Updates: IRP Amendments, Utility Tax Cuts

Dominion Files IRP Amendments,  Cost Scenarios Requested by SCC

Late last week Dominion Virginia Power filed a summary of amendments and additions to its rejected Integrated Resource Plan, along with a legal memorandum arguing with the SCC over what parts of the 2018 Ratepayer Bill Transformation Act are mandates.  Dominion, of course, uses its name for the Grid Transformation and Security Act (GTSA).

The provisions of GTSA included add $4.7 billion in capital costs to the plan. (Hence my nickname for the legislation.)

I share this mainly to give interested readers a link to the documents, which will not mean much without careful comparison to the earlier data.  The testimony of several Dominion witnesses mentioned is not yet included on the record, and other parties to the case have until April to digest and respond to the new data.  SCC staff testimony is due April 16.  A hearing is set for May 8.  

Per the SCC’s demand, Dominion does add a baseline low-cost plan for meeting future energy demand, which then provides a comparison to measure the additional estimated costs of various options.   For scenarios above that $25 billion baseline, Dominion added in various elements of the GTSA which had not been spelled out in previous estimates, including the two offshore wind turbines, installing more residential lines underground, demand management programs, the planned grid investments themselves and projected the impact of a coming carbon tax on CO2 emissions.

It listed a capital cost of $2.2 billion for the grid improvements but balanced that with a claim the investments will save ratepayers $1.5 billion.  Without that adjustment, these new scenarios show dramatic increases in costs, ranging from $5.8 billion to a high of $10.4 billion over the baseline plan over the covered period. With the adjustment the higher costs range from $4 billion to about $9 billion.

The highest cost option- $10.4 billion above the baseline — is one that models Virginia’s coming membership in the Regional Greenhouse Gas Initiative with a limit on the utility’s ability to import power from non-RGGI members of PJM.  Comparing plans which include the GTSA elements with RGGI compliance with one that drops RGGI, disregarding RGGI apparently saves an estimated $2 billion.  Proponents of RGGI will dispute this.

Earlier SCC data indicated the carbon tax itself is only part of the cost imposed by compliance.  The Dominion summary indicates these new scenarios include the early retirement of two Chesterfield and two Clover coal generating units, not proposed for closure in the earlier IRP.  Retiring such plants before they need to be shuttered will not save customers money, just the opposite.

No estimates of the possible impacts on customer bills were included in the data filed so far.  When Dominion makes another attempt to get its distribution grid enhancements approved by the SCC, it will be interesting to see if it seeks to recover the $2.2 billion total cost, or gives ratepayers immediate benefit from that asserted $1.5 billion in savings.

Dominion continues to vigorously complain that the 23 percent capacity factor for solar facilities demanded by the SCC for planning purposes is unrealistically low and badly skews the results, preferring at least to assume the plants will be producing more than 25 percent of their capacity over their lifetimes.

Dominion, APCo Not Only Utilities Passing Tax Cuts to Customers

The federal Tax Cuts and Jobs Act of 2017 just lowered the electric bills for most Virginians, with the State Corporation Commission deciding last week to order refunds and then cut base rates for both Dominion Energy Virginia and Appalachian Power Company.

The real money is the base rate reductions, already partially implemented last year and now about to be sweetened, add up to $263 million a year for the two utilities.  Missing from the SCC’s news release, and unavailable when Bacon’s Rebellion queried, are the rate cuts for all the other companies with regulated rates that were subject to a 2018 SCC order to adjust rates to reflect the lower tax payments.

They are Virginia-American Water Company; Aqua Virginia, Inc.; Washington Gas Light; Columbia Gas of Virginia; Virginia Natural Gas; Roanoke Gas; Atmos Energy; Southwestern Virginia Gas; Appalachian Natural Gas Distribution; and Kentucky Utilities.  If you are among the many Virginian’s writing them monthly checks, they also reflect or will reflect the lower federal taxes.

Local governments and member-owned cooperatives are not taxed as corporations, so the 40 percent decrease in the federal tax rate didn’t matter to them or their customers for water, gas or power.

SCC Spokesman Ken Schrad said all the companies that were covered by it responded to the SCC’s 2018 directive, but most are adjusting their rates as their annual financial reviews come up.  He was not aware of any effort by SCC staff to compile the totals.  Nor does the amount for Dominion Energy reflect lower tax payments in its various rate adjustment clauses, many of which also include a (taxable) profit margin.

In case you were on pins and needles wondering, the SCC did not take Dominion Energy Virginia’s side on the argument over that disputed $67 million.  As reported last month, Dominion was claiming a $67 million credit it paid out as a rebate for excess profits should be counted as a cost of service.  Had the SCC agreed, the upshot would be a way for Dominion to get back the $67 million.

The story yesterday was a state tax reduction not nearly as generous or long lasting as some of political leaders are saying, and here we have a long-term and widespread federal tax reduction that nobody is even trying to measure in full.

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7 responses to “Updates: IRP Amendments, Utility Tax Cuts

  1. Appreciate the updates which add SOME clarity and also confirm how complex the utility/SCC “dance” is.

    One thing that we all ought to recognize about the tax rebate issue is that Corporations don’t pay taxes – they pass that cost on to customers.

    Of course in Dominions’ case, if you cut those taxes, they’d rather keep what they already collected unless the SCC can figure out a way to get it back!

    That part aside, it’s becoming increasingly clear that Dominion sees it’s monopoly in terms of a certain total value that it’s entitled to – no matter what array of services and electricity provided or how much people use, even if they use less. In other words, they do not accept the idea that if people uses less electricity that Dominion will earn less revenues.

    So their idea is that as long as they provide electricity – we pay X dollars for it – no matter how much we use and even if we use less!

    And I don’t expect the Dominion supporters in the GA to see it any differently and, in fact, if the SCC tried to hold Dominion’s feet to the fire on these issues, unless the GA goes blue – more harm to the SCC role will happen.

  2. Another viewpoint worth reading – even if you might not agree totally:

    “How the General Assembly failed Virginia again on clean energy”


    • I do regularly read Ivy’s work, and I’d link to VA Mercury more often if it returned the favor. But, see, it’s a “good” outlet, fair and balanced, whereas Jim and I are tainted conservatives so not suitable for sharing on a fair and balanced outlet. Just a fair and balanced as Fox, certainly.

  3. I’m particularly interested in the issue you raise, Steve, about the projected capacity factor for solar. Should it be 25% as Dominion projects, or should it be 23% as the SCC proposes. Surely, there is enough experience with solar in Virginia over several that we can ascertain the facts. Dominion has been operating a dozen or more solar facilities in scattered locations. What are the numbers?

    • What is really fascinating is that single variable, when plugged into the model that determines which generation methods make the most sense, really changes the outcome against solar. Perhaps as the record develops more info will appear.

  4. Let’s not forget that the grid independent system operator, PJM, also does projections of demand, including one for the “Dominion Zone” (Dominion’s retail territory plus the territory of all the wholesale customers, mostly co-ops, supplied by Dominion). PJM did not agree with Dominion’s low demand projections in the earlier IRP and has insisted that the grid’s transmission facilities be planned for higher Dominion demands. The SCC knows this, as PJM so testified in the hearings held on that IRP.

  5. Pingback: SCC Details High Customer Cost of RGGI - Bacon's Rebellion

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