Imprudent, Unreasonable, Unnecessary, Approved

The State Corporation today found as a factual matter that the two-turbine Commonwealth of Virginia Offshore Wind (CVOW) demonstration project 27 miles off the coast is imprudent and places unreasonable costs and risks on Dominion Energy Virginia’s ratepayers.  It then approved the project citing the clear legislative mandate in an omnibus energy regulation bill passed earlier this year.

Other news outlets will provide the highlights, so focus on the words of the opinion from Commissioners Mark Christie and Judith Jagdmann:

“The Commission has considered the entire record. The Commission finds — as a purely factual matter based on this record — that the proposed CVOW Project would not be deemed prudent as that term has been applied by this Commission in its long history of public utility regulation or under any common application of the term. The Commission further finds, however, that as a matter of law the new statutes governing this case subordinate the factual analysis to the legislative intent….

 “As listed above, the General Assembly declared, in at least six separate locations, that a project such as CVOW is in the public interest. For specific purposes of offshore wind, the General Assembly further mandated that “the Commission shall liberally construe the provisions of this section.” In addition, the General Assembly made the new prudency proceeding in Code § 56-585.1:4 F merely voluntary.”

 “While we agree with the Sierra Club that, “the General Assembly wants this project,” we do not believe that the General Assembly has directed that facts regarding cost, need or other serious issues pertinent to a prudency petition should not even be developed or included in the factual record, if only for purposes of transparency. Nor do we rule herein as a matter of law that there can never be a set of facts regarding prudency that could overcome the multiple mandated public interest findings in the statutes. (Emphasis added.) There may be, but we need not speculate on which hypothetical factual record would be sufficient to overcome the governing statutes and require disapproval of the petition.”

In truth, it is hard to imagine a worse factual record, a worse example of wasting ratepayer money and imposing ratepayer risk.  For $300 million or more the company will receive only 12 megawatts of power and with the assumed operational efficiency of the turbines that will work out to 78 cents per kilowatt hour.  Then a hurricane may wreck it.

A few additional bullet points from the order’s text.  These are now findings of the Commission, not assertions by skeptics:

  •  Dominion’s ratepayers bear almost all the risk of a project design failure except for a limited amount of risk retained by the EPC contractor during the limited warranty period.
  • CVOW’s energy cost is 9.3 times greater than the average cost of the Vineyard Wind offshore wind project off the coast of Massachusetts, which is 8.40/kWh.
  • CVOW’s energy cost is 13.8 times greater than the cost of new solar facilities, which is 5.60/kWh.
  • The Company estimates that the construction cost of the larger scale offshore wind project would be approximately $1.77 billion, excluding financing costs.
  • The cost of energy from large-scale offshore wind is 13.10/kWh, which is also significantly costlier than several other conventional and renewable energy alternatives as listed above.

That $1.8 billion estimate for a larger wind field in the same location off Virginia Beach, and the estimated 13.1 cent per kWh energy cost, are numbers that had been held confidential during the proceedings.  But the demonstration project will not be using the same turbine technology planned for that larger project and will not have time to demonstrate much of anything before a decision is made on the larger project.

  • The Company asserts that it may seek additional cost recovery from customers if the Project exceeds $300 million.
  • Based on Dominion’s prior CVOW risk assessments, the contingency amount built into the projected $300 million appears low.

The order is very specific that only the $300 million initial estimate (excluding financing) is approved, leaving open the question of who pays for any cost overrun or how such an overrun might be treated in a future review of earnings and costs.   The $300 million plus financing is money that will not be available for future customer rebates.

To further drive home its point, the SCC also approved a Dominion request for a power purchase agreement for 80 megawatts of solar from a third party.  The news release paired the two announcements and highlighted that the other project is prudent, was competitively bid, and places the risk squarely on the shoulders of the third party provider.  The contrast is clear.

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28 responses to “Imprudent, Unreasonable, Unnecessary, Approved”

  1. What a travesty of the regulatory process.

    I hope the GA recognizes how the new energy bill fails to protect the interests of families and businesses in Virginia (their constituents).

    In the long-run, increasing energy costs without a benefit to customers will come back to harm the utilities as well.

    We are on a lose-lose path with our energy system in Virginia. We can do so much better. Lower rates, cleaner energy, more efficiency and a prosperous future for our energy companies. Other states are doing it, so can we.

  2. Steve Haner Avatar
    Steve Haner

    David Botkin’s moronic comment in the Times-Dispatch notwithstanding, I had enough conversations with Dominion folks about this in the past to know they understand this is unwise. This is to satisfy political demands, and as noted before to provide Virginia Democrats a shiny object to distract from their pipeline support. There is absolutely no need to “demonstrate” this proven technology. It’s there to provide campaign photo ops. Just wait, you’ll see.

