Key Takeaways

  • The Virginia State Corporation Commission (SCC) issued an order on July 31 requiring Dominion Energy to modify its transmission cost allocation policy, directly allocating the costs of specific transmission infrastructure to large load users such as data centers, as these facilities are the direct cause of the infrastructure construction.
  • Mandatory construction contributions (CIAC) will apply to "direct connection" facilities, covering the costs of substations and transmission lines that connect these facilities to the grid.
  • The case involves Dominion's proposal to increase its Rider T-1 line item to recover approximately $1.5 billion in transmission investments. The SCC approved Dominion's revised version of the new 12 coincident peak demand allocation factor (12CP), reducing the average monthly cost increase for typical residential customers from $2.90 to $0.94, a decrease of 67.5%.

In-Depth Analysis

The SCC wrote in its order: "In the extreme case, this minimum demand adjustment reduces the allocation factor for residential customers by 2.84%, while the allocation factor for the GS-4 rate class increases by 4.33%." Dominion's GS-4 rate class applies to large commercial or industrial customers that require at least 500 kilowatts of power and take electricity directly from the grid.

The SCC required Dominion to revise its existing line extension policy, "requiring mandatory CIAC for specific types of transmission facilities," and directed Dominion to submit a proposal for the revised policy in a new docket within 90 days of the final order.

Dominion spokesperson Jeremy Slayton said in an email to Utility Dive: "Under the SCC's oversight, we already have one of the strongest protections in the nation to prevent data center-driven cost shifts to residential customers. When we file our revised line extension policy, we will add more protections for residential customers, ensuring that high-energy users continue to pay their fair share."

Michael Barber, senior energy infrastructure policy analyst at the Piedmont Environmental Council, said the SCC's decision is "a big step in the right direction" in the nonprofit's view. The organization testified and submitted documents to the SCC in this case.

Barber told Utility Dive in an interview that this case had a "very short hearing process," lasting only 90 days. "So, I think the order the Commission issued is probably as deep as they could go on direct allocation," he said. "Given that, I think we achieved amazing results. What the Commission did not do is define other types of transmission projects that could also be primarily caused by a data center or multiple other data centers and order Dominion to develop direct allocation procedures for those projects."

However, Barber added: "The Commission said in its final order that they are willing to consider applying the direct allocation concept to some of those higher-level, more upstream transmission costs in the future, and we are very excited about that."

The SCC said it may use the new docket to consider whether the revised line extension policy "should or should not" be extended to these higher-level costs, as well as the merits of a "hybrid approach" that directly allocates these higher-level costs to Dominion's new GS-5 rate class (which applies to energy users requiring 25 megawatts or more of power).

Hyperscalers, including Google and Amazon, also testified at the SCC hearing on this case, with both companies requesting voluntary CIAC, but the SCC ruled that these payments would be mandatory.

Barber said he believes Virginia is a national "bellwether, or canary in the coal mine" on these specific cost allocation issues surrounding energy infrastructure, and expects Dominion's upcoming filing in the new SCC docket to receive "broad attention."