Virginia lawmakers delay decision on Dominion Energy’s offshore wind monopoly

Virginia lawmakers delay decision on Dominion Energy’s offshore wind monopoly

Renewable energy advocates have vowed to double down next year on legislation designed to enable competition with Dominion Energy on offshore wind projects serving Virginia.

A legislative committee unanimously tabled a proposal to let private developers compete with the utility on offshore wind procurement. The Senate Commerce and Labor Committee’s late January decision to push Senate Bill 578 onto the 2025 agenda followed intense lobbying from Dominion Energy to protect its monopoly.

Evan Vaughan, executive director of the Maryland-based Mid-Atlantic Renewable Energy Coalition Action (MAREC), was among the disappointed.

“We … will continue to advocate for competition as the best way for Virginia consumers to achieve a strong and cost-effective offshore wind industry,” Vaughan said in an interview. 

Democratic Sen. Creigh Deeds, the bill’s sponsor and commerce committee chairman, had joined advocates in claiming that such competition would provide a swifter, cheaper, more transparent, and less risky path to meet or exceed the target of 5,200 megawatts of offshore wind by 2032 outlined in the four-year-old Virginia Clean Economy Act.

The measure would not have interfered with the lock Dominion already has on constructing its 2,600 MW Coastal Virginia Offshore Wind project 27 miles from Virginia Beach. 

As drafted, the bill would have required the state’s next 2,600 MW to be competitively bid among private developers. In a nutshell, the state would set up and operate a competitive procurement system. Rather than having the sole authority it now has, Dominion would then have to purchase power from the winning entity.

MAREC lobbyist Alex Thorup, with the Commonwealth Strategy Group, said private wind developers offer a bargain for ratepayers by taking on the burden of financial risk. That’s in contrast to the utility model, where costs are passed off to the ratepayer whether or not a project generates power.

“If you are a renewable energy advocate or with an environmental group, the ultimate goal is to see wind development be done at the lowest cost possible,” Thorup said. “Without the tools to make sure that happens, Virginia might lose the political will to move forward with what should be very successful projects.”

Vaughan emphasized that Dominion would still be eligible to participate in the federal auction bidding.

“There’s a misconception out there that this bill takes away Dominion’s status as a monopoly utility,” said. “That is just not true. Dominion can compete on a level playing field to supply that energy themselves, and the independent developers we represent welcome the challenge to deliver the best value to Virginia ratepayers.”

Advocates were eager to pass SB 578 this session so as to align with the federal Bureau of Ocean Energy Management leasing schedule. The agency has proposed only two areas in the central Atlantic region for wind energy lease sales this year. What BOEM refers to as C-1, which is adjacent to Dominion’s 113,000-acre Coastal Virginia project site, is the one with the potential to serve Virginia utility customers.

At 176,505 acres, C-1 is expansive enough to generate 2,600 MW of power. Dominion isn’t a shoo-in to win the lease, advocates said, noting that BOEM has expressed willingness to divide the site among multiple wind developers.

“The way I see it, Dominion will bid as much as it can to get area C-1,” Vaughan said. “They could well win it at auction, but that’s not guaranteed.”

Losing that bid to a private wind developer — without SB 578 in place — means there would be no clear path to selling that electricity in Virginia, he continued.

“We’re not saying Dominion can’t compete,” Vaughan said. “We’re saying that passing this bill encourages Dominion to be more responsible toward its ratepayers.”

Dominion: Why import ‘failed model?’

The committee voted to postpone Deeds’ bill on Jan. 29, the day before Dominion announced that federal authorities had approved construction and operations plans for its 176-turbine Coastal Virginia wind farm. Initial offshore construction is slated to begin this spring.

Dominion, the largest utility serving Virginia, put its considerable muscle into quashing the measure before it even emerged from the Senate committee.

“There is nothing about this legislation that would make offshore wind more affordable or accessible for Virginians,” Dominion spokesman Aaron Ruby said before the committee vote. “Bottom line, the Virginia model for offshore wind is working and the (competitive) model is failing. Let’s use our common sense. If it ain’t broke, don’t break it.” 

Ruby pointed to several slowed or canceled wind projects in the Northeast — which were competitively bid and rely on power purchase agreements — as reasons enough to reject importing “that failed model to Virginia.”

Two other shortcomings he cited centered on cost controls and consumer protection, as well as economic growth. For instance, he said it’s a mistake to take regulatory authority away from the State Corporation Commission and hand it to the state Department of Energy.

He also questioned the validity of potentially importing energy from another state and exporting economic benefits out of Virginia. He was evidently referring to the Kitty Hawk wind farm that Avangrid Renewables is scheduled to construct on the coastal border between Virginia and North Carolina, and a separate BOEM lease area farther north set to be auctioned this year. The latter, a 101,443 acre site near the Delaware Bay, is known as A-2.

“The Coastal Virginia Offshore Wind project is creating thousands of jobs, hundreds of millions in economic benefits and millions in tax revenue,” Ruby said. “Don’t we want the economic benefits … here in Virginia?”

Wind advocates countered each of Ruby’s points. For instance, they said the bill requires that prevailing wages and apprenticeships be part of any bid, which would mimic the relations that private wind developers have forged with organized labor across the Northeast.

They also said multiple companies building an array of projects would position Virginia as an ideal regional offshore wind hub, opening opportunities for jobs and small businesses in tandem with investments in ports and infrastructure.