  3. TooManyTaxes Avatar

    The stated position of the Sierra Club provides additional evidence that many environmentalists and their organizations are anti-consumer. It is pushing a plant that would cost 78 cents per kwh. So with evidence like this we should follow the environmental groups to fix climate change – NOT!!!!

  4. Jane Twitmyer Avatar
    Jane Twitmyer

    The Sierra Club is not supporting a project that costs 78 cents per kwh. What Sierra VA did was to commission an analysis by BVG Associates about what developing an offshore industry in VA would mean and what would be required. There is nothing in that report suggesting a pilot of 2 windmills which only made sense in 2013-14 when it was first proposed, and no longer makes any sense at all.

    The report talks about the threshold and timing required for investment … which is the equivalent of 60-125 units or 1GW. The report “provides a simple yet credible and compelling case supporting a Virginia vision of developing at least 2 GW of offshore wind by 2028. … and “demonstrates why Virginia should seek to establish offshore wind as a key element of its energy and industrial development and discusses some options in terms of how to proceed.” It speaks of 2 projects of 875MW in 2026 and ’28 with onshore development in place then.

    To say environmental groups are anti-consumer is just plain wrong.

    1. TooManyTaxes Avatar

      Jane – then why would the Sierra Club point out that the GA wants the project? The SC should have told the VSCC that, despite GA support, this is a bad project as proposed by Dominion. If the SC supported consumer interests, it would demand that offshore wind be installed and used only in the event it provides lower-cost energy for consumers than Dominion’s fossil fuel generation.

      I’m very cynical about environmentalists because they argue that renewable energy will costs consumers less, while being equally reliable, but then seem to support higher-cost projects.

      The last several days I spent with clients meeting with the FCC commissioners’ offices. The questions we received were generally related to what gives consumers more choice, better services and lower prices?

      The energy debate quickly turns from “better for less” to “the same for more.” And when landowners with property in areas likely to be flooded due to rising sea levels are taxed to help fund remedial measures, I’ll consider paying a bit more.

      I have good friends deep into environmentalism but on that issue, I keep them at pole length. Their vision raises my bills.

      1. Jane Twitmyer Avatar
        Jane Twitmyer

        I can not answer your question and do not know the context of “the legislature wants the project”. It could have been said in complaint or an acknowledgment of some level of inevitably that the project will get built.

        Re the cost issue of environmental fixes: several things to be aware of when looking at the costs of most of the environmental challenges: … costs have been offloaded by corporations onto the public … corporations have either been ignoring the appropriate laws, the laws have not been enforced, or the environmental toxicity came to light after the fact. Whatever … the public gets stuck with the bill most often and environmentalists are the ones asking for the fixes.

        Another issue concerning the costs of renewable energy. The fixes required new industries whose products are always more expensive as the industry develops. Then costs come down. We have seen that happen dramatically in solar and onshore wind and it is still happening in those industries.

        Too bad Virginia doesn’t have much good onshore wind. Offshore will produce much better because the winds are much stronger and the need for finding the right land is not a problem. Costs will come down rapidly once the demand reaches a good level, but unless we are willing to put some skin into the game of building the offshore industry it will happen elsewhere and VA will lose.

        1. TooManyTaxes Avatar

          How long have we had solar? We’ve had windmills for centuries. Yet, I don’t see big price breakthroughs being proposed for consumers. I don’t see a renewable energy company advertising that, if retail competition came back to Virginia, it could offer consumers retail rates that are 3/4 of Dominions.

          But look at computers and telecommunications. What did your first computer cost and what could it do? Remember the heavy cell phones that first entered the market and the prices 45-50 cents per minute or more. What do you get now? What do you pay? If the rest of technology was like renewable energy, we’d still have 386 processors as the top of the line. We’d have text messaging at a dime a message and no data except for businesses that could afford it. 40 plus years in technology-related law leads me to believe that the renewable energy industry is a scam as big as Dominion’s attempt to fleece the ratepayers.

          All I read from environmental groups is rhetoric that the price of energy needs to be higher to incent conservation. And, like the media, they hide any information that doesn’t fit with their advocacy. We hear prediction after prediction of climate horror. But never about the many earlier predictions that didn’t come true. We see posturing by elected officials about climate as they drag their feet when confronted by Alexandria’s combined sewer system that dumps human waste into the Potomac every time it rains. Yet, Fairfax County sewer bills rise yearly. (Some Fairfax County residents are connected to the Alexandria sewer system.)

