In August, the celebration which greeted state regulatory approval of Dominion Energy’s massive and promising offshore wind initiative dissolved into uncertainty as the company took issue with a performance provision that now threatens to scuttle the whole project.
The State Corporation Commission agreed to hear the company’s concerns in September but it is deeply worrisome to see such an important undertaking teetering on the verge of collapse. Virginia should hope for an agreement that fairly balances cost considerations, protects consumers and allows the project to proceed.
When the SCC gave the project its blessing on Aug. 5, it was expected to be the final hurdle, given the lack of opposition to the project. But even as it hailed the approval, Dominion raised concerns about one of the ratepayer provisions in the order.
The company said the provision for an “involuntary” performance guarantee was unprecedented, far too broad and “untenable.” If the clause stays, Dominion said, it will abandon the project.
That would be a setback for Hampton Roads, Virginia and the nation in our collective transition to clean, renewable energy. Dominion’s project would be the largest offshore wind project in the country. Its construction would be a double win, making us more energy independent and helping to slow global warming.
The wind farm, and related ventures such as the Siemens Gamesa wind turbine blade finishing plant being built at Portsmouth Marine Terminal, should bring good jobs to Hampton Roads and boost the region’s aspiration to be a center for offshore wind energy.
Such a massive project — capital costs are estimated to be nearly $10 billion — is not without great risks. The main point of contention boils down to who bears most of those risks: the ratepayers who are Dominion’s customers, or Dominion and its shareholders
In the original order, the SCC commissioners acknowledged that Dominion’s customers cannot be protected from many significant risks. When the legislature passed the Clean Economy Act in 2020, paving the way for the wind farm, it declared the project in the public interest, as it clearly is.
But the SCC also has a responsibility to protect consumers, and it noted in the original order that Dominion has “chosen a construction and ownership model that places most of the risks on the customers.”
After hearing from environmental groups, the Office of the Attorney General and corporations such as Walmart calling for more protection for customers from some of the financial risks, the SCC came up with three “customer protections.” Including a “performance guarantee” that Dominion says is so objectionable it would kill the whole project.
The original order allows Dominion to impose a rider fee on household ratepayers to pay for developing the wind farm — but only if the project generates a certain percentage of capacity. If the project doesn’t perform at 42% of capacity or better in any three-year period, ratepayers do not have to pay for replacement energy.
Dominion has estimated that the bill of average residential customers will increase by $4.72 a month, with a peak of $14.22 in 2027. Dominion argues that over time, the project will save customers money because offshore wind turbines have no fuel costs. How much the switch to offshore wind will save customers is uncertain, depending on how much fuel prices rise.
SCC now is trying again to work out something acceptable both to Dominion and to its customers, who, after all, can’t just switch to another power company.
The risks and costs of this forward-looking, ambitious and important project should be shared in a way that is fair. To ask either shareholders or customers to bear all the burden would be untenable.
After the SCC agreed to reopen hearings, Dominion issued a statement saying it looks forward to completing the project. Here’s hoping the SCC can work with Dominion to come up with a plan that shares the risks equitably and gets this pioneering offshore wind farm back on track.