RD229 - Report of the State Corporation Commission to the Commission on Electric Utility Regulation of the Virginia General Assembly - Status Report: Implementation of the Virginia Electric Utility Regulation Act - September 1, 2014

Executive Summary:
*This report was replaced in its entirety by the State Corporation Commission on February 10, 2015.

Section 56-596 B of the Code of Virginia ("Code") directs the State Corporation Commission ("Commission") to provide an annual update on the status of the implementation of the Virginia Electric Utility Regulation Act, §§ 56-576 through -596 of the Code ("Regulation Act") and to offer recommendations for any actions by the Virginia General Assembly ("General Assembly") or others. This report is responsive to that directive. Since the Commission's last report, presented on September 1, 2013, the following activities occurred:

• The Virginia Energy Sense ("VES") program, which is designed to fulfill the requirements of §§ 56-592 and 56-592.1 of the Code, continued to enhance features to the program designed to stress the value of energy conservation and efficiency. Over the past year, new initiatives included enhancements to the website, expanded use of social media, targeted advertising on local news websites and sponsored radio traffic and weather reports. The program expanded its school outreach, added public service announcements, increased its participation in community events, and expanded its partnerships with non-profit organizations and businesses. The current VES campaign concludes at the end of 2014, and the Commission has elected to continue the campaign for another three-and-one-half-years. In June 2014, the Commission issued a solicitation to establish a new term contract with a qualified contractor to continue the program.

• The Commission considered and approved requests to construct a nominal 750 megawatt ("MW") combined-cycle merchant generating facility in Loudoun County and to convert existing coal-fired generating facilities at Bremo and Clinch River Power Stations into generation facilities fueled by natural gas. Additionally, the Commission approved Virginia Electric and Power Company's d/b/a Dominion Virginia Power ("DVP," "Dominion," or "Dominion Virginia Power") renewable generation pilot program for third party power purchase agreements. With respect to generation additions approved prior to this year:

DVP's coal-fueled to biomass-fueled conversions were completed and biomass operation commenced at the Altavista, Hopewell and Southampton facilities during the latter half of 2013;

Dominion's 1,300 MW natural gas combined-cycle facility in Warren County is under construction and expected to begin commercial operation in December 2014;

Dominion's 1,358 MW natural gas combined-cycle facility in Brunswick County is under construction and expected to begin commercial operation in the summer of2016;

Natural gas operation of DVP's Bremo units 3 and 4 began in March and June 2014, respectively;

Natural gas conversion of Appalachian Power Company's ("APCo") Clinch River units 1 and 2 is underway and is expected to be completed in late 2015 and early 2016, respectively; and

Northern Virginia Electric Cooperative's 49.9 MW biomass facility in Halifax County began commercial operation in November 2013.

• APCo and Dominion have met their 2013 renewable energy portfolio standard ("RPS") goals pursuant to § 56-585.2 of the Code;

• The Commission approved an enhancement to an existing, and the addition of a new, demand-side management ("DSM") program for Dominion Virginia Power.

• The Commission granted applications for base rate increases for Kentucky Utilities ("KU"), Rappahannock Electric Cooperative ("Rappahannock"), and Southside Electric Cooperative ("SEC"), and also is considering an application by Shenandoah Valley Electric Cooperative ("SVEC") for a base rate increase.

• The Commission granted, among other things, a 10.0% return on equity ("ROE") for DVP's biennial review period and is currently considering several issues regarding APCo's biennial review.

• APCo's and DVP's 2013-14 electricity rates appear to be competitive with their peer utilities that meet the criteria of § 56-585.1 A 2 of the Code, although pending rate requests could lessen the competitiveness of electricity rates in the future.

• The Commission continues to participate in and monitor several proceedings at the Federal Energy Regulatory Commission ("FERC") involving PJM Interconnection, LLC ("PJM").