Dominion pushes back against SCC finding that two coal unit upgrades were imprudent

Coal fired units at Dominion Energy's Chesterfield Power Station would close by 2024 under the Clean Economy Act that passed the General Assembly last year. (Ryan M. Kelly/ For the Virginia Mercury)

A dissatisfied Dominion Energy is asking the State Corporation Commission to reconsider an earlier ruling that blocks the utility from passing on about $18 million in upgrade costs to customers.

The petition for reconsideration, filed Friday, relates to Dominion’s Rider E, an extra charge that the utility is allowed to add to customers’ bills to recoup the cost of investments it made to comply with new state and federal environmental regulations in 2015.

Dominion originally sought to recover about $302 million spent on upgrades at its Clover, Mt. Storm and Chesterfield plants to handle coal combustion residuals, more commonly known as coal ash. On Aug. 5 the State Corporation Commission approved the inclusion of most of those costs in Rider E but ruled that about $18 million in upgrades to two coal-fired units at Chesterfield known as units 3 and 4 had been neither “reasonable” nor “prudent” and therefore shouldn’t be passed on to customers, since it planned to retire or refit the units within five years.

State Corporation Commission staff have estimated that Rider E will add just under $2 to the monthly bills of a typical residential customer using 1,000 kilowatt-hours, but that “ball park” figure excluded the recovery of the contested costs.

In Virginia, costs that a utility cannot recover through either base rates or riders are carved out of shareholders’ profits.

Dominion’s request for reconsideration argues that the commission’s final order incorrectly focused on the prudence of the utility’s upgrades at Chesterfield rather than whether or not they were “necessary.” State law says the commission “shall approve” a rider petition submitted by a utility to cover environmental compliance costs “if it finds that such costs are necessary to comply with such environmental laws or regulations.”

Furthermore, the utility claims, the commission’s finding that Dominion acted imprudently in conducting expensive upgrades to two units that were subsequently retired “is against the great weight of the evidence.”

Dori Jaffe, a senior attorney with the Sierra Club, however, said that in the present case both the “necessary” and the “reasonable and prudent” standards were applicable to the commission’s decision-making. During the case’s proceedings, the Sierra Club contested Dominion’s recovery of costs related to all four of the Chesterfield units that it upgraded to comply with coal ash regulations.

“I think the commission’s order, at least with respect to units 3 and 4, weighed all that evidence and decided it wasn’t a prudent investment for them to have made at the time,” said Jaffe, who also emphasized that the utility had been given permission to recover “90 percent of the costs” it requested.

If Dominion’s petition for reconsideration is not granted, the utility will have the right to appeal the commission’s decision to the Virginia Supreme Court.