Now comes applicant Dominion Energy Virginia, petitioning the Virginia State Corporation Commission to reverse its recent decision to impose actual financial risk on the company and its stockholders. If a hurricane blows down its planned offshore wind farm in a few years, the related costs should be imposed 100% on its captive ratepayers, Dominion demands.
Imagine that, expecting a monopoly with a guaranteed right to earn in excess of 10% profit on a $10 billion project to face actual risk. What is the world coming to?
The claim this project was a safe and reliable investment was Dominion’s opening bet and smelled like a bluff to most of us. The General Assembly bought it. But the SCC called the bluff, and now Dominion is threatening to fold. What does that tell us about its hand?
The regular news media has covered this latest development in the Coastal Virginia Offshore Wind saga, so I’ll focus a bit deeper. When the SCC imposed a performance standard with some teeth, I wrote that a motion to reconsider that part of the approval was possible. Here is the petition. The motion has now been granted and parties to the case have until September 13 to dispute Dominion’s assertions, and the company gets a final reply on September 22.
If unhappy with the final SCC ruling, an appeal by the utility to the Virginia Supreme Court is likely. In its petition Dominion helpfully reminded the Commission of other times the Supreme Court has overruled SCC efforts to protect consumers, one just a couple of weeks ago.
Here is the one thing all must remember, something stressed only in columns on this topic for Bacon’s Rebellion and the Thomas Jefferson Institute. Huge swaths of the case record are secret. Sometimes it is a few redacted paragraphs, sometimes entire documents. Much of the information withheld from the public relates to the various risks that could increase the costs of the project or cause it to fail miserably.
The SCC judges and their staff have read all those secret documents. Attorney General Jason Miyares’ team in the Office of Consumer Counsel have read all those secret documents. The lawyers for the various environmental groups, otherwise highly supportive of offshore wind, have read all those secret documents. There have also been secret interrogatories exchanged.
Having read them, they endorsed a significant performance standard with financial penalties. In its final order, the SCC noted the multiple risks, although it did not specifically cite any of the secret reports or testimony. What is in those secret documents? Can we see them now? Did they motivate the decision to adopt the performance standard?
Recent unrelated developments have many Americans on edge again over government secrecy. Secrecy is usually bad policy. In this case, it is Dominion itself which can open it all up. It requested the secrecy.
If the case moves up to the Supreme Court, the appeal will be based on the allegations in this petition, and the various hidden facts and expert opinions in those secret documents probably will not even be considered. The meanings of various statutes and the extent of the SCC’s authority will be the only debate, not the reasons for its decision to impose a performance standard.
One fact that is on the record is that no other utility on the East Coast is proposing to build and own such a project directly, imposing all the risk on its customers. The other projects in the pipeline are all being built by third parties who then sign a long-term contract to sell the power or the renewable energy credits. If the projects don’t produce power, the risk shifts at least in part to those developers. Dominion refused that option out of greed.
A quick refresher: No generator runs at 100% capacity 100% of the time. Projects dependent upon sun and wind have relatively low capacity factors, and in this case, Dominion bragged it would produce a 42% capacity factor with these 176 offshore turbines. That is substantially higher than has been achieved in Europe, with an average of just under 35% capacity output from offshore turbines.
The lower the energy output, the higher the cost to consumers per unit of energy. Zero output from a $10 billion project ($21 billion with profit and financing costs) would prove quite expensive.
In the discussion of the original opinion, I noted that some variation below the 42% figure probably would not have financial consequences for the company. And in this new brief, Dominion again argues the project is financially beneficial with as low as 38% capacity factor. (That would still, however, increase the cost per unit of energy.) That confirms my observation.
No, a steady output that simply fails to average out to 42% over each three-year period is not what scares the utility. The risk it refuses to take on, to impose on its shareholders, is the risk of major failure, including a catastrophic failure. That risk, which was evident before the first piece of legislation mandating this was ever introduced in Richmond, should have kept Virginia totally off this road in the first place.
Dominion admits the risk is huge. That is how to interpret this appeal, an admission of risk and an effort to foist it on customers. Ending this mistake now is a viable option.
Stephen D. Haner is Senior Fellow with the Thomas Jefferson Institute for Public Policy. He may be reached at [email protected].