Dominion to Recover $140 Million for Burying Electric Lines for Outage-Prone Customers

A screen capture from a Dominion video shows the machinery used to bury electric lines.

A screen capture from a Dominion video shows the machinery used to bury electric lines.

by James A. Bacon

The State Corporation Commission ruled earlier this week that Dominion Virginia Power can recover up to $140 million on what it has spent to bury about 400 miles of electric distribution lines. By putting the overhead tap lines of the 6,000 most outage-prone customers underground, the electric company hopes to significantly reduce time spent restoring electric power after hurricanes, ice storms and other widespread service disruptions. The benefit to improved reliability will cost customers an average of fifty cents to the monthly bill.

The General Assembly had passed enabling legislation in 2014 but the State Corporation Commission (SCC) turned down Dominion’s first proposal to bury 4,000 miles of overhead lines serving some 150,000 customers on the grounds that there was insufficient data to show a positive cost-benefit ratio. But the SCC approved the pilot program, which will apply retroactively to overhead lines that Dominion has already buried, with the expectation the Dominion will regularly provide data on outages and restoration times to use in evaluating the program.

“If we were to get the full 4,000  miles of underground line, it would cut the typical hurricane outage period of seven to ten days in half,” says spokesman David Botkins. There is no way to estimate what difference the pilot project will make until the data comes in, but he said Dominion targeted “the most outage-prone and most difficult to repair tap lines” in its service territory — “the worst of the worst.”

In granting approval, the SCC wrote, “We find that the [project] satisfied statutory requirements, and is reasonable, prudent, and in the public interest.”

Even with the kind of automated equipment shown in the photo above — Dominion will not be handing the job over to ditch diggers — the expense is considerable. The cost of $140 million spread over 6,000 customers is $23,000 per customer. Dominion’s long-term vision, covering about 150,000 customers, would cost an estimated $2 billion.

But Dominion contends that cost-per-customer is not a relevant metric. Payback will accrue to all customers when restoration is shorter following large weather events, allowing the Commonwealth to return to normalcy sooner, says Botkins. In fact, an industry expert estimates that the economic benefits of the first 400 miles of undergrounding exceeds the cost by a ratio of over 2 to 1.

Stated the SCC ruling:

Dominion should be prepared to establish, with specificity, how the [Strategic Underground Program] has resulted in demonstrated system-wide benefits, as well as documented local benefits to the neighborhoods in which distribution lines have been placed underground. The Company has the burden to collect the data necessary to measure … “whether the SUP can be a cost effective means of ensuring reliability for its entire system.”

The buried lines are scattered throughout more than 80 cities, towns, and counties in Dominion’s service territory. In a typical example, The company placed 11 miles of overhead lines to underground in King George County; 24 separate projects impacted 68 customers.

In major outages, Dominion has a hierarchy of response. First, it attends to hospitals, water pumping stations, emergency centers and other critical needs. Next it tackles major circuits where a single repair job can put a large number of customers back on line. Then the company works its way down to subdivisions with a few customers, and finally to individual houses.

“The overhead lines in the back lots are very labor intensive,” explains Botkins. “It’s hard to get the truck back in there. The crew has to do a lot of the work by hand. It’s very time consuming.”

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13 responses to “Dominion to Recover $140 Million for Burying Electric Lines for Outage-Prone Customers

  1. “Dominion contends that cost-per-customer is not a relevant metric” unless they are talking about burying a transmission line and the customer is Amazon, then it is the most relevant metric.

  2. looks like there is a return on investment also but ratepayers have to pay for it in addition? talk about sweet deals!

    • Customer rates include a return on all a utility’s prudent investment, Larry. That’s how they stay in business.

      • right. I got that. But it looks like putting lines underground -saves them money when overhead lines go down so in the areas where they have seen this happen – they can save money .. i.e. keep more of what they get from ratepayers but having to pay out less for downed lines..

        no?

        it looks like they are not only saving money by burying but then they get to turn around and increase rates also.

        where am I going wrong?

        • To set rate, a utility shows historic revenues, expenses and investment and makes projections on a going forward basis. The forward-looking expenses should reflect increased costs (CapEx and OpEx) for burying the lines) and lower costs for outage repair. Presumably, the cost savings are greater than the cost increases over time.

        • TMT is correct. But to put that in plain English, when DVP can “save money” on storm recovery costs it doesn’t “keep more of what they get from ratepayers” but lowers the overall amount LarryG’s (and my) electric bill for distribution services goes up. Actually that’s not quite right– LG’s bill for distribution service isn’t affected because he receives that bill from a distribution co-op — so he has no dog in this fight.

