Dominion admits cost of North Anna 3 will top $19 billion

photo by Peter Burke/Wikimedia

A nuclear plant in Pennsylvania. Photo by Peter Burke/Wikimedia

Dominion Virginia Power is projecting that the capital cost of a third nuclear reactor at its North Anna facility will total over $19 billion, according to filings in its 2015 biennial review before the State Corporation Commission (PUE-2015-00027).

This works out to over $13,000 per installed kilowatt, according to the testimony of Scott Norwood, an energy consultant hired by the Attorney General’s Department of Consumer Counsel to analyze Dominion’s earnings evaluations. He notes that this capital cost is “approximately ten times the capital cost of the Company’s new Brunswick combined cycle unit,” which will burn natural gas.

As a result of this high capital cost, the “total delivered cost of power from NA3 is more than $190 per MWh in 2028.” That translates into 19 cents per kilowatt-hour.

By comparison, in 2014 the average wholesale price of electricity in the PJM region (which includes Virginia) was 5.3 cents per kWh. Dominion currently sells electricity to its customers at retail for between 5.5 and 11 cents/kWh.

In other words, NA3 is ridiculously expensive.

Dominion had kept its cost projections for NA3 secret until this rate case forced the disclosure. Previously, executives had acknowledged only that the cost would be “far north of 10 billion.”

This cost revelation may point to the real reason Dominion pushed so hard for SB 1349, the 2015 legislation that insulates the company from rate reviews until 2022.

As Norwood testifies, “DVP forecasts a dramatic increase in NA3 development costs over the next five years, during which there will be no biennial reviews.”

These costs are dramatic. A table included in Norwood’s testimony shows Dominion expects to have spent $4.7 billion on NA3 development by the end of 2020. By the time the SCC is allowed to review this spending, more than one-quarter of the total cost will have been spent, and Dominion will be looking to ratepayers to cover the bills.

With perfect deadpan, meanwhile, Dominion executives told legislators this year that SB 1349 was necessary to protect ratepayers from higher costs to be imposed by compliance with the Environmental Protection Agency’s Clean Power Plan.

This isn’t the first time legislators have been snookered in the cause of NA3. Recall that in 2014 Dominion succeeded in lobbying for a law that allowed it to shift 70% of already-spent NA3 development costs onto ratepayers, some $323 million. The effect was to soak up the company’s over-earnings so it would not have to rebate millions of dollars to customers.

This year’s snookering was more comprehensive. Given that Dominion has continued to over-earn, those who opposed SB 1349 assumed it was this year’s version of the 2014 maneuver, designed to protect over-earnings this year and for years to come. Now it appears the real purpose of SB 1349 was to allow Dominion to spend freely on NA3 development costs in amounts that it knew would be unacceptable to state regulators, not to mention the public.

That Dominion thought it could do so in secret is especially reprehensible. Lawmakers and the Governor should be outraged by this deception, whether they voted for SB 1349 or not.

The Attorney General’s office is now trying to force Dominion to justify NA3 to regulators before it racks up billions in sunk costs. Norwood recommends that the SCC “initiate a proceeding to address the prudence of DVP’s planned future investments for development of NA3. This proceeding would allow the Company to present its case regarding the need for and cost effectiveness of NA3, including the value of the proposed project from a fuel diversity perspective and as a means to comply with any final version of the Environmental Protection Agency’s proposed Clean Power Plan and other potential future environmental regulations.”

In reversal, Virginia AG says localities may ban fracking

fracking signVirginia Attorney General Mark Herring issued an official advisory opinion on May 5 holding that Virginia localities have the right to prohibit hydraulic fracturing (or “fracking”) as part of their power to regulate land use within their boundaries. The letter reverses a two-year-old opinion by former Attorney General Ken Cuccinelli.

Herring’s opinion cites §15.2-2280 of the Virginia Code, which grants broad zoning powers to localities. These include the power to “regulate, restrict, permit, prohibit, and determine” land uses, such as “the excavation or mining of soil or other natural resources.” Thus, writes Herring, “I conclude that the General Assembly has authorized localities to pass zoning ordinances prohibiting fracking. The plain language of the stature also authorizes localities to regulate fracking in instances where it is permitted.”

Herring’s opinion comes in a letter to Senator Richard Stuart, who had asked whether Virginia law allows localities to prohibit “unconventional gas and oil drilling,” commonly known as fracking, and whether they may use their zoning authority “to regulate aspects of fracking, such as the timing of drilling operations, traffic, or noise.”

The letter overrules a January 11, 2013 opinion by then-Attorney General Ken Cuccinelli, which held that the General Assembly had preempted localities’ right to regulate or ban drilling when it passed the Virginia Gas and Oil Act. Under §45.1-361.5, localities may not “impose any condition, or require any other local license, permit, fee, or bond to perform any gas, oil or geophysical operations which varies from or is in addition to the requirements of this chapter.”

But, Herring notes, the statute “also includes a savings clause stating that the Act does not ‘limit or supersede the jurisdiction and requirements of . . . local land-use ordinances.’” Thus, it explicitly preserves local zoning authority to prohibit or limit fracking.

Herring concludes, “To the extent that the 2013 Opinion conflicts with this conclusion, it is overruled.”

Interestingly, if localities choose to restrict fracking but not prohibit it, they may actually leave themselves more open to challenge. Herring’s opinion reaffirms that portion of Cuccinelli’s opinion that upheld the right of localities to impose some restrictions on fracking, short of outright prohibition. However, the restriction must be “reasonable in scope” and “not inconsistent with the Act or regulations properly enacted pursuant to the Act.” As a result, a fracking company might have a better shot at challenging a restriction than it would an outright ban.

Herring adds, “Determining the extent to which particular zoning restrictions on fracking may possibly be preempted by state law will be governed by the particular facts, restrictions, and regulations at issue. Consequently, I can express no opinion on whether any particular zoning restriction has been preempted.”