RD418 - Status Report: Implementation of the Virginia Electric Utility Regulation Act Pursuant to § 56-596 B of the Code of Virginia – September 1, 2022
This document contains the report of the Virginia State Corporation Commission ("Commission") pursuant to § 56-596 B of the Code of Virginia ("Code"), which directs the Commission to provide an update by September 1 of each year on the status of the implementation of the Virginia Electric Utility Regulation Act, Code §§ 56-576 through 56-596.3 ("Regulation Act"). The Regulation Act has expanded in recent years with new programs and requirements that fall within the Commission's purview. This report summarizes the Commission's efforts to implement the Regulation Act for incumbent electric utilities(*1) as well as the electric cooperatives.
Key highlights from the report include:
A. Current Status of the Regulation Act
• Over the past several years, the Regulation Act has been amended to require new or expanded programs and rulemakings that apply to the Commonwealth's incumbent electric utilities and electric cooperatives. These programs include ones that implement the requirements of the Virginia Clean Economy Act ("VCEA").(*2) The VCEA includes provisions establishing mandatory Renewable Energy Portfolio Standard ("RPS") and Energy Efficiency Resource Standard. The relevant Commission dockets that implement or update these programs, as well as the dockets that continue to provide oversight of the utility's existing operations, are summarized in Section IV, below.
• On November 18, 2021, the Commission issued its Final Order concerning its triennial review of Dominion Energy Virginia's ("DEV") rates, terms, and conditions for the provision of generation, distribution, and transmission services.(*3)
• On January 7, 2022, the Commission issued a Final Order concerning its review of DEV's petition for approval of Phase II of its Grid Transformation ("GT") Plan.(*4) The approved GT Plan investments focus on grid reliability and are designed to accommodate or facilitate the expected increase in distributed energy resources. Approved Phase II investments include (i) advanced metering infrastructure; (ii) the customer information platform; (iii) grid infrastructure, which comprises targeted corridor improvement and voltage island mitigation; (iv) grid technologies; (v) telecommunications; (vi) cyber security; (vii) physical security; and (viii) customer education. The projected capital and operations expenses for Phase II are projected to be approximately $776 million. The Commission's approval of these projects was made subject to certain contingencies, cost caps, and reporting requirements.
• On March 15, 2022, the Commission issued a Final Order concerning its review of DEV's 2021 RPS Filing which included (i) DEV's RPS Development Plan (encompassing proposed development of new solar, onshore wind, and energy storage resources); (ii) requests for approval to construct 13 new utility-scale projects and to enter into 24 new purchase power agreements ("PPAs"); and (iii) DEV's request for approval of revised Rider CE. The Commission (i) found that, for the limited purpose of filing its second annual RPS plan under Code § 56-585.5 D 4, DEV's plan was reasonable and prudent; (ii) approved the utility-scale projects and PPAs proposed by the Company; and (iii) approved revised Rider CE.(*5)
• On July 1, 2022, the Commission issued a Final Order concerning its review of DEV's request for approval of a rate adjustment clause, designated Rider SNA, for costs associated with preparing Petitions for Subsequent License Renewal to the Nuclear Regulatory Commission to extend the operating licenses of, and the projects reasonably appropriate to upgrade or replace systems and equipment deemed to be necessary to operate safely and reliability, Dominion's Surry Units 1 and 2 and North Anna Units 1 and 2 in an extended period of operation.(*6) The Commission adopted a proposed Stipulation in that case and approved the Petition as modified by the Stipulation.
• On July 15, 2022, the Commission issued its Final Order concerning Appalachian Power Company's ("APCo") 2021 RPS Plan. The Commission: (i) found APCo's RPS Development Plan is reasonable and prudent for the limited purpose of its second annual plan; (ii) approved APCo's requests for approval of cost recovery for 313.9 MW of solar and onshore wind capacity, including both company-owned resources and PPAs; (iii) granted APCo's request for a prudency determination for 238.9 MW of solar capacity, including company-owned resources and PPAs; (iv) approved the recovery of projected costs of renewable energy certificates ("RECs") purchased in the PJM(*7) REC market; and (v) approved rate adjustment clauses ("RACs") for cost recovery.(*8) The Commission also established additional directives regarding APCo's modeling in its subsequent RPS Plans.(*9) The Commission further directed APCo to continue filing a consolidated bill analysis in its RPS Filings.
