SCC -62

COMMONWEALTH OF VIRGINIA

STATE CORPORATION COMMISSION

APPLICATION OF

VIRGINIA ELECTRIC AND POWER COMPANY CASE NO. PUE-2012-00128

For approval and certification of the proposed Brunswick County Power Station and related transmission facilities pursuant to §§ 56-580 D, 56-265.2, and 56-46.1 of the Code of Virginia, and for approval of a rate adjustment clause, designated Rider BW, pursuant to § 56-585.1 A 6 of the Code of Virginia

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REPORT OF A. ANN BERKEBILE, HEARING EXAMINER

June 13, 2013

This case involves the application ("Application") of Virginia Electric and Power Company d/b/a Dominion Virginia Power ("Dominion Virginia Power" or "Company") for the approval and certification of its proposed Brunswick County Power Station ("Brunswick Plant") and related transmission facilities/infrastructure (collectively referred to as "Project") . Dominion Virginia Power also seeks the approval of an associated rate adjustment clause ("RAC") designated as Rider BW. Because the record fails to demonstrate the Company adequately considered actual third-party alternatives to the Project, I recommend denial of the Application.

HISTORY OF THE CASE

On November 2, 2012, the Company filed the Application seeking approval of the Project and its proposed Rider BW in accordance with §§ 56-580 D, 56-265 .2, 56-46. 1, and 56-585.1 A 6 ("Subsection A 6") of the Code of Virginia ("Code") .' Coincident with its Application, the Company also filed a Motion for Protective Order and Additional Protective Treatment for Extraordinarily Sensitive Information ("Protective Motion") .

On December 12, 2012, the Commission issued an Order for Notice and Hearing ("Procedural Order") that, among other things : (I) docketed this proceeding ; (2) pranted the Company's request for waiver of the requirements of Rate Case Rules 60 and 90 (associated with Filing Schedule 45); (3) required the Company to provide notice of the Application; (4) established a schedule for the filing of notices of participation and the submission of prefiled testimony ; (5) scheduled a public hearing on the Application for April 24, 2013 ; and (6) appointed a Hearing Examiner to conduct all further proceedings in this matter on behalf of the Commission, including consideration of the Protective Motion, and to file a final report . 3

'See Ex . 2 . ' See 20 VAC 5-201-60 and 20 VAC 5-201-90 . .1 On December 14, 2012, the Commission entered an Amended Order clarifying the Company's notice and publication requirements associated with the transmission aspects of the Project .

W On December 18, 2012, 1 granted the Company's Protective Motion and entered a Protective

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Ruling and Additional Protective Treatment for Extraordinarily Sensitive Information ("Protective 4 Ru I i ng") .

On January 23, 2013, Dominion Virginia Power filed a motion ("Supplemental Testimony Motion") seeking leave to file supplemental testimony associated with the Project . By Ruling dated January 24, 2013, 1 granted the Supplemental Testimony Motion .

Notices of participation were filed by the Office of the Attorney General's Division of Consumer Counsel ("Consumer Counsel") ; the Virginia Committee for Fair Utility Rates ("Committee") ; the Sierra Club and Chesapeake Climate Action Network (collectively "Environmental Respondents"); Doswell Limited Partnership ("Doswell"); and the Electric Power Supply Association and PJM Power Providers Group (collectively "PY) .

On March 15, 2013, the Staff of the Commission ("Staff") filed a Motion for Ruling ("Infrastructure Motion") wherein, among other things, Staff asserted that the enhanced return on equity ("ROE") provided in Subsection A 6 does not apply to the transmission infrastructure included in the Project . The Committee, Consumer Counsel, and the Company filed responses to the Infrastructure Motion on April 4, 2013, and Staff filed its Reply in support of the Infrastructure Motion on April 18, 2013 .

The Commission received 16 written comments on the Application expressing the following concerns/sentiments relative to the Project :

Mrs. Deborah Holland owns land in Brunswick County . Mrs . Holland wrote in opposition to alternate Route B (proposed by the Company relative one of the associated transmission lines) .

2 . Mr. Russell Holland wrote that he owns land that is likely to be impacted by transmission infrastructure included within the Project . Mr . Holland states that he is also a trustee for land that is owned by his mother, Myrtle M. Holland . Mr . Holland supports Route C and is opposed to alternate Route B .

Mrs . Myrtle Holland herself also submitted written comments in opposition to alternate Route B .

4 . Ms. Barbara E . Williams is opposed to the Brunswick Plant . Ms. Williams recommends that dirty coal facilities be replaced with renewable energy sources such as solar and wind .

5 . Mr. Frank R. Turner supports the proposed new gas-fired power Brunswick Plant.

' The Protective Ruling was subsequently modified to broaden access to extraordinarily sensitive information . See Modification to Hearing Examiner's Protective Ruling and Additional Protective Treatment for Extraordinarily Sensitive Information of December 18, 2012 (entered February 19, 2013) .

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6. Delegate Terry G. Kilgore, representing the First District, wrote in support of the new power station in Brunswick County. Delegate Kilgore notes the modem combined-cycle plant will be located in Southside Virginia where good jobs are needed and a hard-working motivated workforce is in place. Delegate Kilgore states that his region of the Commonwealth is already benefitting from Virginia Power's Virginia City Hybrid Energy Center which provides 100 well paying jobs . In summary, Delegate Kilgore states the Brunswick Plant will provide much needed electricity with low emissions and will bring a significant economic boost to a region that needs the help .

Delegate Roslyn C. Tyler, representing the Seventy-Fifth District that includes Brunswick County, wrote in support of the Project . Delegate Tyler characterized the Project as the most significant economic event in the history of Brunswick County as it will provide several hundred construction jobs and significant tax revenue to the county . Delegate Tyler further stated the Project will benefit the entire state by providing clean, affordable electricity to power homes and businesses .

8 . Secretary of Commerce and Trade James S . Cheng wrote in support of the proposed Brunswick Plant . He noted that Governor McDonnell's administration has been highly focused on creating jobs and additional investment in Virginia . Secretary Cheng stated the Project will create jobs and bring economic benefits to both Brunswick County and the entire Commonwealth, and urged the Commission to grant its approval of the Application .

9 . Mr . Don Cherry filed written comments suggesting that the Commission evaluate and adjust time-of-day rates . Mr. Cherry stated that if more than 50% of electric use were consumed during off-peak hours, there would be no need to build additional power plants .

10 . Mr. Glenn N. Johnson of Brodnax, wrote in favor of the Application to construct the Brunswick Plant, related transmission facilities, and for the approval of Rider BW.

11 . Mrs. Charlotte T. Johnson of Brodnax, wrote in favor of the Application to construct the Brunswick Plant, related transmission facilities, and for the approval of Rider BW .

12 . Douglas R. Pond, mayor of Lawrenceville, filed a Resolution in Support of the proposed Brunswick Plant adopted by the Lawrenceville Town Council on April 9, 2013. The Resolution states the proposed power station will be an investment of over $1 .1 billion-the largest single investment in the history of Brunswick County. The Resolution further notes the plant will provide several hundred construction jobs and additional tax revenues to Brunswick County .

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13 . By letter dated April 16, 2013, various members of the Virginia business community 5 urged the Commission to reject the Application . The 10 signatories 6

to the letter criticized the Company for requesting approval to build the 1358 MW Brunswick Plant without conducting a competitive procurement to assure that the plant is the least-cost method of meeting Dominion Virginia Power's generation needs . COMPETE argued that the Company should be required to demonstrate that it has weighed alterriative options, including third-party market alternatives, in its selection process .

14 . Mr. Aviv Goldsmith of Spotsylvania County urged the Commission to consider renewable energy expansion and energy efficiency improvements so that we are not dependent on fossil fuels that have high price volatility and envirom-nental consequences . Mr . Goldsmith stated the Commission should require Dominion Virginia Power to first examine and implement energy efficiency and clean energy before building new fossil fuel plants.

15 . Senator L. Louise Lucas, representing the 18 1h Senatorial District, which includes part of Brunswick County, wrote in support of the Application . She stated that Southside Virginia, specifically Brunswick County, has a high unemployment rate and the Project will help to bring that rate down. Senator Lucas also stated that Virginia needs the power and the entire region will benefit from the upgraded natural gas infrastructure associated with the Project. Senator Lucas urged the Commission to approve the Brunswick Plant .

