State agency approves new coal plant for Wise County but sets cost-controls

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By Paula C. Squires

The State Corporation Commission (SCC) has approved Dominion Virginia Power’s application to build a coal-fired power plant in Wise County. The approval is contingent upon measures designed to protect ratepayers from potential construction cost overruns. If the plant, called the Virginia City Hybrid Energy Center, costs more than the $1.8 billion Dominion has estimated, then costs over that amount would not be automatically charged back to ratepayers.

Instead, the company would have to prove in future proceedings that additional costs were reasonable under state law before it could attempt to recoup them from ratepayers.

While supported by many business leaders, the 585-megawatt plant has drawn opposition from local residents and environmental groups because it would be one of the largest polluters in the state. Dominion Virginia Power already has reached an agreement with the U.S. Forest Service to reduce half of the permitted sulfur dioxide emissions and has agreed to install carbon capture compatibility when the technology becomes commercially available by around 2018.

With several hurdles still to cross, Dominion hopes to have the plant in operation by 2012. The company raised concerns about possible delays and increased construction costs earlier this month when the state’s Air Pollution Control Board stepped in and took over the decision-making authority on the issuance of an air permit from the Department of Environmental Quality. 

In a statement following today’s SCC announcement, Dominion characterized the decision as “an important step in moving this project forward.” It said, “... Virginia has a great need for additional electric generating capacity to meet the rising demand for energy and to help maintain price stability over the long term. The Virginia City Hybrid Energy Center is a vital part of Dominion’s integrated strategy to ensure our customers’ needs are met now and well into the future.” 

If the plant obtains the necessary environmental permits, the SCC has approved a rate increase to finance construction.  “It would be a surcharge on the bill, starting in January 2009, especially for this facility,” said Ken Schrad, spokesman for the SCC. The amount of the surcharge would be recalculated on an annual basis depending on the cost of the construction for that year.

The SCC set the return on equity that Dominion Virginia Power will receive for its cost of capital to construct the plant at 12.12 percent. The company had requested 13.75 percent.



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