          • Well.. I do note that REC (my Coop) has been spending a fair amount of time and money dealing with getting powerlines away from trees… and I just assumed that they were calculating the cost of doing that versus the cost of not and putting them back up when they got knocked down.

            I just never thought they’d be charging me in addition to that unless it was going to cost more to do it than money saved and then I’d ask why do it if there is not enough ROI.

            I realize that’s a simple man’s perspective but I bet it’s not that different than other folks…

            or we get a temporary bump in our bills to front the money – and the bills go back down after we pay off the upgrades.

            I just would worry that every time the Co-Op found something that needed to be done – that it would justify a rate increase…

            so clearly I’m not understanding the logic, eh?

        • When they have outage recovery costs, customers pay those too. Less outages, fewer costs for customers to cover. That’s the theory, anyway.

          But, once again, the General Assembly has jimmied things in the utility’s favor. Distribution and outage costs come through base rates–frozen for DVP until at least 2022. So, we have a new RAC (rate adjustment clause) so that DVP can recover these program costs from customers. Any savings are trapped in the frozen base rates.

          • so, in effect ratepayers are paying twice… they pay for burying the lines and then the savings that might accrue are captured by DVP rather than reflected in their actual rates.

            This is not working like one would think – in that one would think that it is in DVP best interest to do this as a business practice but it appears they get their guaranteed return on investment AND get to charge extra for improvements to the system – so in the end – their effective rate of return is more than just the guaranteed minimum.

            When I look at my REC bill – I see a line item for fuel adjustments but I do not see a line item for this kind of expenditures…. Does that imply the co-ops are not able to do what DVP is doing with regard to burying lines and passing on the cost of doing it?

  3. Looks like confirmation of many of the comments made in January to a similar discussion about infrastructure upgrades … business as usual with plans that remain locked into the central generation monopoly business model.

    Here is a view of what the Navy is up to in Virginia’s climate/flooding vulnerable areas. Their plans are all about energy security and resilliance too, but they sure go about it differently. They plan to make all their bases capable of running detached from the grid when necessary.

    …. Entering into a 37-year agreement with Dominion Virginia Power, the Department of the Navy (DoN) recently announced plans for a 21 MW direct current, or DC solar facility in Virginia Beach, Virginia. Following closely on the heels of a 10-year purchase contract for 25 MW DC for Naval Station Norfolk, the new DC solar facility will be constructed on Naval Air Station (NAS) Oceana.

    Rear Adm. Scorby confirms the critical role of energy security. “These projects increase the energy security, energy diversity and energy resiliency of our bases. Energy security, or having assured access to reliable supplies of energy and the ability to protect and deliver sufficient energy to meet mission-essential requirements, is critical to our installations’ roles to support the Fleet.” http://planetsave.com/2016/08/01/navy-adds-new-dc-solar-facility-virginia-beach/

    To fulfill the Secretary of the Navy’s (SECNAV) goals and priorities for renewable energy:
    1. DON will produce 50 percent of its energy from alternative sources by 2020
    2. DON will produce or procure 500 MW by Dec 2014 and another 500 MW by Dec 2015
    3. Integrate renewable energy into the installation electrical grid

    DON is pursuing renewable energy generation to improve our energy security, operational capability, strategic flexibility and resource availability. Projects will:
    1. Be cost-effective, mission-compatible and leverage third-party financing
    2. Stabilize long-term operational costs
    3. Be complemented by smart microgrid technology and utility infrastructure upgrades
    http://greenfleet.dodlive.mil/files/2016/02/RepoFactsheet.pdf

    New England and New York have responded to Hurricane Sandy with similar, forward looking plans, incorporating microgrids for critical facilities and such.

  4. I don’t know the engineering involved but, hopefully, the underground lines will be able to withstand heavy rain and high water events where everything underground floods.

    Large portions of the New York City electrical systems (especially the subways) were destroyed by Sandy and all the damage won’t be repaired for several more years.

  5. Larry, replying to your 8/27 post. You are right, DVP gets to collect twice. Virtually everything they spend significant new sums on they get to collect in the Rate Adjustment Charges (or, RACs). Virtually everything they can save money on (payroll, distribution efficiencies, billing, etc.) is collected in the frozen in base rates. They keep collecting for costs they no longer incur, in other words. And yes, their earned rate of return is consistently higher than the authorized rate. They go to the General Assembly every couple of years to get a new earnings write off written into law to keep their regulators from reducing their rates.

  6. I am an outage prone customer. It will cost them leSS too.bury my line than it costs them to fix it.

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