16 . Charlette T. Woolridge, County Administrator for the County of Brunswick, urged the Commission to approve the Project. She also filed a Resolution in Support of the proposed Brunswick Plant adopted by the Brunswick County

7 Board of Supervisors on April 4, 2013 .

The hearing was convened, as scheduled, on April 24, 2013 . Joseph K. Reid, 111, Esquire, Bernard L. McNamee, Esquire, Ashley B . Macko, Esquire, and Elaine S. Ryan, Esquire, appeared on behalf of the Company ; C . Meade Browder, Jr ., Esquire, and William T. Reisinger, Esquire, appeared on behalf of Consumer Counsel ; Louis R. Monacell, Esquire, Edward L. Petrini, Esquire, and James G . Ritter, Esquire, appeared on behalf of the Committee; Joshua Berman, Esquire, and Kathyrn M. Amirpushaie, Esquire, appeared on behalf of the Environmental Respondents ; George Cannon, Jr., Esquire, appeared on behalf of Doswell ; M. F . Connell Mullins, Jr ., Esquire, and

5 The letterhead is styled : COMPETE, Electricity Competition Drives Innovation and Consumer Benefits, located at 1317 F Street NW, Suite 600, Washington, DC 20004 . 6 Kevin Moran, manager of utility and energy services at BJ's Wholesale Club, Inc . ; Steve Elsea, director energy management, Lowes Companies, Inc . ; Paige A . Miller, senior manager, energy & environmental, Rite Aid Corporation ; Gregory D . Tornsick, senior director-energy, Boston Market Corporation ; Russell S . Subjinske, senior director of energy for Wendy's Restaurants in Virginia ; George Waidelich, vice president of energy operations for Safeway ; Joe Raia, energy manager of Sheetz, Inc . ; Jodi Roth, director of government affairs for the Virginia Retail Merchants Association ; Joe Main, vice president of Yum! Brands, Inc . (parent company of KFC, Pizza Hut, and Taco Bell) ; and Chris Hendrix, director of markets and compliance for Wal-Mart Stores, Inc . 7 The Lawrenceville Rotary Club also submitted a letter in support of the Project on April 24, 2013, following the deadline for written comments .

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Edward Everett Bagnell, Jr ., Esquire, appeared on behalf of P3 ; and William Chambliss, Esquire, Alisson 0. Pouille, Esquire, and Kimberly Beth Clowers, Esquire, appeared on behalf of Staff. The transcript of the hearing ("Tr.") was filed on March 5, 2013, and May 5 and 6, 2013 .8

On May 28, 2013, Staff and each of the parties in this case filed post-hearing briefs.9

SUMMARY OF THE RECORD

Public Witnesses

Senator Frank Ruff, representing the 15'h Senate District, spoke on behalf of his constituents and colleagues on the Virginia Tobacco Indemnification and Community Revitalization Commission. Senator Ruff supports the Brunswick Plant. He stated the power station and the related natural gas infrastructure will provide a boost to an economically depressed area and power from the combined-cycle power station will benefit the entire state. Tr . at 30-32.

Delegate Roslyn Tyler, representative of Brunswick County in the Virginia House of Delegates, supports the Brunswick Plant saying that it may be the most significant economic event in the history of Brunswick County . Delegate Tyler stated the Project will provide energy benefits to the Commonwealth . Tr. at 33-35 .

Denise Williams represents the Sturgeon Election District on the Brunswick County Board of Supervisors . Ms . Williams testified that the Board supports the Brunswick Plant because it will provide many economic benefits to Brunswick County and will provide reliable power and high levels of environmental protection through its use of clean natural gas . Tr. at 37-40.

Raymond Alexander Thomas runs an insurance agency in Lawrenceville, Virginia, and is also a member of the Brunswick County Industrial Development Authority ("IDA"). Mr. Thomas strongly supports the Project, citing the need for revenue, jobs, and new businesses in Brunswick County . Tr . at 41-44 .

Senator William Wampler formerly represented Southwest Virginia in the State Senate for 24 years and currently is the executive director of the Now College Institute in Martinsville, Virginia . He urged the Commission to approve the Application, stating that the Project will help bring energy independence to the Commonwealth and economic opportunity to this region . Tr . at 44-49 .

8 The beginning portion of the transcript relates to oral argument that was conducted on February 19, 2013, relative to the modification of the Protective Ruling . See Tr . at 1-15 . 9 See Post-Hearing Brief of Virginia Electric and Power Company ("Company's Brief') ; Post-Hearing Brief of the Staff of the State Corporation Commission ("Staff Brief') ; Post-Hearing Brief of the Virginia Committee for Fair Utility Rates ("Committee's Brief") ; Post-Hearing Brief of Respondents PJM Power Providers Group & Electric Supply Association ("P3's Brief") ; Post-Hearing Brief of Doswell Limited Partnership ("Doswell's Brief') ; Post-Hearing Brief of Office of Attorney General, Division of Consumer Counsel ("Consumer Counsel's Brief") ; and Post-Hearing Brief of Environmental Respondents Sierra Club and Chesapeake Climate Action Network ("ER Brief') .

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Charlotte Woolridge resides in Lawrenceville and spoke in support of the Project for the much needed economic benefits it will bring to the region . Ms . Woolridge also brought with her a resolution from the Brunswick County Board of Supervisors in support of the Project . Tr . at 49-52 .

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Joan Moore is the executive director of the Brunswick County IDA and expressed the IDA's full support for the Brunswick Plant. She explained that the IDA has the primary responsibility for attracting new industry and supporting the growth of existing industry . Ms. Moore stated that the power station would be an important step in reindustrializing the region . Tr . at 52-55.

David Crandall, a resident of Norfolk, Virginia,, was concerned about the environmental effects of the Project . He stated it will increase the currently high levels Of C02 in the atmosphere . Mr. Crandall recommended efficiency programs to alleviate the need for building new power plants . Tr. at 55-56.

Douglas Stanley is the county administrator for Warren County, Virginia, and spoke in support of the Application . Mr. Stanley compared the Brunswick Plant to the power station under construction in Warren County, which has doubled the county's commercial tax base and decreased its overall unemployment . Tr. at 57-61 . 1

Ellis W. James resides in the city of Norfolk and opposes the Brunswick Plant, stating that natural gas should not be categorized as a "clean energy ." Mr . James recommends an emphasis on energy efficiency and renewable energy such as wind . Tr . at 61-64 .

Jane Twitmyer currently resides in Vienna and opposes the Project, describing "its state-of-the-art-technology [as] yesterday's thinking."10 She testified that "the drilling, extraction, and transportation of natural gas all result in the leakage of methane, a far more potent global warming gas than carbon dioxide ."" Ms . Twitmyer recommends wind farms and solar production. Tr . at 64-71 .

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Geoffrey Urda of Richmond opposes the Application stating that Dominion should initiate wind or solar projects in the Commonwealth . Mr. Urda testified that the natural gas to be used in the Brunswick Plant would be obtained from the northeast, extracted from the ground using the fracturing (also called hydrofracking) method, which carries environmental risks to underground drinking water . Tr . at 71-76.

Tommy Zincone lives in South Hill, Mecklenburg County, Virginia, which is adjacent to Brunswick County, and is a retired Dominion employee . Mr . Zincone spoke in favor of the Application . Tr . at 76-79 .

Ashby Whorley, also a retired Dominion manager, is a fart-ner and businessman in Halifax County. Mr. Whorley stated that the Brunswick Plant is' one of the largest industrial developments in the region's history; he supports Commission approval of the Project. Tr . at 79-82.

'0 Tr . at 65 . " Tr . at 67 .

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Town Council. He favors approval of the Project, noting that the improved natural gas infrastructure will attract other new industry . Tr . at 82-95 .

Welton Tyler is the vice chair of the Brunswick County Board of Supervisors and represents the Powellton Election District, where the Brunswick Plant will be located . He strongly supports the Project and urges the Commission to approve the Application . Tr. at 85-88 .

Richard H. Ball resides in Annandale, Virginia; and is retired from the Environmental Protection Agency ("EPA") and the U. S . Department of Energy. Mr. Ball testified that the proposed plant is not a sound investment at this time for four reasons : (1) the supply of natural gas and its future price are unknown, (2) there will be a concerted effort within the next decade to control greenhouse gas emissions, (3) we are now in the early stages of massive changes to the electrical system (uses, generation, transmission), and (4) new technologies will decrease the costs of renewable energies . Mr. Ball opposes the Project. Tr . at 89-100.

Rekha Nadkarni, who resides in McLean, Virginia, opposes the Application. She noted that Virginia has few incentives in place to promote energy efficiency, which is the cheapest way to produce power. She also testified that Virginia has no wind or solar installations. Tr. at 100- 1 02 .

Steven Bruckner also of McLean, Virginia, opposes the Application, stating that the Company should take steps to reduce peak demand . Specifically, Mr. Bruckner suggested that Dominion adjust its rate structures to include inclining block rates, which can provide consumption savings . Tr. at 103-111 .

