HD8 - Policy Proposals Governing Public Electric Utility Programs to Accelerate Widespread Transportation Electrification in the Commonwealth (Chapter 268, 2021 SSI)

Executive Summary:

This document contains the report ("Report") of the Virginia State Corporation Commission ("Commission" or "SCC") pursuant to Chapter 268 of the 2021 Virginia Acts of Assembly (Special Session I) ("Chapter 268").(*1) The Commission reports as follows:

Chapter 268 directs the Commission to file a report recommending policy proposals that could govern public electric utility programs to accelerate widespread transportation electrification in the Commonwealth. The Commission retained the Great Plains Institute ("GPI") to act as a third-party facilitator and conduct the appropriate public process. GPI convened five stakeholder meetings, involving approximately 85 stakeholders, to develop the report to assist the Commission in the preparation of this Report. After a thorough review of the Great Plains Institute Report ("GPI Report") and the subsequent comments received, the Commission finds that the recommended policy proposals from the GPI Report are generally reasonable for further consideration by both the Commission and the General Assembly with regard to transportation electrification, with the modifications addressed herein. These policy proposals include the following:

1. Utility transportation electrification plans as an ongoing planning tool: regulated electric utilities could be required to submit transportation electrification plans to the Commission on a regularly occurring cadence, detailing several items, including transportation electrification forecasts, potential impacts, and planned utility offerings. The Commission will direct the filing of transportation electrification plans by the Commonwealth's two largest investor-owned electric utilities;

2. Data Collection: As a complement to the transportation electrification plans, regulated electric utilities could be required to regularly file anonymized transportation electrification data for stakeholders to provide transparency and encourage innovation. The Commission will require this data to be included in the transportation electrification plans of the Commonwealth's two largest investor-owned electric utilities;

3. Additional guidance could be developed for use by regulated electric utilities in designing time-varying rate structures and managed charging offerings. The Commission expects that the electric utility transportation electrification plans will provide a description of expected future rate structures and offerings;

4. Pursue and coordinate federal funding: The GPI Report recommended that the Commonwealth pursue federal funding to support transportation electrification in the Commonwealth and form a joint, interagency team to ensure federal dollars are efficiently administered and implemented throughout the state. The Commission is ready to work in consultation with other state agencies to ensure that monies are used by utilities in a manner that reduces overall costs to customers;

5. Additional focused process for medium- and heavy-duty vehicles: a more detailed stakeholder engagement process specifically focusing on medium- and heavy-duty electric vehicles ("EVs") should be considered. The Commission stands ready to assist in this process as needed; and,

6. The GPI Report recommended the General Assembly should give the Commission the authority it needs to make sure that as transportation electrifies, regulated electric rates accurately reflect total costs and total sales. The Commission will make any such recommendations to the General Assembly as transportation continues to electrify.

GPI retained M.J. Bradley & Associates, an ERM Group company ("ERM") to provide modeling and analytical support in connection with the GPI Report, which is discussed further in the GPI Report and below. Importantly, the Report identified two limitations in the modeling of costs conducted as part of the Stakeholder process that limit its usefulness and should be addressed in future modeling. Specifically, the Report states that:

In assessing utility costs, the model considered the increased electricity sales attributable to electric vehicles, the generation and transmission costs of that additional electricity, and the costs of building additional transmission and distribution infrastructure to accommodate increases in peak demand caused by electric vehicles. However, the model did not seek to identify specific generation resources that would need to be built nor how transportation electrification might impact hourly [PJM Interconnection, LLC ("PJM")] energy prices.(*2)

This means that although certain generation costs were modeled, those generation costs were assumed to be energy purchased from the market based on current price forecasts. To the extent additional generation assets are required to be built to meet increased demand from transportation electrification, the resource requirements of the Virginia Clean Economy Act ("VCEA") were not explicitly modeled. For example, the model did not consider the costs of offshore wind resources that may be built by Dominion Energy Virginia ("DEV" or "Dominion"). In addition, increased prices that may result from increased demand for electricity resulting from transportation electrification was not taken into account in the forecasts used in the modeling.

The Commission notes that additional modeling and analysis by the regulated utilities, the Commission, and interested parties will assist in developing these issues further. For example, to address the modeling shortcomings identified above, the Commission's Staff recommended in its comments that the generation planning groups of the regulated utilities perform system-level modeling of the need for additional generation capacity that may be required to support transportation electrification in Virginia, as well as its attendant costs, in light of the policy goal of transitioning to 100% carbon-free generation fleet by 2050. Commission Staff also recommended DEV and Appalachian Power Company ("APCo") present an estimated annual bill impact of the generation, transmission, and distribution requirements associated with EV adoption.

The Commission appreciates the opportunity to report on these important issues to the General Assembly. Indeed, the Commission has previously recognized that the increased deployment of motor vehicles powered by electricity presents several issues that potentially could affect the affordability and reliability of electricity service delivered to consumers by regulated utilities. To further consider these important issues, the Commission established a separate proceeding for the exploration of issues related to transportation electrification and invited interested persons and entities to file comments and participate in a public session.(*3)

Since, as noted above, both the cost of additional generation resources and future energy prices will impact electric rates and bills paid by Virginia customers, these issues warrant further consideration and evaluation. As noted above, the Commission will require its two largest investor-owned electric utilities to file transportation electrification plans in Case No. PUR-2020-00051 addressing the issues raised in this report. The Commission will require these filings to include, among other things, additional modeling and an analysis of how the utilities' plans complement private sector efforts. Importantly, the plans should include an analysis of federal grants and other funding opportunities to defray ratepayer costs. The Commission notes that transportation electrification issues may be explored further in other future Commission proceedings, which may include, but are not limited to, integrated resource plan proceedings, specific utility applications, and others as may be directed by the General Assembly. The Commission stands ready to assist the General Assembly in the implementation of the important policy determinations outlined in Chapter 268.
(*1) Appendix 1 to this report provides a Glossary of Terms used throughout.
(*2) Report at 5, fn. 1.
(*3) Commonwealth of Virginia, ex rel. State Corporation Commission, Ex Parte: Electrification of Motor Vehicles, Case No. PUR-2020-00051, Doc. Con. Cen. No. 200330150, Order Establishing Proceeding Regarding Electric Vehicles at 1 (Mar. 24, 2020).