Offshore wind project “at a crossroads” Dominion argues

Foundations for 176 new wind turbines are scheduled to be installed starting in 2024.

Dominion Energy is arguing that it may “be forced” to pull the plug on its proposed offshore wind project if a performance guarantee remains imposed on it by the State Corporation Commission.

On Aug. 5, the SCC approved a rate adjustment clause, or rider, attached to consumers' power bills so Dominion can recover costs associated with its proposed offshore wind project. The SCC order also included a performance guarantee to protect consumers from potential extra costs if the wind turbines don’t perform as well as expected.

The $9.8 billion wind farm— planned for 27 miles off Virginia Beach— is the largest energy project ever undertaken in the state and would be the largest wind project in the country.

But Dominion challenged the performance guarantee and the SCC agreed to reconsider it — kicking off a window in which both the utility company and other parties have responded.

Thirteen responses were filed in favor of the performance guarantee from businesses, environmental groups and even a state legislator.

“It is the regulator’s job to balance monopoly profit motives by adopting common and reasonable standards that will protect Virginians,” Laura Gonzalez, a policy manager with Clean Virginia said in a statement.

Clean Virginia is one of the environmental groups that responded.

But Dominion objected to the guarantee, asserting it could create uncertainty for its investors and hold the company responsible for things outside of its control — citing extreme weather as example.

“[The performance guarantee] will prevent the project from moving forward and the company will be forced to terminate all development and construction activities,” Dominion wrote in its reply.

Dominion is seeking an exemption from the guarantee and is open to a more flexible provision

Under the performance guarantee customers would be held harmless for any shortfall in energy production below a "net capacity factor" of 42% measured on a three-year rolling average. The capacity factor gauges how often a generating facility runs during a particular period.

“It must be recognized that some years are likely to outperform the average and some are likely to underperform it,” Dominion stated.

Dominion argued that regulation entitles the company to recover cost of service with a share of return to its investors.

“There is no qualifier in the code, or otherwise, to suggest that if a utility project is large enough, a new risk-sharing model should spring to life and ... intervene,” the response said.

According to Dominion, $839 million has already been invested in the project.

“Those investments are at risk of becoming stranded if any operating performance standard remains inconsistent with the law and unreasonable in application,” its response stated.

Dominion closed its arguments by asking for the commission to remove the performance guarantee. The company also noted that it is open to a performance provision instead - where Dominion would report availability and capacity factors of the turbines annually during the first 10 years of its commercial operation. In the case that the project underperforms through fault of the company, the SCC can determine “an appropriate remedy at that time.”

With the response periods closed for reconsideration of the performance guarantee, an SCC spokesperson said that the commission “is deliberating the information from the various parties and Dominion.”