Sherry Swenson, a resident of Farmville, Virginia, is the executive director of Virginia Growth Alliance ("the Alliance"), a regional economic development organization serving the counties of Brunswick, Charlotte, Greensville, Lunenberg, Mecklenburg, and Nottoway, and the City of Emporia . Ms. Swenson read a resolution by the board of the Alliance fully supporting the Brunswick Plant . Tr . at 1] 2-114 .

Michael Ferguson is vice chairman of the Greensville County Board of Supervisors and chairman of the Alliance . He testified in support of the Project ; the Alliance believes the Project will bring benefits to all of the localities served by the Alliance . Tr . at 115-118 .

Debbie Burkett, the director of social services in Brunswick County, testified about the high level of unemployment and poverty in the county, as well as the increasing need for services for children and seniors . Ms. Burkett supports the Project and stated, "[T]his project is the opportunity to help people succeed, to let us help ourselves."' 2 Tr . at 119-122 .

Douglas Pond testified as the mayor of Lawrenceville, Virginia, in support of the Project. He passed to the file resolutions of support from the Economic Development Authority and the Brunswick County Chamber of Commerce . Tr . at 123-125.

12 Tr. at 122 .

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Joe Cook resides in Norfolk, Virginia, and opposes the Brunswick Plant. He testified that air and water pollution from burning coal and gas have adverse health effects on people and the environment. Mr. Cook further stated that energy use could be cut substantially by conservation efforts, thus eliminating the need for new generation . Tr. at 126-129.

Dr. Tony Pauletti resides in Toms Brook, Virginia, and spoke in opposition to the Project on behalf of JB Power Systems Incorporated, based in Abingdon, Virginia. Dr . Pauletti testified that there are methods of energy available that are cleaner, safer, more reliable, and more cost-effective than the Brunswick Plant. He urged the Commission to deny the Application . Tr . at 129-134 .

Wayne Carter, a resident of Chase City, Virginia, is the county administrator of Mecklenburg County and represented members of the county's Board of Supervisors who fully support the Project . Tr. at 135-136 .

Lisa Whetzel, a resident of Fairfax, Virginia, te§tified in opposition to the Project . She stated that although carbon emissions from natural gas are less than from coal, natural gas is the lesser of two evils. Ms. Whetzel said that Dominion should invest in renewable energy sources. Tr. at 137-141 . 1

Ann Talley of Gloucester, Virginia, wants the C ' ommission to deny the Application .

Ms . Talley believes that the fracking process used to recover natural gas may contaminate our drinking water. Tr . at 142-143 .

Adrienne Spratley resides in Surry County and opposes the Brunswick Plant. Ms. Spratley believes it is time for Dominion to develop clean, renewable energy generation, such as wind or solar. She further notes that Dominion consistently overestimates energy demand in Virginia to justify construction of more fossil fuel generation plants . Tr . at 144-147.

Theo Geasey resides in Norfolk, Virginia, and is concerned about the rising sea level and flooding in her area . She opined that with the dangers of climate change, rising sea levels, and fracking, the government will increase restrictions relating to fossil fuels, thus raising costs and reducing reliability . Ms. Geasey opposes the Brunswick Plant and would encourage Dominion to build a wind or solar project . Tr . at 147-149 .

I Bobby Conner resides in Ebony, Virginia, and is the project manager for the Brunswick

County Lake Gaston Tourism Association ("Tourism Association"), which supports the Project . Mr. Conner also represented the Brunswick County Economic Development Coordinating Council, which is made up of all the lending areas in the county, the Brunswick County school system, Brunswick Academy, the Brunswick County Chamber of Commerce, Brunswick County Government, Tourism Office, Lake Gaston Association, Lake Gaston Chamber of Commerce, St . Paul's College, and Southside Community College . Mr . Conner read a portion of a resolution of support passed by the Coordinating Council ; the Coordinating Council fully endorses and supports the Application . Tr . at 150-152 .

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Stefan Reed resides in Richmond, Virginia, and is the deputy director of environmental policy with the Alliance for Progressive Values as well as a student pursuing an environmental studies degree . Mr. Reed opposes the Brunswick Plant because he believes the Commonwealth would be better served by using a safe renewable energy such as solar, wind, geothermal, water current, or hydroelectric . Tr. at 153-159.

Ian Jordan spoke in opposition to the Brunswick Plant, favoring renewable energy sources such as solar . Mr. Jordan works with the firm Abakus Solar, headquartered in Richmond, Virginia, which is a solar engineering and installation firm for residential and commercial projects . Tr . at 159-165 .

Susan Stillman, a resident of Vienna, Virginia, spoke in opposition to the proposed gas-fired Brunswick Plant . Ms . Stillman supports the use of

: -clean renewable energy sources, and

energy efficiency to reduce demand levels . Tr . at 166-168 .

Ivy Main, of McLean, Virginia, is opposed to the Brunswick Plant as unnecessary and a risky use of ratepayer money. Ms. Main cited the trend of a flattening of electric demand and the rise of renewable energy . She stated that gas turbines are now able to integrate with renewable energy . She recommends a more forward-looking energy approach . Tr . at 169-174 .

Keith Martin is vice president of public policy and general counsel to the Virginia Chamber of Commerce ("Virginia Chamber"), located in Richmond . The Virginia Chamber supports a variety of approaches to meet the state's energy needs and avers that Dominion provides this . The Virginia Chamber supports approval of the Project . Tr . at 174-176.

Derek Meyer resides in Alexandria, Virginia, and testified that Dominion should explore the use of a facility for renewables . Mr. Meyer stated that energy efficient buildings with rooftop solar panels should be a part of Virginia's energy future .. Tr . at 177-179 .

Fred Abbey is a resident of both Fairfax County and Nelson County . About 25 years ago he began investing in Dominion stock and he recalled reading in the annual reports at that time that Dominion was promoting a strategy for diversifying its sources of generation . Mr . Abbey stated that Dominion has paid handsome dividends over the years, but has "not made progress in diversifying that technology and that portfolio ." Tr . at 180-184 .

Earl Mitchell resides in Springfield, Virginia, anld is a retired United States Navy supply officer. Mr. Mitchell explained that the Navy conducts an extensive planning process to determine the "life-cycle" cost of any new class of ship . This process includes every cost from the initial planning stage to the ship's end and the scrapping stage. Mr . Mitchell stated that public utilities do not consider life-cycle costs. He suggested utilities look at environmental costs and health costs and suggested that since utilities will be exporting natural gas to Europe in the future, ratepayers will in effect be subsidizing natural gas for Europe. Mr. Mitchell favors the use of renewable sources of energy . Tr . at 185-189.

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Bill Brockhouse lives in Alexandria, Virginia, and opposes the Brunswick Plant. Mr. 0) Brockhouse believes Dominion should focus on energy efficiency and solar and wind power. Such focus would ensure reliable energy at stable, reasonable prices as well as clean energy sources that don't harm the environment. Tr . at 190-193 .

Hugh Keogh resides in Midlothian, Virginia, and is the President Emeritus of the Virginia Chamber of Commerce and a former director of economic development for the Commonwealth . However, Mr. Keogh testified in his capacity as chair of Virginians for Reliable Energy ("VRE") . The VRE supports the Project for two reasons . First, it will help Virginia's efforts to become more energy independent . Second, the Project is an investment in Virginia ; it will increase the state's generation capacity . Tr . at 194-195 .

Mitchell Stout of Arlington, Virginia, is a volunteer with the Sierra Club and presented petitions that were created by the Sierra Club opposing ~he Brunswick Plant. The petitions were signed by approximately 3,000 people across Dominion's service area . The signatories oppose the Project due to its use of fossil fuels rather than clean, renewable energy sources . They encourage the Commission to consider the long-term consequences of the utility's proposals . Tr . at 196-200 .

Debra Smiley of South Hill, Virginia, is the director of Workforce Development and Continuing Education for Southside Virginia Community College . She also serves on the Virginia Community College Workforce Advisory Council and the Brunswick Economic Development Coordinating Council . Ms. Smiley supports the Projecti noting that it will improve economic development by lowering the unemployment rate . She listed a number of businesses in the area that have closed recently, causing a significant increase in unemployment and revenue loss for Brunswick County . Tr . at 200-202 .

Dr. Oliver W. Spencer, Jr., superintendent of Brunswick County Public Schools, testified in favor of the Project, noting it would provide one of the largest investments in the history of Southside Virginia . The region will benefit from additional jobs, revenue, and the community involvement that Dominion brings to its host regions . Tr . at 203-206 .

