The Virginia State Corporation Commission staff is not opposed to the Greensville combined-cycle project of Virginia Electric and Power, as long its ongoing look at how the utility conducted a request for proposals (RFP) for alternative power supply shows that the utility “adequately considered” alternatives.
Marc A. Tufaro, a Principal Utilities Analyst in the commission’s Division of Energy Regulation, made that point in Nov. 20 testimony in a case filed on July 2 where Virginia Electric and Power d/b/a Dominion Virginia Power is seeking a certificate of public convenience and necessity for this project. He was one of four staff members that supplied testimony that is heavily redacted in the public versions.
The company, which is a unit of Dominion Resources (NYSE: D), is petitioning the commission for a CPCN for approval to construct and operate the Greensville Facility, a 1,588-MW (nominal) natural gas combined cycle (NGCC) facility in Greensville County, Virginia. The company plans to begin construction of the proposed generation facility in April 2016 and have it in commercial operation by December 2018.
The company states in its application that the total construction cost of the project will be approximately $1.33 billion, excluding financing costs, which equates to an average capacity cost of approximately $837 per kW at the 1,588 MW (nominal) rating. Tufaro noted that this cost is comparable with the U.S. Energy Information Administration’s (EIA) estimate of the capital cost of an advanced NGCC located in Lynchburg, Virginia, of $952 per kW. The EIA NGCC estimate reflects an expected nominal heat rate of 6,430 Btu/kWh while Greensville is expected to have a net heat rate more efficient than the EIA NGCC estimate.
When asked if staff believes the utility’s savings estimate for this project is accurate, Tufaro responded: “No. The Company’s projected savings represent the results of forecasted fuel prices, forecasted market purchase prices, and a number of other factors that are extremely difficult to predict with a high degree of accuracy. As such, the Staff believes that the Company’s cost savings estimates reflect some, and perhaps a significant degree of, uncertainty. While the Staff has some reservation with respect to the exact level of benefits that may be associated with the Project, the Staff believes that the Project compares very favorably to other Company-build alternatives and will provide benefits over its life.”
Asked whether Dominion adequately considered third-party alternatives, Tufaro answered: “That is a difficult question to answer. Ultimately, the Commission must determine if the Company’s evaluation of third-party market alternatives meets the Commission’s ‘adequately considered’ standard…regarding third-party market alternatives. The Staff will further develop the record on the Company’s evaluations of these alternatives below to assist the Commission in reaching a determination of whether the Company ‘adequately considered’ third-party market alternatives.”
The RFP that the utility issued when looking at alternative power supply options contained a request for “Unit Firm Capacity,” which could only be baseload or intermediate resources for a term from ten to 20 years commencing no earlier than Jan. 1, 2019, and no later than May 31, 2020, Tufaro noted. The quantity was up to approximately 1,600 MW, and the company would not consider proposals for facilities that were not directly connected to the PJM Interconnection transmission system. Also the RFP set parameters for technology and fuel reliability as well as requiring potential responders to have a credible development plan.
The company received a total of eleven proposals for eight separate generation units or combination of units. The company evaluated these proposals on both price and non-price criteria. In November 2014, the company announced the RFP and provided notice directly to 19 potential bidders, including the company’s self-build group. The bidders were directed to a website and were also give the opportunity to ask clarifying questions. The company concluded the RFP on March 10.
Asked about his recommendation, Tufaro wrote: “Should the Commission determine that the Company has adequately considered third-party market alternatives; Staff is not opposed to the approval of a CPCN for Greensville.”
Notable is that the somewhat vague “adequately considered” standard dates back to the commission’s August 2013 approval of Dominion’s 1,358-MW Brunswick combined-cycle project. Outside power providers had complained that Dominion relied on market price forecasts to justify that project and had issued no RFP to test the market for cheaper alternatives.