          I’m not against renewable energy. I don’t like Dominion. But I want to see honesty on the climate issue and I want to see lower prices from renewable energy. How about environmental groups suing the manufacturers of LED bulbs for price fixing? Or are they closing their eyes to high prices brought about by collusion because manufacturers help fund environmental groups.

          1. Jane Twitmyer Avatar
            Jane Twitmyer

            “All I read from environmental groups is rhetoric that the price of energy needs to be higher to incent conservation. And, like the media, they hide any information that doesn’t fit with their advocacy.”

            Not sure what you are reading but I don’t know any environmentalists that think that. Lazards levelized costs tell us that solar and onshore wind produce the lowest cost electricity. It has just taken awhile for the initial prices to drop to this level. Offshore will do the same as the industry develops. Snd the technology of wind and solar is also developing.m mGE is going big into offshore wind and closing down some older fossil technology production.

            Please be specific with the charges of scams and collusion. The climate changes are becoming visible but the process of climate change is a slow process. Wouldn’t you rather be safe than sorry? I would.

          2. Jane Twitmyer Avatar
            Jane Twitmyer

            “All I read from environmental groups is rhetoric that the price of energy needs to be higher to incent conservation. And, like the media, they hide any information that doesn’t fit with their advocacy.”

            Not sure what you are reading but I don’t know any environmentalists that think that. Lazards levelized costs tell us that solar and onshore wind produce the lowest cost electricity. It has just taken awhile for the initial prices to drop to this level. Offshore will do the same as the industry develops. And the technology of wind and solar is also developing. GE is going big into offshore wind and closing down some older fossil technology production. Oil companies are investing in offshore oil as they know lots about putting up things like drilling rigs offshore so can do install turbine platforms.

            Please be specific with the charges of scams and collusion. The climate changes are becoming visible but the process of climate change is a slow process. Wouldn’t you rather be safe than sorry? I would.

          3. TooManyTaxes Avatar

            Jane – “Lazards levelized costs tell us that solar and onshore wind produce the lowest cost electricity. It has just taken awhile for the initial prices to drop to this level.”

            Why? This doesn’t happen in other industries where it adopts new and advanced technology. Price fixing? Conspiracy? Kick-backs? I agree that the mix of generation sources creates a blended rate that could be higher than the incremental cost of the new technology but there should be movement towards incremental cost.

            As far as bad predictions are concerned, let’s start with the 1970s’ claims that earth was entering into a massive cooling period. Then we can turn to James Hansen’s 1988 prediction made to Congresss about a rate of warming that didn’t occur.

            NASA altered data.

            No human being is all prescient. But missed projections go to credibility. And good scientific and public policy debates require a discussion of missed projections and an investigation into claims of altered data. It’s a cover up.

  5. No comment …I am not expecting good things from the state/utility monopoly. I’m just glad that cows don’t fly (translation- I’m just glad the state/utility monopolies finally got off their favoritism for coal-fired power plants).

  6. Steve Haner Avatar
    Steve Haner

    If a third-party investor or group were building that future off-shore field, selling the power to one or more utilities through a PPA and spreading the risk, that would be far better for ratepayers and would still satisfy those who want more wind energy. On-shore also satisfies that desire for a far lower ratepayer cost. By grabbing control of the location Dominion has forestalled that possibility and if they build this it will not be to our benefit at all. The 2018 legislation saw the environmental movement make a deal with the devil. As I saw them line up to endorse it (Sierra Club did not) my respect waned.

    1. Well the environmental movement and the electric utilities tend to be aligned with the Electrification Coalition (promoting electric cars, etc). Recently GM suggested we need a national mandate for electric vehicles, which is sort of equivalent to saying the sales are weak unless they can be forced and subsidized. But you can see there are business interests wanting to move in that direction.

      1. Reed Fawell 3rd Avatar
        Reed Fawell 3rd

        “… the COALITION
        … is POISED
        … to be a DOMINANT PLAYER
        … toward TAKING STANDS on strategies and practices
        … that define ClIMATE CHANGE

        = CRONY CAPITALISM disguised as public service.

  7. LarrytheG Avatar

    My perception is that this particular project is not a big agenda item for the enviros nor the Dems. It got through the GA with a LOT of GOP Votes!

    And so one does have to ask why would the GOP in the GA vote for such an uber project in the first place ESPECIALLY if it was also favored by the Dems and Enviros?