Tyla Matteson lives in North Chesterfield, Virginia, and testified in opposition to the Project because it uses natural gas which adds to the carbon buildup in the atmosphere . Ms. Matteson urges the Commission to consider the impacts of Virginia on climate change in the world . Tr. at 206-210 .

The Company's Direct Testimony and Exhibits

Dominion Virginia Power presented the direct testimony of Fred G. Wood, 111, senior vice president of financial management for Dominion Generation ; Glenn A. Kelly, the Company's director of generation system planning ; Robert B . McKinley, the Company's vice president of generation and construction ; James E. Eck, vice president of business development for Dominion Resources Services, Inc . ("DRS") ; Robert M . Bisha, the Company's director of environmental business supports ; David M . Wilkinson, a regulatory consultant in Dominion Virginia Power's regulatory accounting department ; Bonnie P. Horton, a regulatory advisor for the Company; Peter Nedwick, a consulting engineer in the Company's electric transmission planning department ;

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Robert J. Shevenock, 11, a consulting engineer in the CorrIpany's electric transmission line engineering department; Anthony J . Spears, a consulting engineer in the Company's substation engineering department; Jonathon-David W. Schultis, a senior siting and permitting specialist for the Company; and William P. Johnsen, principal and branch manager with National Resource Group, LLC ("NRG"). A

Mr. Wood testified that he is responsible for the financial management of Dominion Virginia Power's generating business . He provided an overview of the Project and explained that the Company proposed to have the Brunswick Plant in operation by May 2016 . He also introduced the Company's other witnesses . In addition, he sponsored Exhibit I to the Company's Application (containing information responsive to the Commission's Rate Case Rules, 13 including Dominion Virginia Power's I O-K for the period ending December 31, 201 1) . Ex . 8, at 1-2 .

According to Mr. Wood, completion of the Project is appropriate to meet an anticipated increase in demand from Dominion Virginia Power's customers . Furthermore, he testified that the Project supports a balanced portfolio of Company-owned generation, and presents an opportunity to take advantage of favorable construction and equipment markets . He maintained that the Brunswick Plant will operate as one of the most efficient gas-fired plants in the country and it will support system reliability . He also indicated that the Project should be approved given current and anticipated environmental requirements relating to coal-fired generation facilities and the Company's planned retirements of facilities in Chesapeake and Yorktown. Ex . 8, at 2-7 .

Mr. Wood described the planning process followed by the Company in determining that the Project constituted the best resource to meet customer needs - including the consideration of- (1) traditional and emerging generation alternatives ; (2) demand-side management ("DSM") programs ; (3) PJM wholesale market purchases (including forecasts of wholesale market prices) ; and (4) the availability of supply from non-utility generators ("NUGs") . He testified that comparative analysis of these alternatives revealed the Project as the economically superior choice to meet customer needs . Furthermore, while acknowledging that the Company considered the current environment of relatively low natural gas prices when deciding to pursue the Project, he maintained that the Company does not assume such prices will continue indefinitely . He opined that the Brunswick Plant will support Dominion Virginia Power's continued balance of clean coal, nuclear, natural gas, and renewable resources . Ex . 8, at 7-9 .

Mr. Wood testified that the Company has secured firm transportation and adequate natural gas for the Brunswick Plant from Transcontinental Gas Pipe Line Company, L.L.C . ("Transco") . He also explained that the Brunswick Plant will have access to four interstate pipelines . Ex . 8, at 9-10 .

Mr. Wood testified that the Project will benefit from a grant from the Virginia Tobacco Indemnification and Community Revitalization Commission ("Tobacco Commission") to Transco's Virginia Southside Expansion Project ("VSSE") . He also testified that the current environment for construction resources has benefited Dominion Virginia Power's customers by allowing the Company to negotiate very favorable terms for the equipment and manpower needed to complete the Project . In addition, he testified that Chmura Economics and Analytics completed a study for

" 20 VAC 5-20 1 - 1 0 el seq.

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the Company in 2012 showing the various economic benefits that will be provided to the Commonwealth in connection with the Project - including the estimated number of jobs that will be created both during and after construction . Ex . 8, at 10- 1 2.

Mr. Wood testified that the Company used an enhanced ROE of 1 1 .4% when calculating the revenue requirement for its Rider BW - including a base ROE of 10.4% (approved by the Commission in the Company's 201 1 biennial review proceeding) and an additional 100 basis points as provided in Subsection A 6. He maintained that the Company should receive an enhanced ROE for 15 years in connection with the Project - the midpoint of the 10 to 20 year range provided in Subsection A 6 . He testified that a 15 year incentive was appropriate because the Project is in the public interest, is critical to meeting the Commonwealth's energy needs, and has inherent development risks. With respect to risks, Mr. Wood distinguished the Project from the Company's Warren County Power Station ("Warren Station"), another generation plant using similar technology that is currently under construction by Dominion Virginia Power, because the site for the Brunswick Plant was not previously approved for a combined-cycle facility . Ex . 8, at 12-15.

At the conclusion of his prefiled direct testimony, Mr. Wood provided an overview of the testimony being provided by the Company'sother witnesses . Ex. 8, at 16 .

Upon cross-examination by P3, Mr. Wood explained that there are numerous points at which the engineering, procurement, and construction ("EPC") contract and turbine supply agreement may be terminated without requiring full payment. Furthermore, he testified that the Company has recently observed upward pressure on supply resources thereby supporting his conclusion that construction costs are likely to increase in the future . He also maintained that the recent comments of Mr. Farrell relative to the dangers of overreliance upon natural gas are consistent with the Company's overall strategy of employing diversity in its fuel mix . In addition, while acknowledging that Dominion Virginia Power's custom ers bear the risk of construction cost overruns associated with the Project, Ms. Wood asserted that the Company is taking all appropriate steps to manage such risk . Tr . at 289-295.

When cross-examined by the Committee, Mr. Wood confirmed that Dominion Virginia Power is requesting cost recovery associated with the transmission infrastructure included in the Project . He distinguished between the costs of Project's onsite transmission facilities and charges assessed by PJM to the generator (the Brunswick Plant) associated with the interconnection of the Brunswick Plant with the grid . He also explained that the interconnection charges are billed through PJM on behalf of the transmission owner in the territory - in this instance, Dominion Transmission . 14 Tr . at 296-307 .

Mr. Wood acknowledged that generation providers other than the Company could also take advantage of low construction and gas costs in the current market . Furthermore, he agreed that Dominion Virginia Power could have solicited bids - through a request for proposal ("RFP") - for additional bidders, including a possible new build. He maintained, however, that such an expanded RFP was unnecessary given the Company's overall analysis of alternatives . Moreover, he agreed that a new build by an entity other than the Company would constitute "iron in the ground" for purposes of meeting the goals of the General Assembly (when enacting Subsection A 6) .

14 See also Ex . 13 ES .

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Nevertheless, he did not believe another developer, in the PJM queue, would be able to build a CD comparable facility at a lower less cost than the Company. Tr . at 307-320 .

When questioned by Consumer Counsel, Mr. Wood indicated that he was indirectly involved in the NUG solicitation process as an executive of the Company. He did not view the 4k NUG solicitation as an "either/or" alternative to the Brunswick Plant. Instead, he testified that the Company would have explored the possibility of extending its three largest NUG contracts even if it had not determined there was a need for the Brunswick Plant. Nevertheless, he also asserted that Dominion Virginia Power did not assume, prior to engaging in the NUG solicitation, that NUG offers would not have any impact on its decision to pursue or delay the Brunswick Plant. In addition, Mr. Wood indicated that the Company has determined, from prior experience, that "best offer" solicitations (offering NUGs significant flexibility in forming their offers but providing for no counter offers) tend to secure the best alternatives for Dominion Virginia Power. Furthennore, he testified that the Company's IRP analysis, as updated in connection with the Application, and together with the backcast analysis, supported Dominion Virginia Power's conclusion that the Brunswick Plant was the best alternative for meeting its capacity needs. He maintained that the results of the N_LJG solicitation confirmed this conclusion . Tr. at 320-340.

Mr. Wood was next asked about the timing of a press release that was issued by the Company on February 28, 2012 . The press release announced Dominion Virginia Power's decision to pursue the development of the Project in Brunswick County before the NUG solicitation process was initiated . 15 It was Mr. Woods' understanding that the press release focused on the location chosen for the Brunswick Plant - rather than the decision to construct a generation facility that was previously referenced in the Company's IRP. He also denied that the Company has a corporate strategy to eliminate NUGs from its generation mix . Furthermore, although Mr. Wood believed that the General Assembly has expressed a policy, through legislation, of encouraging the construction of generation, he testified that he always understood the Company had an obligation to explore alternatives . In addition, he indicated that he was aware of recent legislation passed by the General Assembly confirming the Company's obligation to explore alternatives to generation construction and eliminating the enhanced rate of return associated with the future construction of natural gas, combined-cycle facilities . Tr . at 353-360 .

