PowerFacts

EPSA/P3 File Expert Testimony Supporting Market Options To Benefit Virginia Over Dominion’s More Costly Brunswick Plant

On March 13, 2013, EPSA and P3 filed expert testimony with the Virginia State Corporation Commission ("SCC") from Michael M. Schnitzer, a director of The NorthBridge Group, a highly respected energy consulting firm. The testimony was filed in the pending case on Dominion Virginia Electric and Power Company's ("Dominion") Certificate of Public Convenience and Necessity ("CPCN") application for approval of the proposed Brunswick County Power Station (Case No. PUE-2012-00128). The testimony focuses on how the proposed Brunswick CPCN unfairly dismisses competitive market alternatives in favor of Dominion's preference for wholly self-built plants which pose far greater risks for consumers. The Brunswick plant would also create broader, price distorting impacts in the multi-state PJM Interconnection regional market on which over 50 million customers rely for electricity. EPSA and P3 recommend the SCC reject the CPCN application and instead require that Dominion apply an open and transparent competitive market test to determine which resources efficiently and reliably meet future needs at the lowest reasonable cost. Below are excerpts from the testimony. The full text is available at www.epsa.org and www.p3powergroup.com.

Conclusions and Recommendations on the Brunswick Power Station

• "[T]he SCC [should] reject Dominion's proposed Brunswick Project CPCN [and] require Dominion to resubmit the CPCN including the results of an open, transparent, and objective competitive market test which includes an assessment of deferring the Project and relying on short-term market purchases as needed in the interim period." (Page 7)



• "[T]he Company's capacity price forecast is double or triple the capacity price implied by one market offer presented to the Company and this market offer is well below - $440 to $600 million in present value terms - the energy and capacity market price forecast underlying the Company's CPCN analysis." (Page 5)



• "Dominion's filed application for a CPCN has serious flaws and does not appropriately incorporate the available advantages of regional competitive markets for the benefit of Virginia customers... Dominion plans to self-build 1,358 MW of new generation and associated transmission facilities without fully considering market alternatives and without conducting a transparent, competitive market test to determine whether such a plan would in fact provide its customers the lowest reasonable cost resource solution. Meanwhile, Dominion estimates that the total capital costs of this new generation resource will be about $1.3 billion. Given the magnitude of dollars involved, if the Commission does not require an open and transparent competitive market test in the CPCN process, Dominion's customers could be forced to pay significant above-market generation costs for long periods of time." (Pages 6 - 7)



• "There is no physical need for new capacity in the Dominion Zone ("DOM Zone") in 2016 and Dominion's load can be reliably served with existing market resources. PJM currently has 5 to 7 GW of excess capacity above PJM's target reserve margin. Based on the Company's proposed resource plan including planned retirements, the DOM Zone reserve margin would be about 31% until 2027, or about two times higher than PJM's target installed reserve margin of 15-16%. Even if Dominion does not build any new capacity, additional capacity is not needed in the DOM Zone until after 2022, suggesting that under any circumstances the proposed Brunswick Project and costs could be deferred at least 6 years." (Pages 4 - 5)



• "Dominion fails to systematically evaluate competitive market alternatives available to Dominion's customers and the related customer benefits that competitive markets provide. Dominion failed to conduct a broad resource solicitation process to identify possible market alternatives to the proposed Brunswick Project. The Company's informal process to solicit existing contract extensions from three [non-utility generators] NUGs was severely flawed." (Page 6)



• "A competitive test and associated cost and risk analysis for the selection of resources - whether a utility constructed plant, a power purchase agreement, or a competitive supplier's new build will ensure that the proposed Project benefits customers by meeting any resource needs in an efficient and reliable manner at the lowest reasonable cost." (Page 7)


Significant Generation Investment Should Be Subject To A Real Market Test


• "Without considering available alternatives, Dominion is gambling with billions of dollars of ratepayer money, betting its plan will provide electricity at prices better than what could be obtained in the competitive market of which Dominion is a part. Absent a competitive market test to ensure customer needs are met at the lowest reasonable price, the Brunswick Project cannot be considered reasonable and in the public interest and should therefore be rejected." (Page 8)



• "Dominion should be required to prove that the Brunswick Project is the most prudent and least-cost choice available to Dominion ratepayers before requiring them to commit paying $1.3 billion in costs. Thus far, the Company has failed to adequately demonstrate that its proposed Project is the most prudent and least-cost choice available using a formalized and systematic solicitation approach…To show that the proposed Project is reasonable and in the public interest, Dominion should conduct an open and transparent competitive market test that can be evaluated in an objective manner." (Page 54)



• "Competitive suppliers have a long history of successfully providing reliable, efficiently-priced electricity from both existing facilities and new construction in contracts of varying lengths to serve all types of customer power needs. A competitive test and associated cost and risk analysis for the selection of resources - whether a utility constructed plant, a power purchase agreement, or a competitive supplier's new build will ensure that the proposed Project benefits customers by meeting any resource needs in an efficient and reliable manner at the lowest reasonable cost." (Page 7)



• "Requests for Proposals ("RFPs") also have been conducted in…vertically integrated utility states (such as Kentucky and Indiana) in order to evaluate market alternatives before committing to spend large sums of ratepayer money on pollution control equipment or replacing retiring coal plants." (Pages 52 - 53)

CONTACT: JOHN SHELK
(202) 349-0154or 703-472-8660

EPSA is the national trade association representing competitive power suppliers, including generators and marketers. These suppliers, who account for nearly 40 percent of the installed generating capacity in the United States, provide reliable and competitively priced electricity from environmentally responsible facilities serving global power markets. EPSA seeks to bring the benefits of competition to all power customers.