SCC considers ‘prudence’ of Dominion’s 2015 Chesterfield investments

Dominion Energy's coal-fired Chesterfield Power Station. (Ryan Kelly)

Dominion Energy faced pointed questions from a State Corporation Commission judge Tuesday over whether the utility should have spent several hundred million dollars in 2015 to retrofit two of its coal-fired units to comply with new state and federal environmental regulations.

“Dominion moved forward that spring on retrofitting these plants knowing that [under] the Clean Power Plan, these plants were going to be the first on the list for the executioner,” said Judge Mark Christie. “[These units] were not going to be viable under that scenario, so why spend money on a retrofit?”

Christie posed the questions during a hearing on whether Dominion should be allowed to recoup $302 million it spent beginning in 2015 to comply with Environmental Protection Agency regulations governing the disposal of coal combustion residuals, commonly known as coal ash, and the discharge of water into coal ash ponds. Those funds went toward the construction of landfills, sedimentation ponds and water treatment facilities, as well as retrofits, at Dominion’s Chesterfield, Clover and Mt. Storm power stations.

The company is seeking to recover those costs through a rate adjustment clause known as Rider E that would add an estimated $1.62 to the monthly bill of a residential customer that uses 1,000 kilowatt hours.

The Sierra Club and the Virginia Office of the Attorney General’s Division of Consumer Counsel have opposed Dominion’s petition, arguing that the utility was “imprudent” when it chose to retrofit Units 3 and 4 of the Chesterfield Power Station as part of the $247 million Chesterfield Integrated Ash Project.

Scott Norwood, an energy consultant hired by the consumer counsel, called the retrofits “a bad decision” that “didn’t make sense.”

Units 3 and 4, he testified, “were very old, they weren’t running much, and certainly after the fall of 2015, the market price dropped and they weren’t expected to be profitable. … It didn’t make sense to double down and invest that level of money.”

In 2015, when Dominion decided to retrofit Units 3 and 4, they were 63 and 55 years old, respectively. Three years later, even after the election of Donald Trump effectively killed the Obama-era Clean Power Plan, the utility placed both in “cold reserve,” meaning that they were no longer in operation but could be restarted if necessary. This past March, it announced that it planned to permanently retire them.

Dominion has defended its decision to retrofit the units rather than close them, place them in cold reserve or simply run them until the EPA’s compliance deadline on the grounds that it was the best course available in 2015 given prevailing knowledge.

“Reasonableness and prudence has to be judged based on the information that the utility had at the time the decision was made,” said Dominion lawyer Joseph Reid.

Attorney Elaine Ryan, also representing the utility, testified that Dominion’s analysis found that the “units were continuing to be customer-beneficial to run.”

The Division of Consumer Counsel and Sierra Club, however, complained that Dominion has failed to be transparent about its decision-making process. The utility says that it based its decision on three analyses conducted in March, May and December 2015 but failed to provide SCC staff, the Division of Consumer Counsel and the Sierra Club with anything more than summaries of those analyses, despite repeated requests.

Senior Assistant Attorney General C. Meade Browder, Jr. testified that without information about the assumptions and data underlying these analyses, it was “impossible” for the Division of Consumer Counsel to evaluate whether Dominion’s decision had been reasonable.

Jeremy Fisher, a technical adviser for the Sierra Club, argued that the evidence showed “a lack of intensive review on the part of the company.”

“I have never been involved in a utility case in which a decision on a multimillion-dollar retrofit or any other decision was made on the basis of such scant evidence,” he said.

The hearing will continue Wednesday morning.

CORRECTION: This story has been updated to correct the Rider E impact on a typical residential customer. Since the original filing, this impact has been revised down from $2.15 per month to $1.62 per month.