When asked about Doswell's offer, he confirmed that the current Doswell contract is uneconomical/above market . However, he also indicated that the Company did not find it in the best interest of its customers to buy out the Doswell purchase power agreement ("PPA") . Tr . at 360-361 .

Mr. Wood agreed that the Company currently purchases approximately 15% of its capacity needs from the market . However, he maintained that Dominion Virginia Power's energy purchases must also be considered when assessing the potential risks of overreliance upon the market . 16 He opined that the Company would become over-dependent on market purchases if its own generation is unable to cover its demand during peak periods. He asserted that the addition of an extremely efficient facility, such as the Brunswick Plant, should mitigate customer risks during volatile peak

" See Ex . 12 . 16 Mr . Wood subsequently indicated that Dominion Virginia Power purchases approximately 17% energy from the market . Tr. at 364-365 .

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periods . Nevertheless, he did not dispute that the Company previously identified access to low-cost capacity as ajustification farjoining PJM . In addition, he indicated thatjoining PJM has expanded the Company's options . Moreover, he explained that Dominion Virginia Power's "all of the above" strategy for meeting the electricity needs of its customers contemplates consideration of numerous Q alternative resources . He maintained that, with respect to the Company's need for additional capacity and energy as of 2016, the Brunswick Plant is the clear preferred alternative . Tr . at 361 -370.

During cross-examination by Staff, Mr. Wood acknowledged making a statement included in a recent article in the Richmond Times-Dispatch regarding the decision of Dominion Virginia Power's parent company, Dominion Resources, to sell certain merchant power plants and to concentrate investment in its regulated businesses . He agreed that the Brunswick Plant constitutes an aspect of such investment . He also agreed that the Brunswick Plant is similar to the Warren County facility in terms of cost . He did not, however, believe that it would be possible for the Company to construct a significant number of natural gas combined-cycle facilities at a comparable cost . Furthennore, he indicated that there is not enough'space at the Brunswick site for another combined-cycle facility . Tr . at 372-376.

Mr. Wood testified that the VSSE pipe being constructed in Southside Virginia does not have additional space to serve another natural gas combined-cycle facility . However, he maintained that increased incremental capacity could be added to the pipeline for a relatively small cost . He also indicated that the Company's customers will receive a financial benefit (that is, reduced fuel charges) if other entities make use of the pipeline . Tr . at 377-379 .

Mr . Wood next discussed his use of the term "preferred mix of resource options" in his prefiled direct testimony . He opined that the Company's "preferred resource mix" is the best mix of resources to mitigate long-terrn supply and price risks . He agreed that the preferred resource mix is not always the lowest cost mix . He also agreed that the Brunswick Plant is needed by 2016, in part, to compensate for the retirement of coal units at Dominion Virginia Power's Chesapeake and Yorktown facilities . He asserted that the conversion/retrofitting of these units (currently providing 918 MW of capacity) to comply with environmental requirements would not be cost-effective. In addition, he testified that the only self-build alternative to the Brunswick Plant would be combustion turbines ("CTs") . In his assessment, the Brunswick Plant is a superior alternative to CTs . Tr . at 380-384 .

Mr. Wood testified that the Company's three largest NUG PPAs currently provide approximately 1,000 MW of capacity . He indicated that Dominion Virginia Power is still willing to consider offers for the extension of such PPAs - despite the unsuccessful result of the NUG solicitation in 2012 . He agreed that 1,000 MW of capacity will need to be replaced in the future if the NUG PPAs are not extended . Furthermore, with respect to the VSSE, Mr. Wood maintained that the VSSE's access to four pipelines will help secure supply for the Brunswick Plant - thereby providing more price stability and greater flexibility with respect to suppliers . Tr . at 384-390 .

On redirect examination, Mr. Wood maintained that the Company's reduction of capacity purchases from the PJM market is not a goal of Dominion Virginia Power's planning process but, instead, is supported by its modeling - the goal of which is to meet customer needs in the most

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reasonable and least cost manner. He noted that 19,000 MW of coal capacity in PJM will be retired by 2019 . It is also Mr. Wood's understanding that demand is rising in PJM and that PJM's reserve 10 margin will go down over time . Furthermore, he maintained that the Company takes into account 0 the concept of risk mitigation in its long-terrn planning process. Tr . at 393-400. 1-1

With respect to the NUG solicitation in 2012, Mr. Wood testified that the Company would have accepted the NUG offers if they had been advantageous to customers . He also indicated that Dominion Virginia Power would have reevaluated its decision to file the Application if the NUG extension offers were advantageous . Moreover, he maintained that the Company considers NUG PPAs independently from the Brunswick Plant as part of its overall planning process. In his assessment, the potential value of the NUG offers that were solicited in 2012 did not come close to the value of the Brunswick Plant for customers - particularly when the energy value of the Project is taken into account . Tr . at 400-402 .

Mr. Wood clarified that the Company has budgeted approximately $89 million for the transmission costs of the Project - including the costs of the transmission facilities necessary to connect the Brunswick Plant to the existing transmission system and the costs of system upgrades necessitated by the Project . He also differentiated between the current PJM market and the non-transparent market that existed in the 1980s, when, according to Mr. Wood, the Company had to use RFPs to determine what options the market would provide . Moreover, he maintained that customers would not receive life-cycle benefits associated with any facility that was not Company owned. Furthen-nore, he testified that the results of the RFP used to ascertain possible alternatives to the Company's Bear Garden facility support his assessment that the self-build option is a superior alternative for ratepayers. In addition, he testified that the Company did not believe it was necessary to issue a broad-based RFP for alternatives to the self-build (of the Brunswick Plant) just to confirrn what was already known from the visible market . Tr . at 402-412 .

Mr. Kelly testified that he is responsible for developing generation portfolio plans to service the capacity and energy needs of the Company's customers . He discussed Dominion Virginia Power's forecasted need for additional generation resources . He also explained the Company's basis for concluding that the Project is the best economic option for meeting customer need (by 2016). Furthermore, he evaluated customer benefits to be achieved through the Project. In addition, Mr. Kelly sponsored the Company's Filing Schedule 46A. Ex . 14 and 14 ES, at 1-2 .

Mr . Kelly described the information contained in Filing Schedule 46A supporting the need and prudence of thiE: Project (including load and generating capacity reserve forecasts, economic studies comparing generation alternatives, and feasibility studies supporting the site selected for the Project) . He testified that the Project was included in the Company's 201 1 and 2012 Integrated Resource Plans. He also testified that load growth in PJM's Dominion Zone ("DOM Zone") contributed to the need for the Brunswick Plant. In addition, Mr. Kelly provided an overview of the various resources planned by the Company to meet its capacity needs over the next several years. Ex . 14 and 14 ES, at 2-9.

Mr. Kelly denied that Dominion Virginia Power is becoming too reliant on natural gas to serve the needs of its customers. He also discussed the Company's projected energy mix for 2017 that includes nuclear (29%) ; gas (26%); coal (23%); net purchases (13%); NUG (4%); renewable

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(2%); and hydro (I%). Furthermore, he testified that it was not advisable for the Company to become over-dependent on market resources. Instead, he maintained that Dominion Virginia Power should add economical, Company-owned generation resources to its portfolio as the needs of its customers grow. He testified that having such additional resources will increase the Company's flexibility and ultimately reduce costs. In support of this conclusion, he explained that 19,000 MW of generation are supposed to retire in PJM by 2019 . He also estimated that the Company's fuel factor would have been reduced by approximately $112,million had the Brunswick Plant been in operation in 2011 (because the Company's purchased power costs would have been lower) . Ex. 14 and 14 ES, at 9-11 .

Mr. Kelly described the process used by the Company when determining the need for the Project including its use of the Strategist ("Strategist") model to evaluate the economics of various alternatives . He testified that Dominion Virginia Power, considered market purchases, supply-side resources, and the effects of DSM programs when performing its analysis . In addition, he identified various screening curves and sensitivities used by the Company when determining that the Project was the appropriate resource for meeting projected load . According to Mr. Kelly, the Project constitutes the most reasonable and cost-effective means of addressing customer growth needs (as compared to market purchases, simple-cycle CTs, and the environmental retrofit of units in Chesapeake and Yorktown. He further explained that the Company analyzed the value of the Project under both future price projections and actual market prices . Ex. 14 and 14 ES, at 12-2 1 .

