporation Commission Thursday wrote in its approval that all parties had agreed the settlement “adequately protects the interests of consumers” or expressed no opposition to it.

The settlement was proposed by Dominion, the attorney general’s office, Walmart, nonprofit Appalachian Voices and the Sierra Club in October following claims from company president, chair and CEO Bob Blue that the $9.billion offshore wind project was “untenable” if regulators required a performance guarantee. Neither Clean Virginia, an advocacy group formed by Charlottesville millionaire Michael Bills to counter Dominion’s influence in Richmond, nor the Virginia Committee for Fair Utility Rates opposed the settlement.

The performance guarantee previously tied to the project’s approval mandated that if the wind farm didn’t produce 42% of the energy it was capable of generating, then the company, not ratepayers, would have to pay for replacement energy costs. The company, citing variables beyond its control such as the weather, asked the SCC to reconsider the guarantee, which it agreed to do.

Instead of the performance guarantee, the settlement requires regulators to review any shortcomings in energy production and then decide an appropriate way to handle those shortfalls.

Most significantly, the agreement outlines a cost-sharing system for any construction overruns. If costs exceed $10.3 billion, the company will pick up 50% of the tab and ratepayers the remainder. The company will foot 100% of any costs that further exceed that amount up to $13.7 billion, after which the commission will determine how costs should be recovered.

In its approval, the commission emphasized that the project is the largest in Dominion history in terms of both size and investment. 

“The magnitude of this project is so great that it will likely be the costliest project being undertaken by any regulated utility in the United States,” the commissioners wrote. “And the electricity produced by this project will be among the most expensive sources of power … in the entire United States.” 

Regulators further warned that if the project were abandoned, ratepayers would still be on the hook for costs incurred up to that point. Even if the project were abandoned at the end of 2023, Dominion could recoup an estimated $4 billion in costs, the commission wrote.

In a concurring opinion, Commissioner Judith Jadgmann, who is slated to retire Dec. 31, noted the project is “legislatively favored” and said the General Assembly is “uniquely positioned to align general fund appropriations or other funding for this project.”

“Such public policy determinations by our legislators would help spread the substantial costs of this project, which currently fall squarely on most of Dominion’s customers, among all in the Commonwealth who stand to benefit from the clean energy and economic expansion benefits associated with this project that the Commission is required by statute to consider,” Jagdman wrote.

Dominion applauded the approval Thursday. 

“Coastal Virginia Offshore Wind has many benefits for our customers,” said spokesperson Jeremy Slayton in an email. “It is fuel free, emissions free, diversifies our energy mix and is a transformative economic development opportunity for Hampton Roads and Virginia.”

Will Cleveland of the Southern Environmental Law Center, who represented Appalachian Voices in the case, said it is “critical as Virginia proceeds on its clean energy transition to be mindful of costs and protect ratepayers.”

Clean Virginia Energy Policy Manager Laura Gonzalez said in a statement that “as Virginia moves to develop the next phase of offshore wind, it is imperative that Virginia lawmakers consider alternatives to the utility ownership model that maximize cost savings for ratepayers and environmental benefits to Virginia overall.” 

The approval comes as Dominion has applied to update the fee charged to customers to cover project costs. A hearing for the proposed update is scheduled for May 10. The Bureau of Ocean Energy Management also announced Monday the release of the project’s draft environmental impact statement, which will open up for a 60-day comment period starting Friday.

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Charlie Paullin
Charlie Paullin

Charles Paullin covers energy and environment for the Mercury. He previously worked for Northern Virginia Daily in the Northern Shenandoah Valley and for the New Britain Herald in central Connecticut. An Alexandria native, Charles graduated from the University of Hartford initially wanting to cover sports. He's received several Virginia Press Association awards for his coverage of crime, local government and state politics. Catch him in nature experiencing all the outdoors has to offer, and contact him at [email protected]

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