More (But Not All) Cost Projections Filed About Ratepayer Bill Transformation Act

Source: SCC Staff summary. Click for larger view.

With some of its closest legislative allies facing primary challenges next week, much of what Dominion Energy Virginia filed Friday in response to questions about the consumer cost of its future plans is redacted.  The story in Tuesday’s Richmond Times-Dispatch (here) could only cover that portion of the data not kept secret.

Three of the four documents filed by Dominion are about its motion requesting protected status for the information, and the fourth (here) includes numerous blacked out portions, which we will not see unless the SCC rejects those motions. 

The newspaper headline was bad enough, especially for the many legislators who voted for the 2018 Ratepayer Bill Transformation Act.  The $12 billion in capital investment, much of it related to that legislation, could add $29 a month to a residential customer’s bill.  For the many residential customers who use more than the illustrated 1,000 kWh per month, the cost will be higher.

The report filed appears to include the total bill impact for the various proposed investments but keeps secret the impact of the individual projects and their timing.  When does Dominion really plan to build offshore wind, apply to extend its nuclear licenses, or proceed with a new pumped storage facility promised to Southwest Virginia legislators?  What is their bill impact?  That’s all covered up with black ink.

“The Projected Rate Information is competitively-sensitive information that, if not afforded the highest level of protection, could result in harm to Dominion Energy Virginia and its customers,” Dominion’s lawyers wrote in their motion for protected status.   Another theory is the full truth might be politically sensitive in certain circles.

The filing is now part of the insanely-thick record (here) for the pending Integrated Resource Plan case.  The additional data was demanded by the SCC after Dominion held an investor presentation on its plans in late March, outlining several capital projects which were not included in the original IRP or an amended version.  The SCC staff, it its commentary on this new data (here) and the chart copied above, refers to it as “Investor Day Spending.”

The staff’s analysis states that the current value of the company’s capital rate base for its Virginia jurisdictional customers is $18 billion and the various proposals would add another $12 billion by the end of 2023.   That growth is somewhat offset by a reduction of $3.6 billion in the rate base as existing assets are paid off or retired.  The actual assets the utility projects will leave the rate base are not detailed.

But will customers actually see reductions in their bills due to those assets being paid off or retired?  That change could only occur following a true rate case looking at the totality of the company’s finances and lowering the base rate, a process the company has persuaded the General Assembly to delay, prevent or manipulate several times to date.

The company is also offsetting the projected cost of the new projects with expectations that fuel costs will go down, with declining cost for natural gas and the increased use of renewable generation with no cost for fuel.  The details on those projections are also lacking from the public portions of this filed testimony.

The substantial drop in fuel prices, if it comes to pass, means a very different impact on residential and large commercial customers.  Large customer bills are more dependent on the cost of fuel.  Assuming all of Dominion projections come to pass and all the projects go forward at the present cost estimates, a large GS-4 customer might see only a 2 percent net increase where the residential hike is closer to 18 percent.

The political sensitivity of this filing by the company is highlighted by who signed the cover letter, President and CEO Paul Koontz.  None of it is redacted and here are a couple of key paragraphs:

Many of these investments are promoted and enabled by the public policy priorities of the 2018 Grid Transformation and Security Act (“GTSA”). Some of them will be funded through rate adjustment clauses (with Commission approval), and others will be recovered through existing base rates, which have not increased since 1992, and which by law cannot increase any earlier than 2025. All investments will be made in furtherance of ensuring a more modern, resilient, secure, diverse, and lower emission energy system to meet our customers’ growing needs and preferences for electric service….

In fact, the Company expects, based on current projections, that the new chapter of regulation under the (Grid Transformation and Security Act) will mirror the successful record over the last decade. The 2007 Act prioritized investment in new electric generation resources to make Virginia self-reliant and minimize the risks of supply from volatile external markets. Between 2008 and 2018, the Company committed over $6.5 billion to develop more than 6,000 MW of new, cost-effective utility-owned generation infrastructure that will serve Virginians for many decades. The Virginia jurisdictional rate base grew from just under $10 billion in 2008 to $18 billion in 2018. However, the typical residential bill increased only to $114.42 from $107.20 over the same period—just 6.7% in the aggregate over ten years, or less than 30% of the general rate of inflation. And the industrial rates actually decreased between 2008 and 2018 by 3%, from 6.3 cents/kWh to 6.1 cents/kWh.