Mr . Kelly testified that the Brunswick Plant will be one of the most efficient gas-fired generation facilities in the country . He also indicated that its construction will have a positive impact in the PJM DOM Zone by lowering the overall cost of purchased power in the region . Ex. 14 and 14 ES, at 21-22 .

In his supplemental direct testimony, Mr. Kelly updated his sensitivity analysis of the Project's economic benefits based on new infon-nation relative to the Company's firrn transportation ("FT") gas contract . He testified that reduced FT prices increase the Project's net present value ("NPV") relative to other generation alternatives . Ex . I ~, at 1-2 .

When cross-examined by the Environmental Respondents, Mr. Kelly maintained that the Company's portfolio of generation resources is balanced and diverse on an energy basis (with 25% gas, 25% coal, 25% nuclear, and 25% NUG contracts, and renewable/market purchases) . He agreed that the Company's 2012 IRP's preferred resources include approximately 4,870 MW from new natural gas generation facilities together with 227 MW from the conversion of Dominion Virginia Power's Bremo facility (units 3 and 4) to natural gas . He explained that the 2012 IRP also contemplates the addition of 1,500 MW of new nuclear capacity to help mitigate supply risks . Furthermore, although Mr. Kelly acknowledged that the Company has not identified new wind or solar power as preferred resources, he maintained that the portfolio is set up to incorporate such resources if prices for wind and solar go down. Moreover, he maintained that Mr. Farrell's statements warning of the dangers of overreliance upon natural gas were not intended to address the Company's best course for meeting the need for increased capacity in the near term . Tr. at 419-427 .

MT. Kelly next described the Company's process for converting its least cost plan (formulated using the Strategist model) to its preferred plan . He testified that Dominion Virginia

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Power assesses the risks associated with the resources included in the least cost plan when formulating and attempting to mitigate risks in its preferred plan . He also indicated that the preferred plan includes a much greater amount of natural gas than renewable resources because of the higher cost of renewables . In addition, Mr. Kelly explained that he uses renewable cost data provided by the Company's construction and business development group when performing his planning analysis (and that he compares such data to other public sources to confirm its reasonableness) . Tr . at 427-434 .

During cross-examination by P3, Mr. Kelly indicated that he participated in the NUG solicitation process by ensuring that the NUGs were asked the appropriate questions and by analyzing their offers . He also indicated that he received the final forecast data provided by ICF International Inc. ("ICF") approximately a month before the Application was filed. When asked about a press release/press conference that occurred earlier in 2012 (that is, before the NUG solicitation), 17 Mr. Kelly testified that he believed the press release related to the selection of a site in Brunswick County rather than in Chesterfield County. Tr. at 437-441 .

Mr. Kelly agreed that the Company could purchase a portion of its needed capacity from the PJM market without leading to reliability problems. Similarly, he acknowledged that PJM has already purchased more than enough capacity for all of its load-serving entities, including the Company, exceeding its targeted capacity through 2016 . In addition, he agreed that a 20% reserve margin has cleared in PJM over the last four years. However, Mr. Kelly also testified that he is concerned, as a planner, regarding the future amount of capacity that will be in the DOM Zone and the potential for capacity shortage given the number of expected coal plant retirements . Furthermore, he maintained that the self-build option is more economical for customers given forecasted prices in the PJM market . Tr . at 441-45 1 .

With respect to the ICF market price forecast, Mr. Kelly indicated that short-term, long-term, and spot market purchases were all considered in the analysis . He agreed that market purchases can have fixed or variable prices and that a fixed price purchase eliminates volatility . He also agreed that fixed price purchases could be aggregated to achieve 1,300 MW but believed such a product would be very expensive and, as such, would not constitute the "best price" for the Company's customers . Moreover, when asked about the risks of possible cost overruns associated with the Project the risks of which would ultimately be borne by the Company's ratepayers, Mr. Kelly maintained that the Company has a history of completing its projects on budget . Tr . at 452-455 .

Mr. Kelly acknowledged that a market price forecast that is too high relative to the Company's existing and potential new assets would favor a self-build option over market purchases . However, he denied that the ICF forecast was biased to favor the Company's self-build of the Brunswick Plant . He also agreed that forecasts vary over time and that the timing of a forecast can be relevant to its use - particularly with respect to short-'terrn decisions. Mr. Kelly further acknowledged that most forecasts tend to be incorrect. However, he maintained that Dominion Virginia Power's backcast analysis (considering actual historical data) confirmed its conclusion that self-building the Brunswick Plant was the best option for meeting expected needs. In addition, he

17 At a later point in his testimony, Mr. Kelly also agreed that the NUG solicitation occurred after the Company signed the turbine agreement . Tr . at 476 .

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testified that sensitivities (contemplating varying market scenarios) were applied to the ICF forecast to further confirrn that the Brunswick Plant was the most favorable alternative. Tr . at 456-467.

Mr. Kelly testified that he had no particular role in determining the timing of the NUG solicitation that occurred in 2012. Furthermore, he indicated that he did not communicate directly A with the NUGs (but that his group did forinulate the questions to be asked of the NUGs). He confirmed that the Company did not do anything additional to test the market other than the NUG solicitation . However, he maintained that the Company is very familiar with the resources available in the DOM Zone. Moreover, he testified that no suppliers within the DOM Zone (other than the solicited NTJGs) contacted the Company regarding the possibility of providing an alternative to the Brunswick Plant - despite being very sophisticated and being aware of Dominion Virginia Power's plans (through the IRP) . Mr. Kelly explained that Dominion Virginia Power chose to solicit NUGs with facilities that were large enough to defer the need for the Brunswick Plant. In addition, he testified that the Company hoped the solicited NUGs would make favorable offers because their facilities are depreciated . Mr. Kelly suggested that there was no need for the Company to contact the Tenaska facility in Fluvanna (as a possible alternative to the Brunswick Plant) because such facility would have had to offer a megawatt price that is lower than the price it is currently receiving from Shell Energy to beat the comparable price of the Brunswick Plant. Tr . at 470-481 .

During cross-examination by Doswell, Mr. Kelly explained that the Company essentially rents a generating facility when it enters into a PPA with a NUG. He acknowledged that a NUG building a new generating facility in the DOM Zone could structure a PPA to provide essentially the same benefits as the Brunswick Plant. However, he maintained that Dominion Virginia Power's customers would not receive the benefits of ownership if the Companywere to enter into such an arrangement . According to Mr. Kelly, benefits of self-b~uilding/ownership include confidence that the facility will actually be built, options for continued use of the Project site following the Brunswick Plant's retirement, generally lower expenses associated with upgrades, greater potential for fuel switching, and greater flexibility with respect to dispatch . He agreed that it may be possible to negotiate with a NUG to achieve some of these benefits - at an additional cost . Mr. Kelly also suggested that the experience gained by the Company through recent generation construction projects, together with the inherent benefits of generation ownership, will lead the Company to favor self-builds over NUG PPAs in the foreseeable future . In addition, he clarified that his team formulated the questions asked to the NUGs after the NUGs made their offers - so that the Company better understood the offers that were being made. Tr . at 590-600 .

When cross-examined by the Committee, Mr. Kelly acknowledged that it may be possible for the Company to negotiate liquidated damages associated with a NUG PPA for a new build - to address the possibility of a NUG's failure to actually build a generating facility . Similarly, he indicated that a tolling arrangement could address the issue of potential fuel switching . However, he maintained that these provisions would raise the cost of the associated PPA. Furthermore, he indicated that the non-price issues relating to ownership are difficult to quantify and, as such, were not included in the Company's Strategist modeling . In contrast, he acknowledged that the potential for future carbon regulation was factored into Dominion Virginia Power's analysis . Tr . at 600-607 .

Mr. Kelly agreed that comparing the cost of building the Brunswick Plant to either market purchases or meeting the Company's capacity needs through PPAs - so as to deten-nine the lower

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cost alternative - was a principal goal of his analysis in support of the Application . He also explained that Dominion Virginia Power used an ROE of 10 .4% with a 100 basis point adder for 15 years when comparing the Brunswick Plant to other alternatives . He indicated that the cost to customers of the Brunswick Plant will be higher if the Commission subsequently approves a higher a ROE and lower if the Commission approves a lower ROE. Furthermore, he agreed that the cost to customers will be lower than what was modeled in his analysis if the Commission approves an enhanced ROE for 10 years (rather the 15 years requested by the Company) . Moreover, he acknowledged that the cost to customers of the Brunswick Plant xNrill be higher if the percentage of common equity is higher than what was modeled (that is, approximately 51 .91%)." Tr. at 607-623 .

