The Virginia State Corporation Commission needs to keep in mind that certain critics of Dominion Virginia Power’s 1,358-MW Brunswick County project are trying to sell power to the utility in competition with that planned facility, said Fred Wood III, Senior Vice President-Financial Management for Dominion Generation.
Wood and other Dominion officials provided April 10 testimony at the commission responding to comments of other parties in the case for the gas-fired Brunswick County project. Virginia Electric and Power, a unit of Dominion Resources (NYSE: D), does business in Virginia as Dominion Virginia Power.
Among other parties, the Dominion officials were responding to prior testimony from Michael Schnitzer on behalf of the Electric Power Supply Association (EPSA) and PJM Power Providers Group (P3) and Nathan Hanson on behalf of gas-fired plant operator Doswell Limited Partnership.
“While I know that the Commission will carefully consider the positions offered by these parties, I believe that their positions, fundamentally, are driven by their economic interests as market participants in the wholesale power sector,” wrote Wood about EPSA, P3 and Doswell. “Doswell is currently our largest [non-utility generator] NUG in terms of capacity, and we have had a relationship with the Doswell facility for over 20 years. EPSA and P3 are national trade groups representing merchant generators and power marketers within and outside the Dominion Zone of PJM Interconnection, L.L.C. (‘PJM’). I am not questioning the standing of these parties to participate in this case, but, clearly, they have a financial interest in the outcome of this proceeding. Whether Dominion Virginia Power purchases power from the wholesale markets or, alternatively, pursues other options to meet its needs, it will have an economic impact on Doswell and members of EPSA and P3, and I submit that their recommendations in this case should be considered against that backdrop.”
Dominion is not saying that wholesale power markets are a bad thing and that they cannot provide beneficial results for customers, Wood added. “In fact, wholesale market purchases have filled a need for the Company in the past, and are forecasted to continue to do so in the future. Our membership in PJM and availability of its market options in particular has proven very valuable to our customers in recent years. We are driven, though, by our statutory obligation to serve our 2.4 million customers reliably and at just and reasonable rates, with growing load obligations and changing dynamics in the marketplace. In this case, we are presenting evidence of our systematic consideration, analysis and evaluation of market alternatives as a supply option among many, including new ‘iron-in-the-ground’ generation in Virginia, during the course of our resource planning process. That process has concluded that the best investment we can make on behalf of our customers to meet a substantial resource gap beginning in 2016 is the Brunswick Project.”
Dominion says it did seek offers from NUGS
A staff witness from the commission had been somewhat critical of the largely undocumented process under which Dominion spoke by phone to some of its NUGs and then followed up with e-mails, to solicit offers for power the NUGs could provide in place of Brunswick County.
Two other Dominion witnesses addressed that point in more detail, with Wood writing: “In summary, the Company received offers from each of our existing available NUGs, including multiple offers from Doswell, which were subsequently evaluated using the same methodology used for integrated resource planning (‘IRP’) and [certificate of public convenience and necessity] CPCN proceedings. This evaluation confirmed that none of the NUG offers, individually or in combination, presented a lower cost option to meet our customers’ needs than the plan which includes the construction of the Brunswick Project in 2016. The results of this solicitation validate and provide further evidence in support of the Company’s earlier modeling results demonstrating that the Brunswick Project best meets the needs of our customers for new capacity resources beginning in 2016, considering all options including market purchases.”
Wood said he disagrees with a contention that the company is pursuing “an exclusive self-build strategy.” He said: “In this case, the Company’s analysis showed that the Project is the clear economic and operational choice for our customers. The Company plans its system to provide the best value to customers over the long term. The Company considers all options, based on their relative economics, across the spectrum of supply-side resources and technologies, wholesale market opportunities, and demand reduction alternatives, subjecting them to a rigorous modeling process . There are current market trends and forecasts which support the development of natural gas-fired units, and, in particular, the economics favor large, highly efficient 3×1 combined-cycle natural gas-fired units like the Warren County Power Station (‘Warren’) approved last year by the Commission and the proposed Brunswick County Power Station that is the subject of this proceeding. However, the conclusion that the Brunswick Project is the preferred and lowest reasonable cost option to meet our customers’ increasing needs beginning in 2016 was not a predetermined one.”
Wood said the company carefully considered, but ultimately did not accept, any of Doswell’s multiple offers to extend the existing PPA, as they were not in the best interests of customers, based on the economics of each offer. “The Company stated clearly in the solicitation that Doswell’s bid should be inclusive of pricing and all terms and conditions Doswell wanted the Company to consider in the final decision,” he added. “If Doswell’s responses did not constitute their best offers, then they did not comply with the terms of the solicitation.”