By Rich Heidorn Jr.

Independent power producers are challenging Dominion Resources’ bid to build a 1,588-MW combined cycle plant in the first major test of a 2013 Virginia law requiring utilities to demonstrate that they have considered “third-party market alternatives” to self-build projects.

Dominion Virginia Power filed its request for a Certificate of Public Convenience and Necessity with the Virginia State Corporation Commission in July, saying its proposed $1.3 billion plant in Greensville County was cheaper than any of the alternatives submitted in response to its request for proposals to fill the increased power demands it expects by 2019 (PUE-2015-00075). Evidentiary hearings on the proposal are scheduled to begin today in Richmond.

In a joint filing to the SCC last week, the Electric Power Supply Association and the PJM Power Providers Group (P3) challenged the fairness of Dominion’s RFP and its evaluation of the competing bids. They said regulators should deny Dominion’s request and order a new “open, broad RFP subject to independent review.”

The groups said Dominion’s RFP “was not designed to elicit competitive bids” but to satisfy the legal requirements to justify its self-build proposal. While the company had been planning a 3×1 combined cycle plant since 2011, the November 2014 RFP, which sought baseload/intermediate generating resources in service by 2020, gave competitors only six weeks to submit bids. They also contended the RFP included “unnecessary and overly restrictive” specifications regarding contractual terms, fuel supply and the plant’s location.

Internal Review

In its application, Dominion’s said its self-build proposal and responses from seven other bidders were impartially evaluated by a Dominion team separate from the staffers developing the Greensville plant. The proposals were judged on price and non-price metrics, including “economic impact, fuel strategy, facility reliability, bidder financial strength and environmental risks.”

The company called the Greensville power station “the clear economic and operational choice” as the next required resource for its long-term needs, saying it would save customers $2.1 billion in net present value compared to purchases from the PJM wholesale market.

“It will support a continued balance of demand and supply resources, in addition to wholesale market purchases, and will serve as a prudent addition to the company’s generating fleet,” Dominion said.

If approved, the Greensville plant would be the third combined cycle plant built by Dominion in five years.

The company said it is projecting peak load growth of approximately 4,580 MW in the Dominion zone over the next 15 years, an average increase of 1.5%. PJM’s 2015 load forecast identified the zone as the fastest growing in the RTO because of its popularity as a site for energy-hungry data centers. (See Changes to PJM Load Forecast Cuts Benchmark Peaks.)

The plant would boost Dominion’s rate base. The company proposed a revenue requirement of $41.6 million per year based on a 10% return on equity. SCC staff said the requirement should be cut by $2.5 million based on an ROE of 9.25%.

EPSA and P3 said the SCC should require a neutral, third-party evaluation of bids because the utility has a conflict of interest.

“The notion that Dominion employees can impartially review the company’s own proposal simply because they were not on the ‘self-build team,’ along with the company’s conclusion that its option represents a net present value savings of $1.5 [billion] to $2.304 billion compared to the alternatives evaluated, are suspect at best,” the groups said. “There is nothing in [the company’s] testimony that gives us any idea of what the company actually did to evaluate alternatives.”

The company’s two proposals received scores of 4.52 and 4.54 on a 5-point scale, while the highest scoring of the seven competitive bids received only a 3.3 rating.

SCC Staff Noncommittal

The groups were also critical of the SCC staff, saying it “has not undertaken a critical analysis of Dominion’s conclusions regarding its analysis of market alternatives.”

Marc A. Tufaro, a principal utilities analyst in the commission’s Division of Energy Regulation, filed testimony Nov. 20 saying the Greensville plant “is expected to have the lowest total cost when dispatched in excess of a 20% capacity factor.”

Tufaro did challenge the company’s projected savings, saying its forecasts of fuel prices, market purchase prices and other factors were “extremely difficult to predict with a high degree of accuracy.”

Tufaro said whether Dominion adequately considered third-party market alternatives was “a difficult question to answer,” expressing no opinion.

“Should the commission determine that the company has adequately considered third-party market alternatives, staff is not opposed to the approval of a CPCN for Greensville.”

Tufaro said “no respondents or comments [were] filed by the public contesting” Dominion’s conclusion Greensville was a better option than any third-party alternatives. EPSA and P3 said Tufaro ignored testimony by a consultant to environmental groups who they said criticized “the limited scope” of Dominion’s RFP.

2013 Law

The Virginia General Assembly amended the state Electric Utility Regulation Act in February 2013 requiring that a “utility seeking approval to construct a generating facility shall demonstrate that it has considered and weighed alternative options, including third-party market alternatives, in its selection process.”

In October 2015, the SCC rejected Dominion’s proposed 20-MW Remington solar facility, ruling that the evidence submitted by the company — an analysis of North Carolina’s solar market — was insufficient because the resources the company considered were already committed.

The commission said a “serious and credible RFP process would certainly be relevant to whether a CPCN applicant has met the code’s requirement to consider and weigh third-party market alternatives in the company’s selection process; however, we do not need to rule herein that a formal RFP must always be performed in a CPCN case in order to fulfill the demonstration required by [the law] regarding alternative options, including third-party market alternatives. There may be other credible methods to meet the statute’s requirement.”