Agreement would guarantee customer cost protections on Virginia offshore wind project

A settlement has been reached in a months-long dispute over Dominion Energy’s proposed Virginia offshore wind project.

The Virginia State Corporation Commission had expressed concern about construction and operation risks for ratepayers. A settlement reached by the Office of the Attorney General, Dominion Energy, Walmart, the Sierra Club and Appalachian Voices includes the protection risks, providing significant cost certainty for customers while allowing the $9.8 billion project to move forward, should the Commission find that adopting the settlement in place of its final order is in the best interest of customers.

Under the terms of the settlement, Dominion Energy has agreed to cost sharing and a cost cap on construction expenses, after which it will be responsible for all cost overruns.

The agreement also includes a performance standard designed to ensure that the project produces the energy promised.

“Justice requires that we build the clean energy infrastructure required for a carbon-free economy while keeping customer bills as low as possible,” Appalachian Voices Virginia Policy Director Peter Anderson said. “Fortunately, these imperatives are not mutually exclusive, and in fact they can be complementary. We will continue to demand similarly thoughtful solutions as we move forward with the energy transition.”

“Offshore wind is a proven resource and is vital to Virginia’s clean energy transition. The primary issue in this case has never been about offshore wind’s value but the risks created by the ownership structure,” said Will Cleveland, a senior attorney for the Southern Environmental Law Center in SELC’s Charlottesville office.

“Where utility-owned projects are concerned, shareholders get guaranteed profits but ratepayers bear all the risks, both in terms of construction and operations,” Cleveland said. “These risks have nothing to do with the fact that offshore wind is clean and has zero fuel costs, and there are cautionary tales in the non-renewable context the Commission can look to for both types of risks. Today’s settlement strikes a much better balance between shareholders and ratepayers that enables the project to move forward.”

The agreement provides for initial cost sharing between customers and Dominion up to $11.3 billion. If the construction costs fall between $10.3 billion and $11.3 billion, Dominion and consumers will share those additional costs evenly. If the construction costs of the project exceed $11.3 billion, Dominion is required to pay those additional costs in full.

In the event that the project’s construction costs exceeds $13.7 billion, the project will be put back before the SCC for a further determination of viability and/or cost allocation. This feature of the agreement protects all stakeholders from catastrophic cost overruns.

This cost sharing and cost cap agreement means that Dominion will potentially have to pay almost $3 billion if the project runs over budget. Ensuring that the project remains on budget is crucial to ensuring it is also built on time.

“I am pleased that we have achieved consumer protections never seen before in modern Virginia history,” Attorney General Jason Miyares said. “For the first time Dominion has significant skin in the game to ensure that the project is delivered on budget. Should the project run materially over budget, it will come out of Dominion’s pocket, not consumers’. If approved by the State Corporation Commission, this agreement provides first-of-its-kind protections for Virginia consumers. A wide range of stakeholders support this agreement. I especially want to thank the Sierra Club and Appalachian Voices for joining, as well as Virginia’s largest private employer, Walmart. This landmark agreement means that Virginia will be a national leader in offshore renewable energy for years to come and most importantly in a fiscally responsible way.”