Earlier this month, Virginia’s utility regulatory agency, the State Corporation Commission, approved the largest energy undertaking in Virginia history — Dominion Energy’s offshore wind project just beyond the shores of Virginia Beach. As part of this process, the SCC adopted a standard consumer protection measure called a “performance guarantee,” which holds that Dominion and its shareholders take on the financial obligation of replacing energy when the project does not meet the output levels that Dominion set out for itself in its regulatory application.
As a threshold matter, Dominion customers will cover 100% of the project’s costs, paying $21.5 billion over 30 years. This also includes $7.2 billion in guaranteed profit for Dominion. Without the performance guarantee in place, the overall bill for customers could increase well beyond $21.5 billion to pay for replacement energy if the project cannot deliver as expected. In response, Dominion is publicly threatening to walk away from the project altogether unless the SCC grants its request to reconsider the guarantee.
Not only does this about-face appear disingenuous, it reflects a common pattern with our primary energy provider. Performance guarantees are widely employed, including in Virginia. Like any corporate actor with an obligation to maximize profits and shareholder dividends — often at the expense of the public good — Dominion is once again trying to have its cake and eat it too. Unfortunately, our monopolistic system allows the company to hold ratepayers over the barrel time and time again. This time, Dominion wants guaranteed profits, full cost recovery from ratepayers and full ownership of the project.
First, Dominion has little to no expertise in offshore wind beyond this project. Second, this type of ownership model is practically unheard of for commercial offshore wind projects in the U.S. because it places most of the risk on ratepayers. Additionally, Dominion wants zero recourse for any delays, cost overruns or missed generation targets.
During the regulatory approval process, the attorney general’s consumer protection division requested the performance guarantee provision. It is common sense to expect the operator of this massive endeavor to assume some modicum of financial responsibility when it has insisted on a unique ownership model.
Bear in mind that Dominion insisted to the SCC that the offshore wind project could perform at an average net capacity factor of 42% and used this level of performance to justify the reasonableness and prudence of its application. If Dominion is confident it can achieve its own average capacity factor, it should not have a problem facing the financial ramifications if its own goals aren’t met.
Despite Dominion’s theatrics, this is not an unusual requirement for a renewable energy project. The SCC has adopted performance guarantees in the past, including for Dominion’s solar projects. Furthermore, other state’s utility commissions have approved the mechanism for large-scale wind projects in Texas, Arkansas, Louisiana and Oklahoma. Importantly, it is also something Dominion requires in its own power purchase agreements of renewable energy.
The climate crisis is an immediate threat to our coastal way of life in Hampton Roads. We also pay some of the highest energy bills in the nation and also have some of the highest eviction rates in the country. As a delegate, I championed legislation that returned hundreds of millions of dollars of Dominion’s overcharges back to Virginia families and businesses. In this case, the least regulators and Dominion could do is ensure that Virginia’s largest energy effort is as efficient and affordable as possible. Burdensome consumer costs should not overshadow the vast environmental and economic benefits this project brings to Virginia.
It is the SCC’s job to ensure energy projects are a fair deal for Virginians. By requiring this performance guarantee, the agency is simply doing its job and should hold firm.
Jay Jones is a practicing attorney in Norfolk and former state delegate. Jones ran in the 2021 Democratic primary for Virginia attorney general.