RD717 - Status Report: Implementation of the Virginia Electric Utility Regulation Act Pursuant to §§ 56-596 B and 30-205 of the Code of Virginia – November 1, 2024
Executive Summary: 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 November 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 investor-owned electric utilities(*1) as well as for the electric cooperatives. Key highlights from this report include: • The Regulation Act was amended by the 2023 General Assembly to make significant changes to the Commission's regulation of both Virginia Electric and Power Company d/b/a Dominion Energy Virginia ("Dominion" or "DEV") and Appalachian Power Company ("APCo"). Among other things, the new legislation directs a return to biennial reviews of base rates for both companies rather than the triennial review structure.(*2) House Bill 1770 and its companion Senate Bill 1265 (collectively, "HB 1770")(*3) permitted Dominion to seek Commission approval to securitize its deferred fuel balance; directed the "roll-in" of $350 million of DEV's rate adjustment clause ("RAC") revenues into base rates on July 1, 2023; required DEV to file a biennial review after July 1, 2023; set a return on equity ("ROE") of 9.7% for DEV's 2023 biennial review; modified the sharing provisions applicable to earnings above an approved level; and directed the Commission to initiate a proceeding before December 31, 2023 to determine protocols and standards for performance-based adjustments to ROE. • House Bill 1777 and its companion Senate Bill 1075 (collectively, "HB 1777")(*4) created a separate biennial review process applicable to APCo. APCo filed its first biennial review on March 29, 2024. The proceeding is currently pending before the Commission. • As a result of projected large load growth occurring in the Commonwealth due to data centers, or retail large-use hyperscale customers, the Commission issued its Scheduling Order and Notice of Technical Conference on October 2, 2024, to explore these emerging issues. Specifically, this exploratory proceeding and technical conference seeks information related to current and projected future challenges presented by serving various types of large-use hyperscale customers from the perspective of electric cooperatives, investor-owned electric utilities, existing customers, and potential new load. This proceeding will also explore the identification of one or more potential frameworks that could be used by electric cooperatives and investor-owned electric utilities to serve potential new large-use customer load. The technical conference is scheduled for December 16, 2024, and is open to the public. After the technical conference, the Commission intends to invite all interested persons to submit post-technical conference comments addressing some or all of the issues raised during the technical conference. • The Commission continues to implement the requirements of the Virginia Clean Economy Act ("VCEA").(*5) The VCEA includes provisions establishing a mandatory Renewable Energy Portfolio Standard ("RPS") and an 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 September 18, 2023, the Commission issued a Final Order concerning its review of DEV's petition for approval of Phase III of DEV's Grid Transformation ("GT") Plan, its most recent GT Plan petition.(*6) The approved GT Plan investments focus on grid reliability and are designed to accommodate or facilitate the expected increase in distributed energy resources on the grid resulting from recent policy developments, including the VCEA and FERC(*7) Order 2222. Approved Phase III investments include a continuation of: (i) advanced metering infrastructure; (ii) the customer information platform; (iii) an expanded mainfeeder hardening pilot; (iv) targeted corridor improvement; (v) voltage island mitigation; (vi) voltage optimization enablement; (vii) substation technology deployment; (viii) distributed energy resource management system; (ix) telecommunications; (x) physical security; (xi) cyber security; and (xii) customer education. The Commission also approved two new programs: an outage management system and a non-wires alternative pilot. The Commission's approval of these projects was made subject to certain contingencies, cost caps, and reporting requirements. • On March 29, 2024, the Commission issued a Final Order on DEV’s 2023 RPS Filing wherein it: (i) found DEV's 2023 RPS Plan to be generally reasonable and prudent based on the record of the case; (ii) granted certificates of public convenience and necessity ("CPCNs") and approved approximately 329 megawatts ("MW") of new solar generation capacity in the Commonwealth; (iii) found that 435 MW of solar power purchase agreements ("PPAs") were prudent; and (iv) approved, to recover through Rider CE, the costs of the CE-4 Projects (and related interconnection facilities) and CE-4 PPAs, (*8) and the costs of solar projects (and related interconnection facilities) and PPAs approved by the Commission in prior RPS filing proceedings. (*9) The Commission also established additional directives regarding DEV's modeling in its subsequent RPS Plans. DEV made its 2024 RPS filing on October 15, 2024.(*10) • On September 7, 2023, the Commission issued a Final Order on APCo's 2023 RPS Filing, wherein the Commission: (i) approved APCo's annual plan for the development of new solar, wind, and energy storage resources; (ii) approved APCo's requests for approval of cost recovery of the up-to-146.2 MW Grover Hill wind facility located in Ohio; (iii) granted APCo's request for a prudency determination for six new solar PPAs totaling 184 MW and one renegotiated PPA totaling 20 MW; (iv) authorized APCo to count its over-retired renewable energy credits ("RECs") towards its 2023 RPS Program requirement; and (v) denied APCo's request for cost recovery associated with its Beech Ridge wind facility located in West Virginia due to negative net present values. The Commission also established additional directives regarding APCo's modeling in its subsequent RPS Plans.