On April 30, 2021, the Virginia Commission issued two orders – one for Dominion and one for Appalachian Power Company – that laid out the annual framework by which each utility will demonstrate compliance with the Virginia Clean Economy Act’s (VCEA’s) aggressive renewable energy portfolio standard. This blog entry will focus on the Dominion Final Order, Case No. PUR-2020-00134, although the decision with respect to annual utility filings are similar. The documents in the Dominion case, including the Final Order, are here.
Before explaining the Commission’s decision, let’s look at a few provisions of the VCEA at a high level:
First, Va. Code § 56-585.5 C spells out the percentage of renewable energy each utility must sell every year as part of its total load. The percentages increase every year and, for Dominion, reaches 100% by 2045. A utility must retire renewable energy certificates (RECs) every year to prove that it met its renewable energy obligation. This subsection is the core legal obligation of the VCEA.
Second, Va. Code § 56-585.5 D 2 requires Dominion to petition the Commission for approval to construct, acquire, or enter into agreements for 16,100 MW of solar and wind located in Virginia by 2035. The law breaks down the amount of MWs in phases through 2035 and requires that 35% of the solar and wind be owned by third parties.
Third, Va. Code § 56-585.5 D 4 requires Dominion to make an annual filing with the Commission with respect to the proposed plan and facilities. In considering the plana and facilities, and the Commission must consider whether they are reasonable and prudent and give due consideration to several items, including the RPS requirements.
The case dealt with Dominion’s initial RPS plan under § 56-585.5 D 4. As part of its plan, Dominion proposed to build and operate 82 MW of solar and to enter into six PPAs with third parties for 416 MW of solar. Dominion maintained in testimony that its compliance with the REC retirement obligations under § 56-585.5 C was irrelevant to the proceeding, and several parties pushed back. Those parties requested that Dominion be required to provide additional information in its RPS filings because § 56-585.5 D 4 requires the Commission to give “due consideration” to the RPS obligation. The Commission approved the current plan, including the new solar facilities and associated rate adjustment clauses, but held that Dominion’s future annual RPS plan filings “shall analyze how Dominion’s plan and petition requests address and implement the RPS and carbon dioxide reduction requirements in Code § 56-585.5, including but not necessarily limited to Code § 56-585.5 C.”
The Commission then laid out a list of elements for inclusion in future RPS plans, including at a minimum:
- a least cost VCEA plan that meets: (i) applicable carbon regulations, including Virginia’s inclusion in RGGI; and (ii) the mandatory RPS Program requirements of the VCEA;
- evaluation of RECs from all sources (with both high and low-price sensitivities), including utility-owned, third-party PPAs, and unbundled REC purchases;
- modeling of the solar capacity factor as required by the Commission’s directives in the 2020 IRP proceeding;
- distributed generation sensitivities for unbundled REC purchases through Requests for Proposals (RFPs), fixed price offers and over-the-counter purchases;
- modeling of reliability impacts;
- updated fundamental forecasts and commodity pricing that reflect the VCEA requirements; and
- a detailed chart showing how Dominion has complied to date with the VCEA’s RPS requirements.
In addition to the above elements, the Commission directed Dominion to certify in these annual proceedings its compliance with the RPS program. To that end, Dominion must, “propose reporting metrics, and any needed protocols, associated with RPS Program certification in its 2021 RPS filing.” Other requirements include a bill analysis through 2035 to project the RPS plan’s impact on customers’ bills, and the complete results of RPS-related RFPs.
A hotly contested issue in this proceeding was whether to synchronize the annual RPS proceedings with the triennial integrated resource planning (IRP) proceedings. The declined to synchronize the proceedings but held that it may revisit that decision at a later time as additional experience is gained from the annual RPS filings. The Commission recognized that the modeling for the RPS and IRP proceedings should be consistent and directed Dominion to explain any future deviations in the assumptions and modeling used in the two proceedings.
Why is the Commission’s decision regarding the annual filings important? Because the VCEA’s REC retirement obligations in § 56-585.5 C are the core legal obligation of the RPS mandate, which is one of the strictest in the country. It will transform Virginia’s energy policy and economy. This proceeding was the first annual filing involving implementation of that mandate. The point of these annual proceedings under § 56-585.5 D is, as our friends at the Virginia Advanced Energy Economy have written here, “to determine whether the utility has put forward a plan to fully, efficiently, and cost-effectively satisfy the RPS requirements.” It is not enough to only consider specific projects and not consider how those projects fit within the overall implementation of the VCEA. As Dominion itself acknowledged, “the RPS Program is the primary driver of the need for significant new renewable energy generation.”
GreeneHurlocker’s regulatory and transactional lawyers have represented clients in cases throughout the Mid-Atlantic region and with respect to projects across the country. If you want to know more about this case or our renewable energy practice, contact Brian Greene or Eric Hurlocker or any of our Virginia energy lawyers.