Regulators approve Dominion offshore wind projectAugust 5, 2022
State regulators on Friday approved plans by Dominion Energy to construct the nation’s largest offshore wind farm in waters off Virginia Beach but imposed several conditions intended to protect ratepayers, including reporting requirements for cost overruns and a performance guarantee.
The hotly anticipated ruling from the Virginia State Corporation Commission gives Dominion the state’s go-ahead to embark on the $9.8 billion project.
“The project is truly distinctive in numerous respects, encompassing cost, size, technology, complexity, ownership, and risk. … No other utility or independent developer has attempted to construct and operate an offshore wind project of this size in the United States,” wrote the commissioners.
But they also cautioned that the Central Virginia Offshore Wind project is unique in the risks it will pose to utility ratepayers.
“Parties must undoubtedly recognize that consumers cannot be protected from the most significant risks attendant to the project” and that Dominion “has chosen a construction and ownership model that places most of the risks on customers,” they said.
Over the next 35 years, CVOW is expected to increase the monthly bill of Dominion’s average residential customer by $4.72 on average, with a peak of $14.22 in 2027. The company will have to petition the commission for recovery of its costs annually.
Virginia lawmakers in 2020 wrote provisions into state code through the Democrat-backed Virginia Clean Economy Act that incentivized Dominion’s development of the 2.6 gigawatt wind farm as part of a broader push to decarbonize the state’s power grid. Those provisions not only declared the project to be “in the public interest” but directed regulators to approve the recovery of project costs from ratepayers as long as the utility met three specific conditions.
“This is a legislatively favored project,” SCC Judge Judith Jagdmann wrote in a concurring opinion released Friday.
What’s ‘reasonable and prudent’ when it comes to Dominion offshore wind project’s costs?
During hearings this spring, no groups argued against the development of wind power as a key part of Dominion’s energy portfolio. But numerous parties, including the Office of the Attorney General, the Southern Environmental Law Center, Walmart and Clean Virginia, pushed regulators to impose requirements on Dominion that could protect customers from some of the project’s financial risks.
Dominion resisted those calls, particularly the proposal for a performance guarantee, which would require utility shareholders rather than ratepayers to cover the costs of replacement energy if the project fails to produce a certain amount of power.
In May, Dominion Senior Vice President of Project Construction Mark Mitchell said an “arbitrary” performance guarantee “could put the company at risk.”
The SCC rejected that argument in its Friday order, saying,…