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Doswell Letter To Virginia State Public Utility Commission and Attorney General Urges Suspension of Uncompetitive Solicitation Process for New Power Generation Peaking Resources

November 21, 2019 GMT

NEW YORK, Nov. 21, 2019 /PRNewswire/ -- LS Power, through its affiliate Doswell Limited Partnership, today announced that a letter was sent to the Virginia State Utility Commission and Attorney General encouraging the review and suspension of a Dominion Energy Virginia request for proposals for up to 1,500 MW of new peaking resources.

“The RFP limits participation to only new supply resources, does not provide for an independent third-party to evaluate responses, and includes other uncompetitive requirements that all but guarantees that a Dominion self-build option will prevail. Dominion’s ratepayers should get the benefit of a competitive auction and not have to be burdened with higher costs to benefit Dominion shareholders,” said Nathan Hanson, Senior Vice President of LS Power.

“We urge the Virginia State Public Utility Commissioner and Attorney General, in his capacity as consumer protector, to suspend the solicitation as it is currently structured, review the requirements, and implement changes that will make the process competitive, for the benefit of Virginia consumers.”

The full text of the letter is below.

November 18, 2019

William F. Stephens
Director of Public Utility Regulation
Virginia State Corporation Commission
P.O. Box 1197
Richmond, Virginia 23219

Mark R. Herring
Attorney General of Virginia
Office of the Attorney General
202 North Ninth Street
Richmond, VA 23219

Re: Dominion Energy Virginia 2019 Solicitation for Peaking Power Supply Generation, November 6, 2019

Dear Director Stephens/Attorney General Herring:

We write to you regarding our concerns related to the Dominion Energy Virginia (“Dominion”) solicitation (“RFP”) issued on November 6, 2019 to procure up to ~ 1,500 MW of new peaking resources. Bids will be compared to the projected costs of Dominion building all or a portion of the 1,500 MW of generation in the Commonwealth.

Typically an RFP is utilized to assure a competitive process that will achieve the lowest cost for the consumer. However, Dominion’s RFP is structured in such a way that it limits competition and will not provide the competitive results that will ensure the consumers in Virginia and not the shareholders of Dominion are the beneficiaries of the process.

We respectfully request that you intervene in your capacity as regulators and the protectors of consumers’ interest to suspend the current RFP process in order to thoroughly review the requirements of the process and make the necessary changes to ensure it is truly competitive.

Among the areas to be reviewed that we believe make the current RFP uncompetitive and need to be revised include:

  • The RFP limits participation to “NEW” resources only. This is unnecessary as the PJM regional market is over supplied by existing resources very capable of providing the ratepayers with competitive supply into the future. Requiring bidders or Dominion to build new generation to address a perceived “energy gap” will unnecessarily increase the costs to Dominion ratepayers. There are sufficient existing resources in PJM, including combined cycle and peaking generation in Dominion’s service territory some of which commenced operation in 2018, that are excluded from the RFP that are able to provide Dominion ratepayers reliable energy supply at competitive prices.
  • The RFP requires bidders to compete against Dominion’s “self-build alternatives” with Dominion performing the analysis of the bids in secret. In addition, while the RFP is explicit with the costs the bidders are to include in their bids and the risks they are to assume, there is no description of the costs and risks the Dominion self-build alternatives are to assume. The bidding and evaluation process has to be transparent and there needs to be a level playing field to ensure the ratepayers of Virginia are getting the benefit of true competition. Each of the RFP bids need to be evaluated on an apples to apples basis, including all costs that would impact consumers in rates such as fuel supply and transportation costs, electrical interconnection costs and the cost to supply capacity and energy over an equal term of supply. For example, evaluating a 10 or 20 year PPA (terms provided for in the RFP) compared to a self-build alternative that will assume to have a useful life of ~40 years creates an inherent benefit for the self-build alternative. Under the current RFP structure it is doubtful, and more likely that the ratepayers will not get the benefit of a truly competitive process resulting in higher rates than they otherwise need to be.
  • As part of ensuring the competitiveness of the process and to provide confidence in the results, an independent third-party under the direction of the VA SCC, and not Dominion who is one of the “competitors” in the process, should be retained to perform the bid evaluation, including Dominion’s self-build alternatives, to ensure competitive results. With Dominion as the sole judge of the process, there is little confidence that the process will result in competitive results.
  • The RFP requires the bidders to take on the risk of future changes in law including environmental law. It is unclear if Dominion’s self-build alternatives will be held to the same requirement or be allowed to pass those costs along to the ratepayers (as they typically do with their self-build resources). If the latter is true, then to ensure the process is competitive, bidders should be permitted to pass along those costs onto Dominion and to the consumers in the same manner as Dominion.

Without the changes described above it is likely that this uncompetitive process will not provide the results that will ensure the ratepayers of Dominion are receiving the benefits in the form of low rates that a truly competitive process can provide. Left in its current form, the supposedly “competitive” process will only ensure that the ratepayers are not receiving the most competitive rates achievable.

Respectfully submitted,

/s/ Nathan Hanson

Nathan Hanson
Doswell Limited Partnership

About LS Power:
Founded in 1990, LS Power is a privately owned, independent power company with offices in New York, New Jersey, Missouri, California and Texas. LS Power is a developer, owner, operator and investor in power generation and electric transmission infrastructure throughout the United States. Since inception, LS Power has developed, constructed, managed or acquired more than 41,000 MW of competitive power generation and 630 miles of transmission infrastructure, for which it has raised over $40 billion in debt and equity financing. For more information, please visit www.LSPower.com

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