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 GW Coastal Virginia Offshore Wind (CVOW) project, to be constructed 27 miles off the coast of Virginia Beach.
If approved by the SCC, the agreement would resolve the pending petition and provide significant customer benefits.
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. 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, as well as 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 decarbonization goals, customer rates lower than national and relevant regional averages, and high levels of reliability for customers, 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,” says Robert Blue, Dominion Energy’s chair, president and CEO. “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,” Blue adds. “We expect over 90 percent of the project costs, excluding contingency, to be fixed by the end of the first quarter in 2023 as compared to about 75 percent 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,” Blue says. “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.”
CVOW represents a clean-energy investment of approximately $9.8 billion and is good for energy diversity, the environment and is transformational for Virginia’s economy, particularly in Hampton Roads.
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 any costs that exceed $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 provide a detailed explanation of 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,” concludes Blue.