Virginia Electric and Power d/b/a Dominion Virginia Power said that a Virginia State Corporation Commission hearing examiner is wrong and that its gas-fired Brunswick power project can be approved as the case currently stands.
“The Brunswick Project is a unique, timely and highly valuable opportunity for the customers of Dominion Virginia Power which should not be lost,” the utility said in a July 3 filing with the commission that rebuts the hearing examiner’s June 13 recommendation that the commission reject this project application. “The evidence in this case – substantially undisputed – soundly supports that proposition.”
The retirements of Dominion Virginia Power’s coal units at the Chesapeake and Yorktown stations in 2015, resulting in a 918 MW loss of capacity to its portfolio, contribute to the need for the Brunswick project, the utility argued. At least 19,000 MW of capacity will also retire in the broader PJM Interconnection market during this timeframe as more stringent environmental regulations take effect, bolstering the importance of an adequate and diverse utility-owned generation portfolio that can mitigate price and supply risks faced by the company’s customers.
“Brunswick’s 3×1 natural gas combined-cycle technology has not been questioned,” Dominion argued. “The [hearing examiner’s] Report, Staff and Consumer Counsel support this technology choice as efficient and prudent, particularly given the current and forecasted state of domestic natural gas reserves and pricing. Brunswick will be a very large unit, with a capacity rating of 1,358 MW (nominal), and is projected to meet a full 9% of the Company’s total energy supply requirements cost-effectively during its first full year of commercial operation. The Company’s customers will see immediate fuel savings anticipated at approximately $96 million during that first year, and these savings will continue over time as a result of Brunswick’s size and exceptional heat rate. There is also no dispute that the Project’s estimated capital costs of $1.27 billion ($934/kW), exclusive of financing costs, are reasonable.”
The June 13 report nonetheless recommends rejection of the Brunswick application. The report’s rationale rests on two narrow positions and associated findings, both of which the company said are not supported by law and, in fact, contrary to the substantial evidence established in the record.
- First, the report presumes that the commission, in its final order in the company’s 2011 Integrated Resource Plan proceeding, issued about a month prior to the filing of the Brunswick project application, changed the rules on consideration of market alternatives and established a new, higher standard of proof in certificate of public convenience and necessity (CPCN) proceedings. Based on the report’s interpretation of the 2011 IRP order, it concludes “that the Commission expected the Company to fully investigate the possibility of actual third-party alternatives as part of its process of establishing that a particular self-build option is necessary and prudent,” and that such an investigation necessarily required “a broader solicitation” of resources – apparently either a formal, competitive request for proposals (RFP) or a less formal broad invitation to third-party providers of capacity.”
- In addition, the report determines that none of the company’s evidence concerning consideration of market alternatives to Brunswick, including evidence relating to its solicitation of current under-contract non-utility generators (NUGs) for extension offers, constitutes evidence of “true market options” or “actual third-party alternatives” to Brunswick.
Dominion argues that there is no requirement for an RFP to be issued
“The Company requests that the Commission find contrary to these two positions of the Report,” Dominion wrote. “As to the law, while the Company believes that the Commission’s statements in the 2011 Plan Final Order constitute important guidance, it does not interpret them as revolutionary or course-reversing changes in the standard of proof for a CPCN proceeding as Consumer Counsel and others have advocated. These parties have argued that the Company cannot prove its case in the absence of a broad solicitation or RFP. To the extent the Report accepts this proposition, it is imposing – effectively – a requirement for competitive bidding, whether termed a ‘formal RFP, an ‘informal invitation,’ or otherwise. But the 2011 Plan Final Order simply does not say that a ‘broad solicitation’ or competitive bidding is required in all CPCN cases; rather, its guidance is contained in the phrase ‘adequately consider.’”
Dominion added: “The Company believes that the Commission’s requirements for a CPCN application brought under Va. Code §§ 56-580 D and 56-585.1 A 6 (‘Subsection A 6’) are evident and have been consistently applied over time. The Company must demonstrate that the proposed investment is reasonable, prudent, and in the public interest; that the methodologies and analyses supporting the proposed investment are reasonable and sound; and that the Company has ‘adequately considered’ reasonable alternatives to meet customers’ needs for capacity and energy. Those alternatives include existing owned generation; potential new generation; existing under-contract generation (NUGs); other third-party market resources, either contracted or available through the PJM capacity and energy markets; and demand-side measures. The Commission has not heretofore prescribed a ‘one-size fits all’ approach or mandatory process to consider third-party market alternatives, and the Company does not believe the 2011 Plan Final Order suggests it is doing so now. Rather, when the Company brings a self-build proposal to the Commission for approval, the Company believes that the Commission expects it to ‘adequately consider’ market alternatives and meet the legal requirements noted above, employing its best professional judgment and with the best interests of its customers as the ultimate guide. That is precisely what Dominion Virginia Power has done in this case.”
The Virginia Attorney General’s Division of Consumer Counsel said in its own July 3 filing: “After hearing the evidence, the Hearing Examiner properly found that Virginia Power has not adequately considered third-party market alternatives to its proposed $1.3 billion Brunswick County Power Station project, and thus failed to follow the directives of this Commission. Because the Company has not adequately considered third-party market alternatives to the Brunswick project, it has not established the prudence or reasonableness of its self-build proposal.”
PJM Power Providers Group and the Electric Power Supply Association (collectively called “P3”) said in their July 3 comments: “P3 respectfully submits that the Hearing Examiner reached the proper conclusion – relying on a market price forecast as a proxy for market purchases may be appropriate for an IRP, which is a planning document, but is inappropriate for a CPCN proceeding, where ratepayers are asked to invest over a billion dollars and commit to a specific resource. The record in this case clearly demonstrates that Dominion has failed to meet its burden to adequately consider actual market alternatives to the proposed Project. Therefore, absent a broader solicitation of true market alternatives to the proposed Project, the Commission should deny the Company’s application for a CPCN for the Brunswick County Power Station.”
Dominion Virginia Power is a unit of Dominion Resources (NYSE: D).