SCC updates from the week of Sept 23rd, 2019

Electric cases

(1) Hearing transcript posted regarding Dominion’s request for 17% increase in its allowed profit level – Case No. PUR-2019-00050

On September 10 and 11, the SCC held an evidentiary hearing regarding Dominion’s request to increase its rate of return on common equity (“ROE”). Dominion wants to increase its current ROE (i.e., the allowed shareholder profit level) by 17%, from the current 9.2% to 10.75%. The SCC Staff called Dominion’s proposed ROE excessive, finding that current market conditions support a return of 8.6%. The SCC Staff calculated that the 155 basis points increase requested by Dominion would result in a $147 million increase to Dominion’s total revenue requirement (including both base rates and riders). The Attorney General’s expert witness testified that Dominion’s required return should be between 7.6% and 8.8%. 36 members of the Virginia General Assembly filed a letter supporting the testimony filed by the Attorney General’s expert witness.

The hearing transcript is now available on the online docket for this case. The parties will file post-hearing briefs on October 18. The SCC must enter a final order on or before November 30, 2019.

(2) SCC Staff files testimony regarding Dominion’s request for approval of solar power purchase agreement – Case No. PUR-2019-00133

Dominion is requesting SCC approval to enter into a PPA with a third-party generator to purchase the output of a 20 MW solar facility in Westmoreland County. Dominion’s application notes that the General Assembly, pursuant to the 2018 Grid Transformation and Security Act, found that it is “in the public interest” for utilities to construct or purchase up to 5,000 MW of new solar and wind generation by 2028. Dominion states that it will recover the costs of the PPA through its base rates and fuel clause. The Commission has previously expressed its preference for Dominion to enter into PPAs for renewable energy as opposed to building and owning generation. (See Case No. PUR-2018-00135).

 On September 24, the SCC Staff filed testimony stating that the evidence submitted by Dominion would support a finding of prudence. The Staff found, among other things, that the PPA would support the Commonwealth’s goal of having purchase or construct at least 5,000 MW of new wind and solar generation by 2028. The Staff also found that the solar purchase could result in fuel cost savings and may help the Commonwealth comply with the Regional Greenhouse Gas Initiative emissions limitations. A hearing on the application will be held on October 8.

 (3) Dominion reaffirms its objections to the SCC’s disallowance of expenditures at retired coal plants – Case No. PUR-2018-00195

 

In late 2018, Dominion applied for SCC approval for a RAC to recover the costs for new coal ash ponds and treatment facilities. On August 5, the SCC entered a Final Order approving most of the request, but disallowing $18.4 million of investments made at Chesterfield Units 3 and 4. These coal units are now retired and are not being used to serve customers. The Commission noted that Dominion decided to make these investments in June of 2015, recently after the Clean Power Plan carbon regulation was announced. Therefore, the Commission found, it was not reasonable to make continued investments in units that Dominion should have known would soon be retired. 

 In its decision, the SCC relied in part on Va. Code § 56-585.1 D. This statute provides that the SCC has the authority to determine the “reasonableness and prudence” of any cost sought to be recovered pursuant to a proceeding brought under Va. Code § 56-585.1, including environmental RAC proceedings. On August 23, Dominion filed a Petition for Reconsideration of this disallowance. Dominion claims that the SCC’s decision “is inconsistent with the historic application of any prudence standard and otherwise contrary to the principle of reasonable discretion being afforded to utility decision-making.”

 On September 17, Sierra Club and the Attorney General’s Division of Consumer Counsel filed responses in opposition to Dominion’s Petition. Both Sierra Club and the Attorney General provided support for the legality and prudence of the SCC’s decision. On September 24, Dominion filed a response to the Attorney General and Sierra Club arguing that the SCC did not have the authority under to disallow the disputed costs under § 56-585.1 D. Dominion also noted that, in every case where the SCC has relied on § 56-585.1 D to rule against Dominion’s expenditures, “the General Assembly has promptly amended relevant statutes to limit the scope of Subsection D.” If the SCC affirms its final order, Dominion may appeal the decision to the Virginia Supreme Court. Regardless of whether Dominion prevails, all of Dominion’s attorneys’ fees and litigation expenses in this case (including costs associated with an appeal) will be paid for by Dominion’s ratepayers.

  

(4) SCC Staff recommends rejection of Dominion’s proposal to market low-quality RECs – Case No. PUR-2019-00081

 Dominion is requesting SCC approval to offer a new, lower-cost renewable energy credit (“REC”) purchase option to its customers. Under the proposed rate schedule, designated Rider REC, customers could purchase lower-quality RECs to match up to 100% of their energy usage by paying a premium of 0.10 cents/kWh. The RECs may be associated with any “renewable energy” resource, as that term is defined in Va. Code § 56-576. The new REC rate schedule would allow Dominion to sell RECs “without the requirement of meeting certain Green-e certification requirements, such as criteria related to the age or length of time a renewable generation source has been in service.” There does not appear to be any vintage requirement for the RECs of the associated generation facilities.