If things really are that great, why all the secrecy again?

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24 responses to “More (But Not All) Cost Projections Filed About Ratepayer Bill Transformation Act

  1. so where are the commenters here that rail about transparency and accountability?

    I also want to know if this stuff affects ratepayers with the co-ops?

    Why does Dominion get to do this stuff and the Co-ops not?

    Dominion seems to run amok in the regions it serves and the Co-ops don’t do any of this stuff that Dominion is doing.

    Why?

    • The Coops are regulated under a different set of basic statutes, Larry. All the fluff built by the General Assembly into Dominion’s rates does not apply to them.

  2. So, I forgot one little metric – the annual ROE on that additional $12.1 billion added to the rate base is $1.1 billion per year. Nice profit. That assumes the present 9.2 percent ROE, which of course is really the center point of band so D can earn and keep almost 10 percent ($1.2 billion per year) under the statute. A statute which the General Assembly has basically gutted, so they earn and keep even more….

    That is the difference, Larry, the coops don’t make their money that way and their customers ARE their stockholders so the whole incentive profile is different. They do come to the GA, give some money, put in some bills, get into occasional disagreements, but they have no incentive to tilt the playing field quite the same way. When dealing with the coops or even APCO I never feel the need to check my back pocket every ten seconds to see if my pocket is being picked.

    • So the OBVIOUS question is why ALL of Virginia could not operate LIKE it does now with the Co-Ops and not have all this stuff that Dominion is padding onto it’s bills for more profit?

      • There are a couple of obvious answers. First, NOVEC and indeed all electric cooperatives are non-profit entities that are owned by their members. They don’t have to generate profits sufficient to entice investors to buy their stock.

        Even though they do not have to generate profits for shareholders, rates for the cooperatives are often much higher than those of the investor-owned utilities because co-op service territories tend to be very rural and higher cost per customer to serve. NOVEC rates have always been higher than Dominion’s or nearly always and it is the most heavily urbanized coop in the Commonwealth.

        Second, almost all members of the General Assembly, either D or R, just really, really like Dominion, too!

  3. Not sure I am following, but I am not expecting we will hit New Jersey elec price overnite…just heading in that direction

  4. Not sure I am following, but I am not expecting we will hit New Jersey elec price overnite…just heading in that direction

  5. It’s time for consumer advocates and business to start a campaign to get rid of Dominion in Fairfax County and surrounding areas.

    • In Fairfax, there are primary two electric utility providers – Dominion and NoVec.

      NoVec is independent – it is not affiliated with Dominion nor ODEC and it has very little generating power it owns. From what I understand, it buys all it’s power from PJM.

      NOVEC is not (as far as I know) doing the so-called Grid Transformation Act, not getting RACs for it and not making a profit on it. They’re not doing the other RACs that Dominion is doing – either.

      They’re not tangled up with Dominion’s bogus solar or wind program – and as far as I know they’re not paying for coal ash cleanup nor the “profit” Dominion is proposing on coal ash cleanup.

      So- how can that be? How can there be ratepayers in NoVa living next to each other -one side gets power from NOVEC and the other from Dominion and one side subject to all the RAC by Dominion and the other side not.

      I’d argue that most folks would prefer to not have to pay all these RACs to Dominion and are essentially trapped.

      So.. when we talk here about Dominion and the SCC – like for coal ash cleanup – should we also talk about how that issue is being handled by the Co-ops and if it is not – point that out?

      • It would definitely cost too much to buy out Dominion. Our service territories were set many years ago and attempts to change them, even in small ways, have been defeated. Thus, everyone is “essentially trapped” with our provider.

        There is another way some communities get their power (than investor owned and co-ops). It’s municipal power. Manassas has it. Salem. Danville. But in Virginia, we have very little municipal power. Folks don’t like the idea of government being involved.

        Virginia chose to mostly go with member ownership via cooperatives in the areas that years ago the investor owned utilities did not find likely to provide them enough income. It’s hard to compare NOVEC with my Craig Botetourt Electric Cooperative. NOVEC is in area that is growing. CBEC is in area that is not growing. We are small enough that it’s pretty easy for new businesses to elect to locate in another location to avoid our highest in the state rates. We cover mountainous area and comparatively, so little inexpensive to serve area, that our costs will always be higher. Most cooperatives and municipal power providers buy their electricity instead of owning generation. Again, size matters. CBEC is so small that our providers wouldn’t notice if we got our power elsewhere and they have little motivation to help us keep our costs low and plenty of motivation to make as much from us as they can.

