The Virginia State Corporation Commission approved applications from Dominion Energy for its proposed Coastal Virginia Offshore Wind Project to feature 176 wind turbines 27 miles off Virginia’s coast, although the project still needs federal approvals. In a final order issued Friday, the SCC approved the utility’s application for cost recovery from the project, allowing the utility to raise rates, creating an average increase of $4.72 in the monthly bill for a residential customer using 1,000 kilowatt-hours of electricity per month over the project’s expected 35-year lifetime.
The SCC said approving the project is necessary given the expressed will of the general assembly in the Virginia Clean Economy Act.
“In 2020, the Virginia General Assembly enacted the Virginia Clean Economy Act (VCEA) that declared in order to meet the Commonwealth’s clean energy goals prior to December 31, 2034, the construction or purchase by a public utility of one or more wind generation facilities off the state’s Atlantic shoreline is in the public interest,” an SCC statement says. “Following a full proceeding, the commission found, as directed by the General Assembly, that construction of CVOW is in the public interest.”
The SCC included a performance standard in the order in case the utility has to buy outside energy due to under-performance of CVOW, protecting consumers from increased costs, and requires continued updates from Dominion if project costs exceed the estimated $9.8 billion, or if completion is delayed beyond February 2024.
“Beginning with the commercial operation and extending for the life of the project, customers shall be held harmless for any shortfall in energy production below an annual net capacity factor of 42 percent, as measured on a three-year rolling average,” the release states.
Dominion CEO Robert Blue praised the SCC for approving CVOW, but pushed back on the performance standard in a separate Friday press release.
“Our customers expect reliable, affordable energy, and offshore wind is key for delivering on that mission. We are very pleased that the commission has approved this important project that will benefit our customers. We are reviewing the specifics of the order, particularly the performance requirement,” Blue said.
Advocates including representatives of the Virginia Office of the Attorney General argued for that protection.
“The performance guarantee is not set at an arbitrary level – it is directly taken from the Company’s representation that it is confident that the CVOW Project will have a net capacity factor of 42 percent. The performance guarantee simply provides for financial accountability related to the Company’ s sworn testimony regarding the CVOW Project’s performance,” the OAG argued in a June filing with the SCC.
In a Dominion transcript of a Monday earnings call, Blue said, “You may recall that 42 percent is also our projected 30-year lifetime average net capacity factor, meaning, of course, that roughly half the time it would be above that level and half below. Effectively, such guarantee would require DEV [Dominion Energy Virginia] to financially guarantee the weather, among other factors beyond its control for the life of the project.”
“While no party opposed approval of the project, there were concerns raised regarding affordability and the financial risk to customers given a project of this magnitude. However, the Commission’s performance guarantee creates an unprecedented layer of financial one-way risk to DEV. And it is inconsistent with the utility risk profile expected by our investors,” Blue said.
Dominion spokesperson Jeremy Slayton said in a statement, “We continue to believe CVOW is an important and beneficial project for our customers. It also has significant public support. Nevertheless, the performance guarantee outlined in the SCC’s order is untenable. There are many factors that could affect the performance of CVOW that are outside of Dominion Energy’s control, including natural disasters, acts of war or terrorism and changes in public policy, to name a few. We plan to actively engage with stakeholders on the unintended consequences of this provision and are reviewing all options.”
Thomas Jefferson Institute for Public Policy Senior Fellow Stephen Haner warned in a Friday article, “Lest you think that means the ratepayers can relax, the long final order issued August 5 once again highlights all the things that could go wrong with the Coastal Virginia Offshore Wind (CVOW), scheduled to fully operational by 2027. The regulators also wash their hands of any responsibility and record for posterity that the Virginia General Assembly made them approve this.”
Haner said that the performance standard is likely to face reviews and appeals in court.
Conservatives for Clean Energy – Virginia State Director Ron Butler has argued that CVOW will help protect energy consumers amid rising natural gas prices.
He told The Virginia Star, “Conservatives for Clean Energy supports the offshore wind project and applauds Attorney General Jason Miyares for pushing for a performance guarantee to protect ratepayers. Miyares’ leadership on this issue will help hold Dominion accountable and keep costs in line with projections.”
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