Dominion Energy Virginia, the Office of the Attorney General, Walmart, Sierra Club and Appalachian Voices have filed a settlement agreement in the company’s pending petition to the State Corporation Commission of Virginia (SCC) to reconsider the performance guarantee included in the Final Order approving the development of the 2.6-gigawatt Coastal Virginia Offshore Wind (CVOW) project to be constructed 27 miles off the coast of Virginia Beach. The agreement would resolve the pending petition and provide significant customer benefits if approved by the SCC.

The settlement agreement provides a balanced and reasonable approach that supports continued investment in CVOW to meet the Commonwealth’s public policy and economic development priorities and the needs of Dominion Energy Virginia’s 2.7 million customers representing more than 5 million people and businesses.

CVOW’s schedule calls for construction to be completed in late 2026 when it can generate enough clean energy to power up to 660,000 homes. The August 5, 2022, Order from the SCC affirmed that CVOW meets all Virginia statutory requirements for rider cost recovery and the issuance of a Certificate of Public Convenience and Necessity for the onshore infrastructure. The settlement agreement substitutes the previously ordered performance guarantee with a cost-sharing approach for unforeseen costs that exceed the project budget and enhanced Commission review of operating performance.

The settlement agreement aligns with the customer-focused, state-regulated utility framework in Virginia. That framework has resulted in nation-leading decarbonisation goals, customer rates lower than national and relevant regional averages, and high levels of customer reliability, made possible by a state regulatory model that embraces long-term planning, a diversity of generation sources, and resiliency safeguards. 

“I appreciate the thoughtful effort of all parties in reaching a constructive agreement to allow the project to continue moving forward,” said Bob Blue, Dominion Energy Chair, President and Chief Executive Officer.

“Since the August Order, we have further mitigated some of the project’s development risks that, strengthen our confidence of remaining on time and on budget. We have:

  • Continued to work closely with Bureau of Ocean Energy Management and other stakeholders to support the project’s timeline;
  • Advanced engineering and design in preparation of immediate release of major equipment for fabrication;
  • Advanced procurement and other pre-construction activities for the onshore scope of work; and
  • Completed independent project review and construction readiness assessment, along with a comprehensive assessment of schedule and cost.

“Development of the project has continued uninterrupted to maintain the project’s schedule. We expect over 90% of the project costs, excluding contingency, to be fixed by the end of the first quarter in 2023, compared to about 75% today, further de-risking the project and its budget.

“We have a lot of work ahead as we continue to build on our long record of completing projects on time and on budget while safely delivering affordable, reliable, and clean energy to our customers.  Offshore wind is expected to alleviate pressure on customer fuel rates for 30 years once the project is in service.  Our customers expect reliable, affordable energy – and offshore wind is key for accomplishing that mission.”

The company has previously announced its third-quarter 2022 earnings call will take place at 10 a.m. ET on Friday, Nov. 4, 2022.  Management will discuss matters of interest to financial and other stakeholders, including recent financial results and the settlement agreement for CVOW.

CVOW represents a clean-energy investment of approximately $9.8 billion and is good for energy diversity in the environment, and is transformational for Virginia’s economy, particularly in Hampton Roads.

As a renewable energy resource, offshore wind turbines have no fuel costs, which is especially beneficial considering the recent rise in fuel costs across the country. The project is expected to save Virginia customers more than $3 billion during its first 10 years in operation. However, if ongoing commodity market pressure trends continue, those savings could total up to nearly $6 billion – almost double the savings.

Offshore wind’s economic development and job benefits are transformative for Hampton Roads and the Commonwealth, including its diverse communities. CVOW could create over 2,000 direct and indirect jobs during construction and operations while attracting companies to invest in Virginia, making it a hub for offshore wind.

In addition to the Office of the Attorney General, the agreement is joined by Dominion Energy Virginia, Walmart, Sierra Club and Appalachian Voices.  Key components of the settlement, which requires approval from the SCC, would provide for pragmatic cost sharing in the event of unforeseen cost increases prior to completion and other significant customer benefits, including the following:

  • In the context of the project’s current capital investment of $9.8 billion, the company voluntarily agreed that shareholders will share 50% of any costs in the range of $10.3 billion to $11.3 billion if any.
  • The company has further voluntarily agreed that shareholders will be responsible for 100% of any prudently incurred costs in the range of $11.3 billion to $13.7 billion if any.
  • There is no voluntary cost-sharing agreement for costs exceeding $13.7 billion.
  • The company will not be required to guarantee future energy production levels or factors beyond its control, as was outlined in the August Order. Instead, the company will explain the factors contributing to any shortfall in energy output from projected amounts in a future SCC proceeding.

The company will also ensure that customers receive the benefits of the Inflation Reduction Act, which could provide potential additional customer savings.

“Given the now-significantly de-risked status of the project’s development and given its continued ‘on-budget’ status, we feel that this settlement reflects a balanced sharing of financial impacts in what we currently see as unlikely scenarios of material delays or cost overruns,” added Blue.

In addition to solar, energy storage, and nuclear, offshore wind is a key component to Dominion Energy’s diverse energy generation strategy to meet the Commonwealth’s clean energy goals and the company’s Net Zero target. Offshore wind complements the company’s growing solar portfolio in Virginia since offshore wind and solar generate peak energy at different times throughout the day and year.

View the proposed settlement filing on the Dominion Energy website.

Source: https://www.dominionenergy.com/
Image source: Courtesy of Dominion Energy

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