The PJM Power Providers Group (P3) and the Electric Power Supply Association (EPSA) in Jan. 5 joint comments filed with the Virginia State Corporation Commission slammed the 2014 request for proposals (RFP) that Virginia Electric and Power used to justify its current application for approval of its own 1,588-MW Greensville County power project.
Virginia Electric and Power d/b/a Dominion Virginia Power is a Dominion Resources (NYSE: D) subsidiary that filed last July with the Virginia commission for approval of this gas-fired, combined cycle project.
PJM Power Providers Group is a non-profit organization dedicated to advancing federal, state and regional policies that promote properly designed and well-functioning electricity markets in the PJM Interconnection region. PJM Power Providers Group members own over 84,000 MW of generation assets. EPSA is the national trade association representing leading competitive power suppliers, including generators and marketers.
The combination of P3/EPSA has formally participated in recent years as a respondent in the company’s cases seeking approval and certification of new generation facilities and approval of Integrated Resource Plans (IRPs). P3/EPSA firmly believe that developing new resources and retaining existing resources based on competitive market signals will, over time, provide consumers reliable electricity at the lowest cost.
Dominion issued an RFP in November 2014 seeking up to 1,600 MW of “Unit Firm Capacity,” with a delivery point located in or in close proximity to the PJM Dominion Transmission Zone. In December 2014, P3/EPSA sent a letter to the Virginia commission expressing its concerns that the 2014 RFP was not designed to elicit competitive bids, and therefore could not result in the level of consideration of market alternatives required by a 2013 mandate requiring utilities to consider and weigh third-party market alternatives prior to obtaining a Certificate of Public Convenience and Necessity (CPCN). P3/EPSA now submits these Jan. 5 comments to highlight the same flaws in Dominion’s Greensville 2014 RFP that they raised in correspondence with the commission a year ago.
Commission has ordered that an RFP be done for a Dominion solar project
This case represents the first large-scale generation project subject to the new requirements for third-party alternatives. The commission has, however, previously interpreted the amendment in the course of reviewing Dominion’s 2015 application for approval of the 20-MW Remington Solar Facility.
In the Remington Solar case, the only evidence the company offered that it considered alternatives was its analysis of the North Carolina solar market, but because the resources the company considered were already committed, the commission correctly held that those resources were not alternatives to the proposed project, and denied Dominion’s application, the power providers noted. Commenting on arguments advanced by state Consumer Counsel, the Virginia commission stated that “[a] serious and credible RFP process would certainly be relevant to whether a CPCN applicant has met the Code’s requirement to consider and weigh third-party market alternatives in the Company’s selection process; however, we do not need to rule herein that a formal RFP must always be performed in a CPCN case in order to fulfill the demonstration required by Code § 56- 585.1 A 6 regarding alternative options, including third-party market alternatives. There may be other credible methods to meet the statute’s requirement.”
P3/EPSA said in their Jan. 5 comments that when utility seeks to build a $1.33 billion, 1,588-MW facility, interconnected to a Regional Transmission Organization (RTO), such as the proposed Greensville Power Station, that a broad-based and equitable RFP process is the only credible means to properly consider alternatives to the project. Moreover, such an RFP cannot be designed to favor a utility’s self-build option, but instead, must be fairly designed, appropriately administered, and impartially reviewed, to constitute a serious and credible RFP.
The two power groups said: “As described in P3/EPSA’s prior correspondence with the Commission, Dominion’s 2014 RFP purposely and unreasonably favored Dominion’s long-standing plans to self-build the Greensville Power Station, and fails to comport with best practices implemented in a fair and impartial RFP in several ways.
“Although Dominion has contemplated the need for a facility such as the proposed Greensville Power Station since 2011, it issued its RFP on November 3, 2014, and required an intent to bid in less than two weeks, and a completed bid in six weeks. This time frame unreasonably restricted prospective bidders’ ability to meaningfully respond. Meanwhile the Company’s self-build team had been working to develop its Greensville application since at least as early as August 29, 2014, as revealed by the IRP filed on that date.
“The 2014 RFP’s narrowly-tailored fuel specifications, requiring ‘fuel transportation that must have full-year firm capacity from origin (or liquid supply point) to plant,’ are overly restrictive. As are Dominion’s ‘exclusive right’ to 100% of the facility’s output, and the 2014 RFP’s provision requiring that Bidders make ‘no exception’ to the form of the PPA or provide an ‘execution-ready’ PPA.
“Similarly, the Delivery Point requirements unnecessarily limit the zones from which resources in PJM must be delivered. As long as the resources are deliverable, and the risk remains upon the supplier, restrictions on delivery locations should not be made. Likewise, the requirement of a fully dispatchable product is unnecessary and unreasonably limits the pool of qualified bidders. Dominion also limited the term to 10 to 20 year contracts, but such a limitation is unnecessary and precludes bidders from offering shorter term proposals that could delay the projected need for the Company’s self-build project, resulting in significant savings to customers.
“P3 respectfully submits that the review of bids in response to any RFP must be impartial, and that the Company should seek, and the Commission should require, that a neutral, third-party perform an evaluation and comparison of bids, including the Company’s proposed self-build option. This is particularly true where the Company is motivated to build by the financial incentives available to it through rate adjustment clauses. … As P3/EPSA has demonstrated in prior proceedings before the Commission, numerous other jurisdictions utilize an independent review board, independent monitor, or other impartial, third party review of bids received in response to an RFP. By contrast, Dominion conducts its own review of bids, relying heavily on Strategist modeling, the details of which are not shared with the public or the Commission.
“Because the record does not tell the Commission or the public what Dominion did with any of the bids it received, it is impossible to evaluate whether Dominion’s consideration was fair and meaningful. Indeed, the RFP was not designed to be a fair evaluation of all available options for the capacity need identified by the Company. Instead, the RFP was based on the premise that the Company’s self-build option was the best choice as evidenced by the narrow scope of the proposals sought, which largely required that bids include characteristics contained in the self-build option. Under this framework, it is not surprising that the Company’s ‘in-house’ review team used evaluation parameters that heavily favored the Company’s own project.”
P3/EPSA requested that the commission promulgate rules implementing the 2013 statutory amendment to require that utilities conduct a broad-based RFP, subject to impartial, third party review, in order to comply with the statutory requirement that they consider and weigh third party alternatives.