Dominion Energy Virginia and key stakeholders on Friday reached an agreement on how to handle any cost overruns or underproduction for the utility’s $9.8 billion, 2.6-GW offshore wind farm, opening a path for it to move forward after the utility threatened to abandon it.
An August decision by the Virginia State Corporation Commission to impose a “performance guarantee” requirement on the wind farm made the project too financially risky to build, according to Dominion.
The agreement filed with the SCC allays those concerns, according to Bob Blue, Dominion Energy chair, president and CEO.
"Given the now-significantly de-risked status of the project's development and given its continued 'on-budget' status, we feel that this settlement reflects a balanced sharing of financial impacts in what we currently see as unlikely scenarios of material delays or cost overruns," Blue said in a statement.
Parties to the agreement are the Office of the Attorney General’s Division of Consumer Counsel, Dominion Energy, Walmart, the Sierra Club and Appalachian Voices. The agreement must be approved by the SCC.
In its August ruling, the SCC said Dominion’s customers must be held harmless for any shortfall in energy production below the wind farm’s expected 42% average annual capacity factor, measured on a three-year rolling average.
Dominion and the stakeholders crafted an alternate approach for dealing with cost overruns and production shortfalls.
Under the agreement, Dominion’s shareholders would pay half of any costs in the $10.3 billion to $11.3 billion range and they would be responsible for all of any prudently incurred costs from $11.3 billion to $13.7 billion.
Dominion would not be required to guarantee future energy production levels or factors beyond its control as outlined in the SCC’s order. Instead, the utility would explain the factors contributing to any shortfall in expected energy production, according to Dominion.
The agreement offers “significant” cost certainty for customers while allowing the project to move forward, according to the Southern Environmental Law Center and Appalachian Voices.
“Where utility-owned projects are concerned, shareholders get guaranteed profits but ratepayers bear all the risks,” Will Cleveland, a SELC senior attorney, said in a statement. “Today’s settlement strikes a much better balance between shareholders and ratepayers.”
Dominion expects to finish building the wind farm in 2026.