    The GOP who is not normally inclined to have the Govt involve itself in the free market much less known for it’s support of “green” energy, much less known to
    FORCE anyone to build such a project – how does it make sense that they’d vote to do this?

    The only way to explain it is that Dominion wanted it.

    blaming the enviros and Dems for this is funny!!!

  8. Steve Haner Avatar
    Steve Haner

    Larry, if you are making apologies for the Democrats and trying to spread the blame to Republicans, my work here is done. You recognize you’ve been had. This actually is a very bi-partisan piece of virtue signaling. Once people fell in love with this idea they never wanted to hear any picky details about cost.

    Jane, VA could build plenty of on-shore wind but its going to be on mountain sides and tops and the NIMBY’s won’t like it.

  9. LarrytheG Avatar

    Steve – well no.. In most time the GOP would never support something like this much less mandate it… Don’t point to the Dems.. ask why the GOP voted for it……..

    1. TooManyTaxes Avatar

      Larry – this is crazy. The House Bill HB 1558 was patroned by Terry Kilgore (R), Lamont Bagby (D), Joseph C. Lindsey (D) and Ken Plum (D). It passed the House 63-35. I recognize Democrats and Republicans on the prevailing side of the vote.

      The Senate Bill 966 was patroned by Frank Wagner (R). It passed 26 -14. I recognize Democrats and Republicans on the prevailing side of the vote. And magically, the bill was signed into law by Democratic Governor Ralph Northam.

      1. LarrytheG Avatar

        And my point is that in the past not a single GOP would have anything at all to do with “mandating” green energy……… much less SPONSOR legislation to MANDATE it.

        Why would any GOP worth their salt sign on to something that mandated green energy? How many of the GOP support the RGGI for instance?

  10. Interesting article today in the WaPo business section on Arizona’s kerfuffle over solar power. Seems a well-funded group wants to impose (by ballot initiative) a State Constitutional amendment that would require electric utilities to generate 50%+ from renewable energy resources (mainly solar, which AZ has lots of). The utilities are pushing back, of course, on the basis of cost — Az Pub Svc has thrown out an estimate of >$1000 per retail customer account annually. The big divide, according to the article, seems to be over cost projections for storage — i.e., massive Li+ batteries — to time-shift some of that solar generation into the evening and night-time hours. Both sides, it seems to me, have dug in over unrealistic (excessively pessimistic versus excessively optimistic) estimates of storage costs.

    Also very interesting, the single biggest-ticket cost item in the utility’s estimates is the cost of advancing the retirement of its nuclear generation. Why? Because nuclear gen. cannot be cycled, which means it either must run or must be shut down. So, nuclear operating on the same grid with a large percentage of solar simply has no economic value, and in fact the nuclear unit owners will have to pay the grid operator to accept the nuclear power during daylight hours at a loss, as so-called “dump power,” backing down the cheaper solar power to make room for it (in the wholesale electric market, someone who dumps power in that manner must compensate the owners of generation that would have sold into the market but for the dumping). And if there are lots of batteries installed on the AZ grid that will aggravate the situation for the nukes by expanding the hours in which they cannot compete beyond those hours with high sunshine. This means certain retirement for the nukes. But what will replace them? It probably won’t be expensive-battery-time-shifted solar power but cheap, easy-to-cycle gas-powered units — unless the 50% threshold demands still more solar, along with even more batteries.

    Good intentions involving new technology often come with unintended consequences.

    And who is supposed to prevent such unintended consequences by foreseeing them? The State utilities commission. Our neutered friends on the VSCC being the local example.

    1. Jane Twitmyer Avatar
      Jane Twitmyer

      Acbsr, Didn’t read the WSJ article but I have been reading other things about Arizona. They don’t see lots of gas in their future. Arizona has real climate problems … 125 degree heat briefly closed down airports last summer. In fact their PUC sent the utility back to the drawing boards because they were planning too much gas. The submitted IRP downplayed utility-scale solar and storage and banked on massive gas plant construction to meet peak demand. The all-Republican Arizona Corporation Commission rebuked the utility plan and froze new gas plant development for 2018.

      A stand alone battery project is underway to serve peak demand in Phoenix. The Salt River Project’s new battery system will charge up on existing energy sources to serve the Phoenix metropolitan area. It won’t be utility owned as the utility has contracted for a 20-year power-purchase agreement with AES, which will own and operate the 10-megawatt/40-megawatt-hour system provided by Fluence.

      In NC Duke is beginning to include batteries as a way to serve remote communities. A battery in Hot Springs will enhance grid reliability at lower expense than a conventional wires upgrade. Until we stop allowing ‘monied interests’ to decide policy matters based on what is best for them, not us … Virginia got a “D” from the Public Integrity Project in government ethics … we won’t see Virginia even proposing projects that will create the experience and knowledge to develop real change in the future.