Upon cross-examination by Consumer Counsel, Mr. Kelly opined that an overreliance upon market purchases would occur if such purchases resulted in separation from the PJM market as a whole . He explained further that there needs to be a balance between resources and the amount of load within the DOM Zone. He also maintained that too many market purchases outside of the DOM Zone will cause significant price increases . Moreover, he indicated that the anticipated retirement of nuclear units in the DOM Zone in the 2030s will reduce capacity in the DOM Zone. Tr . at 623-626 .

Mr . Kelly identified figures from the Company's 2011 and 2012 IRPs reflecting Dominion Virginia Power's plans for meeting its capacity gap . 19 He acknowledged that these figures reflect the phasing out of NUG and market purchases by 2021-22 . Furthermore, when explaining the

,,20 Company's preference not to "put all of its eggs in one basket, Mr. Kelly testified that Dominion Virginia Power strives to maintain diversity in its types of generation - rather than types of purchases - while at the same time focusing upon achieving the lowest costs for its customers . In addition, he opined that the Company complied with the Commission's directive in the Company's last IRP case by adequately considering market alternatives to the Project - that is, by evaluating the PJM wholesale market and actively soliciting NUG PPA extensions . Tr. at 626-633 .

Mr. Kelly was next cross-examined by Staff. With respect to his prior testimony that it is better for customers to own generating facilities than to .lease them, Mr. Kelly acknowledged that Dominion Virginia Power's customers do not actually own the Company's generating plants . However, he maintained that customers reap the benefits of the Company's ownership of power stations . Furthermore, he testified that the Company never considered the "non-price" issues relative to the PPAs for the N-UGs that were solicited in 2012 because the N_UG price offers were unsatisfactory . In addition, it was his understanding that the Company did not change its strategy regarding counteroffers after receiving the N_UG bids . Tr. at 634-640 .

During redirect examination, Mr. Kelly identified portions of the Company's 2012 IRP filing clarifying that Dominion Virginia Power's preferred plan for the next five years includes spot market purchases of energy through pjM.21 He also testified that the Brunswick Plant will be a

18 Mr . Kelly was also asked to identify several schedules that have been filed in connection with the Company's current biennial review proceeding and agreed that such documentation shows a percentage of common equity of 47.7 1% year end 2008, 52.805% year end 201 1, and 55 .624% year end 2012. See Tr . at 620-62 1 . See also Ex . 26 . 19 See Exs . 27 and 28 . '0 Tr. at 628-629 . 21 See also Ex . 28 .

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a strong baseload plant - similar in heat rate/efficiency to a CT unit but without start-up costs . In M addition, he suggested that Dominion Virginia Power's good credit rating will make it less expensive for the Company to build a new unit than for a NUG (at least with respect to customer repercussions) . Finally, he explained the busbar screening curves included in his prefiled testimony 0 pertaining to the costs of differing technologies . He maintained that the busbar screening curves .1% show gas units like the Brunswick Plant are currently the best type of asset for meeting capacity needs . 22 Tr . at 641-654 .

Mr. McKinley testified that he is responsible for the engineering and construction of power station capital projects planned by the Company and its affiliates . He described the design and construction sc'hedule associated with the Project . He also described and sponsored the Company's Filing Schedule 46B. Ex . 29 and 29 ES, at 1-3 .

According to Mr. McKinley, the Brunswick Plant will be an approximate 1,358 MW (nominal) natural gas-fired combined-cycle electric generating facility . He provided a drawing and rendering showing the expected layout of the Project . He testified that the Brunswick Plant will include three Mitsubishi Heavy Industries "G" class CT generators, three heat recovery steam generators with supplemental firing capabilities, and one Mitsubishi steam turbine generator . He also discussed additional features of Brunswick Plant including its expected nominal capacity, net heat rate, environmental controls, chiller system, water treatment facility, auxiliary boilers, and natural gas metering and regulating station . Ex . 29 and 29 ES, at 3-5 .

Mr. McKinley testified that the Mitsubishi technology chosen by the Company for the Project is the most efficient and has proven successful (and reliable) in field experience . He indicated that knowledge and experience gained by Dominion Virginia Power in connection with the construction of the Warren Station supported its decision to use the same technology at the Brunswick Plant. He also described the competitive process used by the Company when determining the technology to be used for the Project. Furthermore, he described Dominion Virginia Power's justification for deciding to enter into a long-term service agreement with the original equipment supplier for the Project. Ex. 29 and 29 ES, at 5-1 0.

Mr. McKinley identified the suppliers expected to furnish the major components of the Project including Transco - the company that will design, procure, construct, own, operate, and maintain the natural gas pipeline facilities necessary to serve the Brunswick Plant . He also discussed the competitive procurement process used by Dominion Virginia Power to select Fluor Corporation as the Project's EPC contractor . Ex . 29 and 29 ES, at 10- 1 2 .

Mr. McKinley described the status of transmission interconnection activities necessitated by the Project . He indicated that the cost associated with connecting the Brunswick Plant to the transmission grid will be approximately $89 .1 million . He also indicated that the Company has executed water and wastewater agreements allowing the Brunswick Plant to interconnect with county water and wastewater . Ex . 29 and 29 ES, at 12-13 .

Mr. McKinley estimated that, if approved, construction of the Project will begin in November 2013 and that it will be completed by May 2016. He also attached a detailed

22 See Ex . 14 and 14 ES, at 14 .

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construction timeline to his prefiled testimony . In addition, he described the site of the Project and provided an aerial view and map. Furthermore, he summarized the various local, state, and federal permits that must be obtained in connection with the Project . Ex . 29 and 29 ES, at 13-14 .

Mr. McKinley estimated that the total Project will cost approximately $1 .27 billion, excluding financing costs (and he attached a detailed cost report to his prefiled testimony). He maintained that his cost estimate was reliable and he discussed various contractual provisions that should mitigate customer risk associated with the Project's costs . He also testified that the Company will be actively involved with the Project's construction . Ex . 29 and 29 ES, at 15-18 .

When cross-examined by the Environmental Respondents, Mr. McKinley explained that the Company developed the cost data used by Mr. Kelly in his analysis (and used to create comparative screening curves shown on Figure 7 in Mr. KelYs direct testimony)23 using a variety of sources including some publicly disclosed information 2 and some information obtained by the Company when developing its own generating facilities (that is, combined-cycle projects, CT projects, and wind and solar facilities) . He did not know if Mr. Kelly's screening curves were created using the

25 same data as was used in connection with Dominion Virginia Power's 2012 IRP . Tr . at 673-682 .

During cross-examination by P3, Mr. McKinley acknowledged that he played a key role in the Company's negotiation of the EPC contract and turbine supply agreement for the Project. He agreed that Dominion Virginia Power used a fort-nal competitive/RFP process (setting forth detailed parameters/terms and conditions) when selecting the EPC contract and when negotiating the turbine supply agreement . Similarly, it was his understanding the Company used a formal competitive process when securing FT associated with the Brunswick Plant. He believed the formal competitive selection process for the fixed price, EPC contract and the turbine supply agreement obtained the best value for the Company's customers . Tr . at 683-688 .

Mr . McKinley was next cross-examined by Staff. Mr. McKinley indicated that the components of the turbines to be used in the Brunswick Plant are already being fabricated . He also explained that the major components of generator turbines are not typically kept in stock but, instead, are fabricated after an order has been placed . He did not believe that any change in the Company's relationship with Mitsubishi, the manufacturer of the turbines, would have an impact on the Brunswick Plant. He also explained that the same type of technology is being developed at Dominion Virginia Power's Warren County facility and has been used by Florida Power and Light . Furthermore, he testified that the Company has had prior experience with the manufacturer of the environmental emissions control components that will be used for the Project . Similarly, he indicated that Dominion Virginia Power has had prior experience with the air-cooled condenser that is intended to be used at the Brunswick Plant . Tr . at 690-694 .

Mr. McKinley described the benefits of the emergency diesel generator that is intended to be installed at the Brunswick Plant - noting that it will serve as a safety feature but will not provide

23 See Ex . 14 and 14ES, at 15 . 24 Mr . McKinley subsequently explained that the Company obtains some of the public cost information from press releases . Tr . at 679. 25 See also Tr. (extraordinarily sensitive) at 699-711 (wherein Mr . McKinley provided additional information relative to the Company's consideration/implementation of various renewable resources) ; Ex . 31 ES.

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black-start capabilities . In addition, he agreed that the Company has obtained a conditional use permit from Brunswick County for transmission structures not exceeding 170 feet in connection with the Project. However, he was unable to confirm that no transmission structure included in the Project will exceed 170 feet . Tr . at 695-697.

