Dominion Energy Virginia reaches agreement on performance guarantee for offshore wind project

Published on November 01, 2022 by Dave Kovaleski


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Dominion Energy Virginia reached a settlement agreement in the company’s petition to the State Corporation Commission of Virginia (SCC) to reconsider the performance guarantee for the Coastal Virginia Offshore Wind (CVOW).

The settlement agreement — reached with the Office of the Attorney General, Walmart, Sierra Club, and Appalachian Voices — substitutes the previously ordered performance guarantee with a cost-sharing approach for unforeseen costs that exceed the $9.8 billion project budget. It also includes an enhanced commission review of operating performance.

Dominion officials say it provides a balanced and reasonable approach that supports continued investment in the 2.6-gigawatt CVOW to meet the Commonwealth’s public policy and economic development priorities. It also aligns with the company’s framework in Virginia, which has resulted in nation-leading decarbonization goals, customer rates lower than national and relevant regional averages, and high levels of reliability for customers.

Since the initial order in August, the company has taken steps to mitigate some of the project’s development risks, including working with the Bureau of Ocean Energy Management and other stakeholders to support the project’s timeline.

“Development of the project has continued uninterrupted to maintain the project’s schedule. We expect over 90 percent of the project costs, excluding contingency, to be fixed by the end of the first quarter in 2023 as compared to about 75% today, further de-risking the project and its budget,” Bob Blue, Dominion Energy chair, president, and chief CEO, said. “We have a lot of work ahead as we continue to build on our long record of completing projects on time and on budget while safely delivering affordable, reliable, and clean energy to our customers. Offshore wind is expected to alleviate pressure on customer fuel rates for 30 years once the project is in service. Our customers expect reliable, affordable energy – and offshore wind is key for accomplishing that mission.”

The key components of the settlement would provide for pragmatic cost sharing in the event of unforeseen cost increases prior to the completion of the project.

Specifically, in the context of the project’s current capital investment of $9.8 billion, the company voluntarily agreed that shareholders will share 50 percent of any costs in the range of $10.3 billion to $11.3 billion, if any. Further, Dominion Energy Virginia voluntarily agreed that shareholders will be responsible for 100 percent of any prudently incurred costs in the range of $11.3 billion to $13.7 billion, if any. However, there is no voluntary cost-sharing agreement for any costs that exceed $13.7 billion. In addition, per the agreement, the company will not be required to guarantee future energy production levels or factors beyond its control as outlined in the August Order. Instead, the company will provide a detailed explanation of the factors contributing to any shortfall in energy output from projected amounts in a future SCC proceeding.

Finally, the company will ensure that customers receive the benefits of the Inflation Reduction Act, which could provide potential additional customer savings.

“Given the now-significantly de-risked status of the project’s development and given its continued ‘on-budget’ status, we feel that this settlement reflects a balanced sharing of financial impacts in what we currently see as unlikely scenarios of material delays or cost overruns,” Blue said.

Offshore wind is a key part of Dominion Energy’s diverse energy generation strategy to meet the state’s clean energy goals and the company’s own net zero target.