  11. LarrytheG Avatar

    What many/most Conservatives including the GOP have said on green power over and over is that it should compete head to head in the market without incentives or tax credits.

    Dems often on the other hand often have no problem with incentivizing solar/wind on the premise that it’s much less polluting.

    Conservatives point out that wind/solar is not “reliable” and that other power sources still have to be built to back it up, that the grid is not able to accommodate green energy that varies according to cloud cover, rain, lack of wind, etc.

    So how does it come to be that Conservatives have voted to MANDATE the building of wind turbines AND have neutered the SCC who is supposed to safeguard consumers from foolhardy “green weenie” ideas for “clean power”?

    So this feel a little like the failed effort at de-coupling which was essentially sabotaged on purpose to fail – then after it failed as intended – it would never be brought up again because “we already tried it and it failed”… excuse.
    Despite the fact that de-coupling HAS been successful when configured differently so it did succeed.

    So this sounds a little like purposely picking a bad offshore project – mandating it, knowing it will turn out bad – then from that point on say that offshore is just not viable and no sense looking at it again in the future.

    So we had this white elephant to Dominion to bollox it up further so has no chance to become a competitive threat… oh.. and we’ll make the whole effort a profitable one that ratepayers pay for.

    So now you now why Conservatives who normally can’t stand incentivizing green power …have no problem mandating it… just set it up for failure so the monopoly utilities don’t have to fend it off ….

    here’s an interesting article along the same lines for the rural electric cooperatives:

    Energy research group says Rappahannnock Co-op customers paying too much – Nov 3, 2018

    The Rappahannock Electric Cooperative’s long-term contract with a power provider is driving up its electric bills, an energy research group says.

    Ratepayers who use 867 kilowatt-hours of electricity each month—the national average—could have saved from $12.14 to $20.80 per month had the co-op purchased its electricity on the wholesale market over the past three years, according to the nonprofit Institute for Energy Economics and Financial Analysis. Power prices have fallen in recent years because of the increasing popularity of wind and natural gas as sources of electricity.

  12. Jane Twitmyer Avatar
    Jane Twitmyer

    TMT … Your temperature data is from 2013 and the last five years show differently. NASA has s website with a very long list of questions about the data that could answer your questions. Take a look. One of the questions I saw relates to one of your references questioning the changed figures. Looks to me like it has to do with how the very old data was determined …prior to our current ongoing data regarding temperatures. Two from of NASA questions list
    “How do we know what greenhouse gas and temperature levels were in the distant past? “
    “Why does the temperature record shown on your “Vital Signs” page begin at 1880?”

    New product development is very different from what must go into developing an offshore wind industry. Right now the blades come from Europe and as one industry guy in MA said … “You can’t build a plant based on one order” …
    The Block Island project utilizes five 6-MW direct-drive turbines designed and manufactured by GE Power in Europe that will be installed atop four-legged-jacket fixed-bottom substructures designed by domestic companies. Oil company offshore installers did the structural installation. Special ships and personell are required.

    The demonstration sites are all on federal waters where site analysis had to be done before leases are put out to bid. DOE’s 3 demonstration projects at different water circumstances are planned to be highly instrumented for measuring metocean conditions, structural loads, power production, and environmental data. To benefit the U.S. offshore wind industry, data collected during the demonstrations will be made available to the public 5 years after project completion. In addition the data collected at new offshore buoys is also available to developers to help them know the wind values available to them.

    The ‘Smart from the Start’ federal program worked to simplify and reconcile shore line regulations among the different states. Anyway, there was and still is lots to beginning the offshore industry that once done can make further development easier and cheaper, as will producing the windmill parts here and in greater numbers. All of this is perfectly reasonable.

  13. LarrytheG Avatar

    re: ” TMT … Your temperature data is from 2013 and the last five years show differently. NASA has s website with a very long list of questions about the data that could answer your questions. Take a look. One of the questions I saw relates to one of your references questioning the changed figures. ”

    essentially the skeptics do not believe the Government and they attack the govt for “bad” data that “changes” and at the same time “believe”others who don’t generate data themselves but go find data generated by others – virtually always – Govt-funded – to “prove” the government is “lying”.

    Basically they don’t want to really understand the data because they believe that scientists around the world have altered it and lied about it.

    It’s really not so much about Global Warming as it is a belief that the Govt and Scientists are lying about it.

    Ergo – NASA and NOAA are also lying….

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