- Virginia's State Corporation Commission (SCC) on Monday approved a $286.8 million rate rider to pay for Dominion Energy's environmental compliance activities at several coal units, but rejected the utility's bid to recover such spending at two other coal units.
- Dominion sought to recover an additional $18.4 million in long-term environmental costs for Chesterfield units 3 and 4, but regulators noted the utility intended to retire those units within five years of the investment. Therefore, Dominion did not adequately prove the prudence of those costs, SCC found.
- Rider E will pay for cleaner disposal of coal ash at various units, among other environmental projects. Virginia S.B. 1355 requires that Dominion seek money for the removal of coal ash through a rate adjustment clause, such as Rider E, while capping how much money they can recover.
While customers won't see significant savings from the SCC's actions, environmental advocates see the dismissed cost recovery as a continuation of an SCC trend of questioning Dominion's spending, following the denial of most of the utility's grid modernization plan last fall.
"Overall, we're looking at [the final ruling] as a win, mostly from the perspective that Dominion's finally been denied cost recovery for something... especially when they've already spent the money," Dori Jaffe, Sierra Club senior attorney, told Utility Dive.
"This time, the commission went so far as to say that [Dominion] could not meet the prudent standard to show that these investments were worthwhile at the time [the utility] made that decision," she said. Now, Dominion will not be able to recover costs for this particular project from "their rate base, when they do their next rate case."
Regulators were asked to cut even more of the environmental costs that applied to the rider. The Attorney General's Division of Consumer Council, which found that Dominion "unreasonably and imprudently incurred the costs" for Chesterfield Units 3 and 4, had also questioned the prudence of Dominion's environmental compliance spending on Units 5 and 6.
Units 3 and 4 were deemed uneconomic and retired in March 2019, despite Dominion's decision in June 2015 to update their compliance with environmental standards. Dominion "was seeking recovery of expenses it believed to be required at the time the units were operating," Ken Schrad, director of the SCC Division of Information Resources, told Utility Dive via email.
But "the Commission determined, based on the record, that the decision to make the $18 million environmental investment (2015) came at the same time the company was avoiding other major life extension capital investments in these units because the company expected these units to be either retired, or retrofitted to burn natural gas, within five years (2020)," Schrad said.
And so the SCC determined the spending was not "reasonable and prudent at the time such cost was incurred."
While Virginia's other investor-owned utility, Appalachian Power, got a rate rider for environmental improvements to coal units in 2011, this is the first time Dominion made such a request, according to Schrad. Dominion had previously recovered expenses related to its compliance with state and federal environmental regulations through its base rates.
Dominion focused on the positive aspects of the SCC's decision.
The SCC ruling "is a good outcome for Dominion Energy customers and supports our plan to safely store and dispose of coal combustion residuals in compliance with federal and state environmental regulations," Jeremy Slayton, Dominion spokesperson, said.
"While coal remains an important part of Dominion Energy’s diverse mix of power generation resources, we have made rapid progress [in] recent years toward a cleaner portfolio which increasingly relies upon lower-emission natural gas and renewable energy sources. This is all part of our effort to see an 80% reduction in carbon emissions by 2050."
Dominion can appeal SCC's rejection of the $18.4 million cost recovery bid within 20 days of when the final order is issued. The utility "continues to review the SCC's final order," according to Slayton.
The utility has 30 days to submit its new tariff, which will take effect on or before Nov. 1.