(*11) • APCo and DEV's 2023 demand-side management ("DSM") proceedings were the first opportunity for the Commission to evaluate each company's performance in meeting the 2022 energy savings target pursuant to Code § 56-596.2. The Commission concluded in those proceedings that "net" savings, which removes free ridership from total gross savings, is the appropriate measurement of the total annual savings required by Code § 56-596.2. • On July 26, 2024, the Commission issued a Final Order on DEV's annual DSM filing that approved, among other things: (i) DEV's proposed Phase XII DSM Programs, including proposed enhancement and expansion of certain previously approved programs; (ii) continuation of the Non-residential Distributed Generation program; and (iii) cost recovery through associated RACs.(*12) Further, the Commission determined that Dominion had total combined net savings of 839,243 megawatt-hour ("MWh") in 2022, which represents 1.23% of 2019 total annual sales and is less than Dominion's 2022 total annual savings target of 1.25%, or 852,892 MWh. • On July 26, 2024, the Commission issued a Final Order on APCo's biennial DSM filing that approved, among other things: (i) APCo's proposed programs, including modification and enhancement of previously approved programs; and (ii) cost recovery through an associated RAC.(*13) Further, the Commission determined APCo had total combined net savings of 219,036 MWh in 2022, which represents 1.52% of 2019 total annual sales, and is more than APCo's 2022 total annual energy savings target of 0.5% or 72,260 MWh. The Commission awarded a margin on energy efficiency program operating expenses to APCo pursuant to Code § 56-585.1 A 5 c. DEV Bill Impacts • From July 1, 2007,(*14) to July 1, 2024, DEV's typical(*15) monthly residential bill has increased by $43.15 (47.63%); i.e., from $90.59 to $133.74. Over the 12 months ended July 1, 2024, DEV's typical monthly residential bill has increased by $8.62. • On May 1, 2023, and July 3, 2023, respectively, Dominion filed applications to reduce its fuel factor and to securitize its fuel deferral balance of approximately $1.275 billion.(*16) The Commission permitted Dominion to reduce its fuel factor, which resulted in an approximate $6.79 reduction in the monthly bill of a typical residential customer, beginning July 1, 2023. The Commission approved the fuel securitization application on November 3, 2023. • On May 1, 2024, Dominion filed an application to reduce its fuel factor. The Commission permitted Dominion to reduce its fuel factor on an interim basis, which resulted in an approximate $7.85 reduction in the monthly bill of a typical residential customer beginning July 1, 2024.(*17) The case is currently pending before the Commission. • The Commission issued its Final Order in the 2023 biennial review on February 28, 2024. The Commission approved and adopted an unopposed stipulation, resulting in a one-time $15 million credit to customers.(*18) • DEV filed an Integrated Resource Plan ("IRP") on May 1, 2023, in accordance with Code § 56-599, in Case No. PUR-2023-00066.(*19) Based on DEV's analysis presented in that case, which incorporated the requirements of the VCEA and provided bill impact analysis through 2035, DEV projects that the monthly bill of a Virginia residential customer using 1,000 kWh per month is projected to be between $174.15 and $235.40 by 2035.(*20) This represents a monthly increase of between $57.97 and $119.22 relative to the same residential customer's bill as of May 1, 2020, or an annual increase of between $695.64 and $1,430.64. • DEI(*21) presented a business update to investors on March 1, 2024. DEI identified approximately $35.5 billion in anticipated capital expenditures for DEV over the period from 2025 – 2029, including investments in zero-carbon generation, generation reliability, transmission and distribution resiliency, and grid transformation. If sought for recovery, these investments potentially reflect an 86% increase in DEV's rate base by 2029, with 75% potentially recoverable from customers through RACs. APCo Bill Impacts • APCo's typical monthly residential bill has increased by $105.48 (158.36%), i.e., from $66.61 to $172.09, from July 1, 2007, to July 1, 2024. Over the 12 months ending July 1, 2024, APCo's typical monthly residential bill has increased by $14.47. • The Commission issued its Final Order in the 2023 triennial review on November 30, 2023.(*22) The Commission approved and adopted an unopposed stipulation, with the exception of provisions related to a proposed low-income customer charge exemption, resulting in a going forward revenue requirement increase of $127.3 million. • APCo filed a biennial review application on March 29, 2024. The case is currently pending before the Commission. The Commission will report on its findings thereon in next year's report. • Based on APCo's billing analysis contained in its 2024 RPS Plan,(*23) showing projected monthly impacts to a residential bill through 2035 incorporating the requirements of the VCEA, the monthly bill of a Virginia residential customer using 1,000 kWh per month is projected to be approximately $178.62, an increase of $19.14 per month over the typical 2023 residential bill (or an estimated annual increase of $229.68) over this period.(*24) In accordance with the provisions of Code §§ 56-585.8, 56-597, and 56-599, APCo is not required to file future IRPs. |