• On August 5, 2022, the Commission issued a Final Order approving requested cost recovery associated with DEV's proposed 2,587 MW Coastal Virginia Offshore Wind Commercial Project ("CVOW Project") to be located in a federal lease area off the coast of Virginia Beach, Virginia.(*10) The project consists of 176 wind turbines, each designed to generate 14.(*7) MW. The project is expected to have a capital cost of $9.8 billion and will likely be the largest capital investment, and single largest project, in the history of Dominion Energy Virginia. The Commission also approved the electric interconnection and transmission facilities to connect the CVOW Project reliably with the existing transmission system. DEV and Consumer Counsel have requested the Commission reconsider aspects of the Final Order.
• On August 10, 2022, the Commission issued a Final Order in DEV's annual demand-side management ("DSM") filing that approved, among other things, (i) DEV's proposed Phase X DSM Programs including proposed enhancement and expansion of certain previously approved programs; (ii) reorganization and consolidation of the DEV's DSM Portfolio; and (iii) cost recovery through associated RACs.(*11) The Commission had previously approved, on September 7, 2021, the DEV's application seeking (i) approval of the Company's Phase IX DSM programs, including 11 new energy efficiency and demand response programs; (ii) the expansion and modification of certain existing programs; and (iii) approval of cost recovery through associated RACs.(*12)
• Both APCo (a Phase I Utility) and DEV (a Phase II Utility) estimate that they are on target to implement energy efficiency programs and measures to achieve the total annual energy savings targets for 2023 as specified by Code § 56-596.2.
B. Rate and Capital Outlook
• DEV's typical(*13) monthly residential bill has increased by $46.34 to $136.93(*14) (a 51.15% increase) from July 1, 2007,(*15) to July 1, 2022. Over the 12 months ended July 1, 2022, DEV's typical monthly residential bill has increased by $15.65.
• DEV did not file an Integrated Resource Plan ("IRP") in 2021. In accordance with Code § 56-599, DEV's next IRP will be due by May 1, 2023.
• On November 18, 2021, the Commission issued a Final Order in DEV's first triennial review, covering the period 2017 – 2020.(*16) The Commission approved a Stipulation among DEV, Commission Staff, and certain case participants.(*17) The Stipulation provided for customer refunds, totaling $330 million, the statutory maximum annual rate reduction of $50 million, and customer credit reinvestment offsets of $309 million.(*18) For a typical residential customer, this results in a decrease of approximately $0.90 per month effective January 1, 2022 and refunds totaling approximately $67.00 over the 2022-2023 period. The Commission also approved a 9.35% return on common equity ("ROE") as fair and reasonable for the 2021 – 2023 period that will be the subject of DEV's next triennial review.(*19)
• As reported by DEV, its base rate financial results for 2021 reflect an actual earned ROE of 11.49%, which is above its authorized ROE of 9.35%.(*20) DEV's 2021 financial results will be audited as part of its next triennial review, which will be filed in 2024 and will cover the period 2021 – 2023.
• In a February 2022 presentation to investors, DEI(*21) identified DEV capital investments of approximately $27.9 billion for the five-year period 2022 – 2026, including investments in wind and solar generation, energy storage, nuclear facility relicensing, transmission, distribution undergrounding, and grid transformation. These investments would reflect a 74% increase in DEV's rate base by 2026, with 55% being recovered from customers through RACs.
• APCo's typical monthly residential bill has increased by $55.64 to $122.25 (an 83.53% increase) from July 1, 2007, to July 1, 2022. Over the 12 months ending July 1, 2022, APCo's typical monthly residential bill has increased by $5.16.
• On August 18, 2022, the Supreme Court of Virginia issued its opinion on the appeals of APCo and the Office of the Attorney General, Division of Consumer Counsel ("Consumer Counsel") concerning the Commission's decision in APCo's 2020 Triennial Review.(*22) The Court affirmed in part, reversed in part, and remanded the case to the Commission for further proceedings consistent with the Court's opinion.(*23)
• As reported by APCo, its base rate financial results for 2021 reflect an actual earned ROE of 5.38%, which is below its authorized ROE of 9.20%.(*24) APCo's 2021 financial results will be audited as part of its next triennial review, which is due to be filed by March 31, 2023, and will cover the period 2020 – 2022.
• APCo filed its 2022 IRP on April 29, 2022. Based on APCo's billing analysis, showing projected annual impacts to a residential bill over the next five years incorporating the requirements of the VCEA, the monthly bill of a Virginia residential customer using 1,000 kWh per month is projected to be between $141.73 and $143.07 by 2026, an increase of between $19.50 and $20.84 per month over the April 29, 2022 typical residential bill (or an estimated annual increase of $234.00 to $250.08).(*25) APCo's 2022 IRP is pending before the Commission and an evidentiary hearing is scheduled to begin on October 25, 2022.(*26)