        Now the co-ops that are in areas that are still rural enough that nobody has been willing to provide broadband are being pressed to add broadband to their offerings. It’s expensive so it’s slow. Co-ops also have the need to maintain and upgrade existing infrastructure for providing electricity. Recently some investments in broadband have been made by the state and other sources but coops have to build broadband infrastructure as they can obtain funding and personnel to address this new service, meaning that all parts of their service areas won’t get broadband at the same time.

        Co-ops have gotten some things through state legislation that make operations easier as they have supported Dominion’s changes. The rules have been changed (twice now) so that coops don’t have to go to the SCC for approval of everything as we did in the past.

        Sadly, most co-op members don’t take time to understand and get involved with operation of their coop. It can be hard to be involved. I’m on the tail end of CBEC’s service area and I work in the opposite direction from its HQ. It takes 90 minutes or more each way to travel so work day meetings are difficult; the annual meeting is always held when we go on vacation to celebrate our anniversary. It’s pretty easy to understand why so few people participate, but I wish more of us did.

  6. Larry. It has been noted that ODEC is part owner of the Clover coal generation facility, so any cleanup/recycling costs there will be shared by coop customers. I assume (somebody can advise) that power dispatched through PJM might also pick up those costs, passing them along to coop customers, although this might be another situation where Virginia’s stricter regime means Virginia dispatched power will be higher priced and shunned in the market….

    Much of the “grid transformation” technology is going to spread throughout the country because much of it makes great sense and lowers costs. And if it doesn’t, then the ideas will wither. These companies are always making investments, upgrades, replacing old with new…they don’t need to come to the GA for permission. That bill was just a trojan horse and it was the stuff hidden from view inside that mattered. Look at that list above and the grid spending is about ten percent of the new capital coming.

    The answer to your “obvious” question about why the major utilities can’t just be run like the coops is this: To get there, somebody would have to pay off all their stockholders….you got that kind of bread? The market cap for the VA jurisdiction share of big D might be some serious money….

    • Steve – I have not heard much if anything about how the Co-ops would share in the clean-up costs in no small part because it seems to be in the hands of Dominion so if it’s true that all other consumers would also have to pay – where exactly would we see that plan and how it works for the Co-ops?

      In terms of the Grid Transformation – ” Much of the “grid transformation” technology is going to spread throughout the country because much of it makes great sense and lowers costs. ”

      I AGREE by why does it have to go through Dominion and Dominion gets a guaranteed profit without any competition from other sellers?

      Finally, “paying off the Stockholders”.

      I’m sure this has been done in other states.

      I would be just fine with Dominion maintaining it’s basic monopoly and getting a guaranteed return on their investment. What I’m NOT fine with is the WAY they are preying on ratepayers for all manner of add-ons that are not really part of their basic monopoly and those add-ons are not part of the co-opts core business also.

      At some point, we cut our losses because Dominion is clearly not moderating their behavior and they fully intend to stick it to ratepayers if they can get the GA and SCC to go along.

      Again – I’m just fine with them benefiting from their core monopoly – no problems with that – it’s this other stuff that is over the top.

  7. Re: ODEC and Clover. As far as I know Clover is already disposing of coal ash in a lined pit and the other source for ODCU is their part ownership in North Anna.

    So does the Coal Ash cleanup specifically apply to the Co-ops?

  8. Why should we be surprised to find that it is absurdly expensive to ripe up the major parts of a state’s generation and distribution of electrical power system, and replace it will an altogether new, different, and untested system? Have we lost all of our common sense, along with any semblance of a grip on our reality around us?

  9. A question for Steve …
    The rate for retirements seems to be zero … plants put on layaway even though PJM is available with extra capacity, as Tom has said. The rate base just keeps growing. How can that be when the data centers want their own generation .. renewable energy with fixed long-term costs … and a ‘normal’ amount of efficient building development could replace all the nuclear units.
    My question … is Dominion keeping the old units on the books because they are not fully paid for, or maybe the 2000 upgrades are not paid for? Is cost recovery the reason nothing gets retired?
    Not retiring the units keeps them in the rate-base even when they are too expensive to run. PJM won’t choose them, but they must have maintenance costs. Could Virginia allow accounting changes as described by the America Power Plan’s Debt for Equity paper? Allowing the utility to cover the costs of uneconomic assets through refinancing the remaining debt would change the picture.
    I don’t understand the balance sheet well enough to know …

    • “My question … is Dominion keeping the old units on the books because they are not fully paid for, or maybe the 2000 upgrades are not paid for?”