 One public commenter characterized Rider REC as “the dregs of the renewable energy category, the stuff that isn’t good enough for [Dominion’s existing REC tariff].” The regional chapter of the Solar Energy Industries Association filed a letter arguing that Rider REC would not support the development of any new renewable energy resources and cautioned that customers might mistakenly believe that, by paying the Rider REC premium, they would be doing something good for the environment.

 On September 24, the SCC Staff filed a report stating that that it “does not recommend that the Commission approve Dominion's proposed Rider REC as it is currently designed.” The Staff noted that, based on the proposal, customers could unknowingly purchase “RECs from sources that are decades old, and potentially more than a century old [and that] customers could end up paying what would constitute an excessive price.” Staff recommended, if the SCC is inclined to approved Rider REC, that Dominion should be required to include “[a] disclaimer clearly stating the RECs purchased under the tariff may come from sources anywhere within the continental U.S. with a vintage that could potentially date back to the year 1900. In addition, this disclaimer should provide a list of the expected generation sources of the RECs customers would be purchasing such as biomass, land-fill gas, etc.” (emphasis original). There is no deadline for the SCC to enter a final order.

 (5) SCC hearing examiner recommends approval of Dominion’s proposed market-based rate schedule – PUR-2018-00192

 On September 25, a hearing examiner recommended approval of Dominion’s request for approval of a revised market-based rate (“MBR”) tariff. The MBR tariff is designed to allow customers the option to buy energy based on PJM wholesale market prices. Dominion says the revised tariff would be an attractive alternative to purchasing energy from a competitive service provider (“CSP”). Dominion states that the revised MBR tariff contains several improvements over the existing MBR tariff, approved in 2016, that will allow more customers to participate. The new tariff also contains features that could encourage customers to reduce energy usage during peak hours.

 Dominion and the Commission Staff entered into a partial settlement regarding disputed issues in the case. Microsoft and Direct Energy, however, did not sign onto this stipulation. Microsoft and Direct Energy challenged several aspects of the proposed tariff, including the minimum charge. Direct Energy argued that the MBR is not actually a “tariff,” since the rate option does not provide any set rates. The hearing examiner’s report and recommendation includes findings on several of the disputed issues and recommends approval of the tariff. Regarding the minimum charge, the hearing examiner recommended that the minimum charges imposed by Dominion should only recover the costs of distribution facilities constructed to serve new customers. Parties may file comments on our before October 16. 

 (6) SCC sets procedural schedule regarding Appalachian Power’s broadband pilot program – Case No. PUR-2019-00145

 On September 6, Appalachian Power (“APCo”) filed a petition requesting permission to provide broadband service in Grayson County, Virginia. 2019 legislation, codified in Va. Code § 56-585.1:9, authorizes APCo to offer broadband services in areas without a broadband provider. APCo provides two different scenarios, with annual costs between $1.5 and $2.5 million. APCo states that the program will benefit its customers because it will use the fiber infrastructure to improve the quality and reliability of electric service in Grayson County and provide a communications platform for grid improvements, including installation of advanced metering infrastructure. The broadband service costs could be recovered through APCo’s base rates or a rate adjustment clause for “grid transformation” investments; however, the statute prevents APCo from recovering broadband service costs before July 1, 2020. An evidentiary hearing will be held on January 24, 2020. Interested parties may participate in this case by filing a notice of participation on or before November 20.

 

 

(7) Appalachian Power files request to decrease its fuel rateCase No. PUR-2019-00157

 On September 27, Appalachian Power (“APCo”) filed a request to decrease its fuel rate from 2.547 to 2.300 cents per kWh. The proposed fuel rate – called the fuel factor – is designed to recover APCo’s costs to procure fuel between November 1, 2019, and October 31, 2020. The reduction would reduce the typical bill of a residential customer using 1,000 kWh per month by 2.6%, or roughly $2.80. The SCC has not yet established a procedural schedule for this case.

Natural gas cases

SCC approves Atmos SAVE application – Case No. PUR-2019-00054

On September 24 the SCC approved a required by Atmos Natural Gas is seeking SCC approval to update its Steps to Advance Virginia’s Energy Plan (“SAVE”) rider. The SAVE statute, § 56-603, allows gas distribution companies to seek rider recovery for costs to replace aging infrastructure, increase safety and efficiency, and decrease emissions. Atmos intends to spend approximately $107 million on SAVE programs over the next 14 years.