On canceled projects in the Northeast, they pointed out that skyrocketing interest rates, supply chain disruptions and uncertainty about federal tax credits contributed to those failures.

Further, they emphasized that ratepayers weren’t on the hook for any payments and that some states received termination fees. Further, procurement terms were modified to include updates such as inflation adjustment clauses.

They also noted that the cost of Dominion’s current offshore wind project ballooned to $9.8 billion from an estimated $8 billion when Dominion filed a cost recovery plan in 2021 with utility regulators. While it has remained on budget and on time since then, that could be subject to change as the project progresses.

Bill a boon for Kitty Hawk

Avangrid is in the midst of obtaining permits for a yet-to-be-built wind farm named Kitty Hawk on the North Carolina-Virginia border. In 2017, the New England-based company won the lease on the site roughly 27 miles from the Outer Banks.

Chief development officer Ken Kimmell said Avangrid is champing at the bit to “deliver power to Virginia at a favorable rate, but the missing element is a clear path to that market.”

Even if SB 578 turning is delayed by a year, turning it into law would let Virginia authorities compare Avangrid’s electricity prices to Dominion’s.

“It doesn’t guarantee anything to us, but at least it gives us an at-bat,” Kimmell said. “Right now, we don’t even have an at-bat. What’s so evil about competition?”

At full capacity, Kitty Hawk would be capable of generating up to 2,500 MW. Wind from its first phase of development could help Dominion meet at least part of its Clean Economy Act targets, Kimmell said.

He also questioned Dominion’s seeming assumption that it would win sole dibs on the C-1 lease. 

“There’s a lot of uncertainty here,” Kimmell said. “I don’t really know why you would want to put all of your eggs in one basket.”

Vaughan pointed out that competition for the two lease sites along the East Coast will be fierce because demand for offshore wind is high among states with clean energy objectives.

“Regionally, offshore wind from Maine to Maryland is procured competitively,” he said, adding that both Virginia and North Carolina have a monopoly structure. “On that front, Virginia is kind of the odd duck.”

All of those factors are more fodder for propelling SB 578 forward, said Cassady Craighill, deputy director at Clean Virginia, a Charlottesville-based nonprofit focused on utility transparency.

“Virginia’s changing political winds have put affordability, reliability, and sustainability at the forefront of the commonwealth’s energy future, but the job is only half done,” she said. “Sen. Deeds is right to advance the conversation about a competitive bidding process.”

Revamped commission gets first crack

Deeds’ bill won’t linger in a bell jar until next January because soon it’s scheduled to be reviewed — and likely reshaped — by the newly revamped Commission on Electric Utility Regulation.

Last year, a bipartisan measure to reboot and free up money to staff the long-dormant commission narrowly passed the Senate and sailed through the House.

Sen. Scott Surovell, D-Mount Vernon, told the Energy News Network last year that he led the charge because he thought it was crucial for legislators, who all serve part-time, to count on a professional staff for guidance as they sort through increasingly complicated energy bills. Republican Del. Terry Kilgore, who represents Southwest Virginia, sponsored the House companion bill. 

The commission needs to robustly monitor the state’s massive transition to clean energy to “ensure we’re doing it in the best way we can,” Surovell said, emphasizing that legislators should not be solely reliant on industry lobbyists and environmental advocacy organizations for energy policy decisions. 

Both Surovell, of Northern Virginia, and Kilgore, who represents the state’s Southwest, are serving on the rebooted commission. Its 13 members — three citizens and 10 legislators — are tasked with reviewing and explaining proposed energy policies to lawmakers and the public. 

Surovell had called for appointing citizen members with expertise in economic development, energy affordability and public utility regulation. The search is still on for the commission’s executive director.

Vaughan is optimistic that commissioners will keep competition and costs for ratepayers top of mind during their upcoming evaluation.

“We hope that (the commission) will give these issues careful review later this year,” he said.

Governor already on board? 

The bill that Deeds put on the table didn’t come as a surprise to the Southeastern Wind Coalition, a nonprofit that represents regional players in the industry, but doesn’t lobby for or against legislation across its 11-state membership.

Julia Pendleton, the coalition’s Richmond-based program director, said the language in SB 578 resembled some unexpected amendments that Republican Gov. Glenn Youngkin had added to a separate piece of wind legislation in April 2023 after it had already passed both the House and Senate.

The governor’s changes signaled that he backed the idea of competitive bidding and power purchase agreements to enhance the trajectory of Virginia’s offshore wind growth. 

Both chambers rejected Youngkin’s amendments to the measure, SB 1441, which had a companion bill in the House. The underlying bill, which became law, required utility regulators at the State Corporation Commission to consider economic and other benefits to Virginia when reviewing offshore wind proposals. It also accelerated the offshore wind development timeline from 2034 to 2032.

“People knew months ago that this is something Youngkin wanted to support, so we had heard that legislation was coming this year,” Pendleton said about his evident support for competitive bidding.

Her coalition will continue to track the journey of Deeds’ delayed legislation. After the November election, Democrats held on to a slim majority in the Senate and flipped the House back to their control. Barring any unexpected changes, those margins would still be in place next year.

“Knowing it has the potential support of the governor makes it a potential reality,” she concluded. “We’re very curious to see what happens.”

Virginia lawmakers delay decision on Dominion Energy’s offshore wind monopoly is an article from Energy News Network, a nonprofit news service covering the clean energy transition. If you would like to support us please make a donation.

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