      No. It is because renewable energy cannot get the job done of substantially reducing carbons alone without blowing up the grid and entire US economy.

      • So, for one example of the ongoing collapse of renewable generation of electric power as the sole solution to carbon reduction, consider the very recent ruling of PG&E’s bankruptcy judge that “could clear the way for the financially troubled utility to tear up billions of dollars in expensive green power contracts as it seeks to exit bankruptcy. The ruling … may allow the company to get out of $42 billion in power purchase agreements, including many pioneering wind and solar deals that now allow well above current market prices. This could threaten scores of electric suppliers … as well as complicate California’s ambitious plans to reduce carbon emissions to combat climate change… Rejecting those (green energy contracts) could save PG&E $1.4 billion annually, according to Moody’s Investors Services.”

        See PG&E Can Exit From Green-Power Deals by Peg Brickley in today’s Wall Street Journal.

        Meanwhile, the state of California is undergoing the threat and active reality of rolling blackouts causing much financial harm to local businesses.

      • More bad news for the future of renewable Green Power generation, this time from Forbes –

        “The myth of renewable energy

        The second misleading claim is that intermittent sources of renewable energy can replace the need for grid-supplied power based on fossil fuels. An endless litany of “green” success stories permeate the mainstream media with the erroneous believe that that wind and solar power are “already competitive” with fossil fuels. Rigorous economic analyses of the hidden costs of unreliable, weather-dependent solar and wind power have countered such claims as an exercise in magical thinking. According to data reported by energy generators to regulatory authorities in the US, wind and solar power are two to three times more expensive than existing coal or gas-fuelled power.

        Perhaps the best response to the renewable energy hype is provided by the example of Dharnai, a small village in India’s Bihar state, which lacked access to the country’s electricity grid. In 2014, Greenpeace activists set up a solar-powered microgrid for the village to much fanfare. Almost immediately, problems emerged with the load put on the village solar “grid” as households began to hook appliances such as rice cookers, electric water heaters, irons, space heaters and air coolers. On the day of inauguration of the solar power system in the village, its inhabitants protested with banners stating “we want real electricity, not fake electricity”. As explained by the reporter at the location, “By ‘real’, they meant power from the central grid, generated mostly using coal. By ‘fake’, they meant solar”. In wonderful irony, the embarrassed government VIPs present for the gala opening of the Greenpeace-promoted solar showpiece ensured that the village was shortly connected to the coal-fired power grid.”

        Extract from Forbes as reported by Tilak Doshi, full article found at:

        https://www.forbes.com/sites/tilakdoshi/2019/06/07/in-coal-we-trust-the-need-for-coal-power-in-asia/

  10. All excellent questions I would not try to tackle without doing more research. y education on this continues, case by case. I think there are some outright retirements, not just plants put into cold storage, but exactly how the accounting works on any stranded costs is beyond my experience. As you can see in the chart, those old plants have to be largely amortized by now, all but Clover. I’m not familiar with the paper you reference, but will search for it.

  11. My blind faith says we can get to about 80% with the ‘stuff’ we have right now but that kind of comment does not answer the question I asked. Closing coal early actually saves operating money if the stranded assets have an out.

    We can close all coal and not add more natural gas … the goals behind Michael Bloomberg’s new initiative … and develop that efficiency to replace the nukes as Tom has described. That combined with the development of third party onsite and rooftop solar could reduce the amount of total central generation required by 25% in VA. according to the study done by NREL.

    Like it or not Virginia is way behind in developing what corporate America wants and way behind in developing a clean energy economy, but I guess that is what Virginia is comfortable with … being last to the future.

  12. Steve, you said you would check out the paper … Sierra has a good, or better paper … Harnessing Financial Tools to Transform the Electric Sector, written with RMI and others …. and giving “particular attention to securitization with capital recycling as a key opportunity”.

    Utilities find that by using these tools they can retire coal early without financial damage.

    • “Sierra has a good, or better paper … Harnessing Financial Tools to Transform the Electric Sector, written with RMI …”

      Sierra Club, and Rocky Mountain Institute – Now there is a pair of detached and impartial observers to stake America’s future on.

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