On redirect examination, Mr. McKinley further explained why selection of the EPC Contract and turbine supply agreement associated with the Project warranted the use of a fort-nal RFP process . He testified that turbines vary by manufacturer - thereby requiring the specification of the Company's needs in connection with the Brunswick Plant . Similarly, he indicated that bidders for the EPC contract required detailed information regarding the Project site and facility type so as to appropriately price their proposals . Tr . at 115-718."

Mr. Eck testified that he is responsible for Dominion Virginia Power's generation business development . He discussed the gas supply and firm transportation arrangements for the Project, including the necessary infrastructure to be overseen by Transco . He also discussed the Company's process for selecting the site for the Project . He also described and sponsored the Company's Filing Schedule 46C. Ex . 32 and 32 ES, at 1-3 .

Mr. Eck summarized the Company's natural gas supply arrangements with Transco pursuant to the VSSE and the rate schedules that will apply to the Project . He described the steps that will be taken by Transco when developing the VSSE to ensure the Project's access to plentiU natural gas, including gas from the Marcellus supply region . He also explained that the VSSE has received a $30 million grant from the Tobacco Commission which will benefit all shippers served by the VSSE, including Dominion Virginia Power, by reducing Transco's capital costs. Furthermore, he described additional benefits achieved by the Company through its agreement with Transco including contractual rights relating to the potential expansion of the VSSE. According to Mr. Eck, these contractual rights provide the Company with the ability to access relatively low cost, incremental pipeline capacity for its customers or, in the alternative, to reduce expenses if the line is expanded for other Transco customers . Moreover, he testified that the ability of customers other than the Company to access fuel supply through the VSSE will not negatively affect the reliability of natural gas supply for the Project . Instead, he maintained that the VSSE will alleviate historical constraints in the region . Ex . 32 and 32 ES, at 3-11 .

Mr. Eck testified that the Company closed on the acquisition of the Project site on August 15, 2012 . He also described the primary criteria considered by Dominion Virginia Power when deciding upon the location for the Project . According to Mr. Eck, the Company identified sites in Brunswick and Chesterfield counties as being suitable for the Project because both locations would, in the Company's assessment, deliver significant customer value . He testified that the Brunswick location was chosen because it provides superior customer value and because of the potential customer savings associated with the Tobacco Commission's grant to the VSSE. Ex . 32 and 32 ES, at I 1- 14 .

In his supplemental direct testimony, Mr. Eck provided an update regarding the VSSE agreement . According to Mr. Eck, Transco advised the .Company (after the Application was filed)

26 Mr . McKinley also provided additional extraordinarily sensitive information relative renewable resources during redirect examination . See Tr . (extraordinarily sensitive) at 699-714 .

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W that it had contracted with an additional shipper . He testified that the addition of this shipper will reduce the Company's costs and such savings will be passed on to Dominion Virginia Power's customers . Mr. Eck also testified the new development with respect to the VSSE is expected to increase the Project's NPV (from the amount initially estimated in the Application) by approximately $26 million to a total of $1 .321 billion . Ex. 33 and 33 ES, at 1-3 . A

When cross-examined by the Environmental Respondents, Mr. Eck acknowledged that the Company has not prearranged for the supply of natural gas to be used at the Brunswick Plant but, instead, intends to purchase most of the needed gas on the spot market . When asked about the sources considered when developing Dominion Virginia Power's renewable resources cost data, Mr. Eck testified that the Company considered information from the development of two co-owned wind farms (in West Virginia and Indiana) and the costs associated with the preliminary development of a solar facility in Halifax County (that was never completed) . He also described the Company's preliminary development of renewable resources (including site selection and estimates) . Furthermore, he testified that the Company considered costs associated with the development of wind projects abroad when preparing its cost estimates for the potential development of offshore wind by Dominion Virginia Power. Tr . at 721-730 .

Mr. Bisha testified that he is responsible for corporate support in environmental studies, permitting, and compliance for the Company . He discussed the environmental aspects of the Project including the Department of Environmental Quality ("DEQ") Supplement attached to the Company's Application . He also described and sponsored the Company's Filing Schedule 46D . Ex. 3, at 1-2 .

According to Mr. Bisha, the Project site is well-suited for the Brunswick Plant because it will have minimal environmental impacts . Specifically, he testified that the impact to ambient air quality is expected to be minimal from the Brunswick Plant . In addition, he indicated that the facility's turbines will be equipped with Best Available Control Technology to limit emissions of nitrogen oxides, volatile organic compounds, particulate matter, and greenhouse gases . Furthermore, he testified that the Brunswick Plant will utilize air-cooled condenser technology to minimize cooling requirements and that the facility's design will use less water than a wet cooling tower design . Mr. Bisha also discussed the Company's intended efforts to comply with local water and wastewater requirements . Moreover, he testified that the Brunswick Plant is expected to cause minimal impacts to jurisdictional wetlands and waters of the United States . Ex . 3, at 2-5 .

Mr. Bisha testified that the Company will place a buffer around a cemetery located within the limits of disturbance related to the Project . Furthermore, he testified that the Project is not expected to result in adverse impacts to natural heritage resources . Ex. 3, at 5 .

Mr. Bisha testified that Dominion will install state-of-the-art controls to meet all applicable environmental regulations arid permit requirements . He also indicated that only a small subset of expected future environmental rules and regulations will impact natural gas facilities . He testified that the Brunswick Plant is designed to minimize the impact of such requirements . Ex . 3, at 6-7 .

Mr. Wilkinson is responsible for the development of revenue requirement analyses and calculations for rate proceedings before the Commission. He discussed the Company's

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development of a revenue requirement associated with its proposed Rider BW RAC. He also a 0)

described and supported Dominion Virginia Power's Filing Schedule 46E . Ex. 35, at 1-2 .

Mr. Wilkinson testified that the Company useddn enhanced ROE of 11 .4% to calculate the revenue requirement over the rate year in this case - consisting of the general ROE of 10 .4% A approved by the Commission in Dominion Virginia Power's last biennial review proceeding and an adder of 100 basis points as provided in Subsection A 6 for a combined-cycle generating facility such as the Brunswick Plant . He also indicated that Dominion Virginia Power used its end-of-test period capital structure and cost of capital to determine its revenue requirement . Ex . 35, at 2-3 .

Mr . Wilkinson identified three components of Dominion Virginia Power's proposed Rider BW revenue requirement : the Projected Cost Recovery Factor, the Allowance for Funds Used During Construction ("AFUDC") Cost Recovery Factor, and the Actual Cost True-Up Factor . He testified that Dominion Virginia Power calculated the Projected Cost Recovery Factor in this proceeding by multiplying the projected 13-month average rate base (for the month ending August 31, 2013, through the month ending August 31, 2014) by the Company's December 31, 201 1, year-end cost of capital . He explained that this calculation produces the projected financing costs for the Project for the projected average investment in rate base during the applicable rate year . He testified that the Company's proposed AFUDC Cost Recovery Factor amortizes unrecovered AFUDC - from April 1, 2012, through August 31, 2013 - over the remaining construction period beginning September 1, 2013 (the date upon which rates go into effect) . He also indicated that the Company has not requested an Actual Cost True-Up Fa&or in this proceeding because Rider BW rates do not go into effect until September 1, 2013, and there was no recovery of costs during calendar year 201 1 . Ex . 35, at 3-4 .

Mr. Wilkinson's calculation of the Company's Projected Cost Recovery Factor - totaling $43,119,000 - is shown in an attachment his prefiled direct testimony (Wilkinson Schedule 1) . He also described the composition of the rate base used to calculate the Company's proposed Projected Cost Recovery Factor . Ex . 35, at 4-5 .

According to Mr. Wilkinson, the Company's AFUDC Cost Recovery Factor recovers AFUDC deferred on Dominion Virginia Power's books between April 1, 2012, and August 3 1, 2013, the date before Rider BW rates go into effect . He calculated an AFUDC Cost Recovery Factor of $1,486,000 using a 32-month amortization period beginning on September 1, 2013, the date that Rider BW rates commence, and continuing through April 30, 2016, the projected end of the construction period . He further explained that the Company's proposed AFUDC Cost Recovery Factor includes a 12-month recovery of approximately 38% of the projected accrued balance of AFUDC at a revenue requirement level that has been grossed-up for taxes. In addition, he testified that the 13-month average outstanding rate base balance used by the Company for August 31, 2013, through August 31, 2014, includes an average outstanding unrecovered balance of AFUDC thereby providing the Company with the means to fully recover its actual financing costs associated with the Project . Ex. 35, at 6 .

Mr. Wilkinson testified that an Actual Cost True-Up Factor will be implemented in 2014 and will either credit to, or recover from, jurisdictional customers the difference between the revenues recovered through Rider BW for the calendar year 2013 and the Company's actual costs of

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the financing rate base plus the associated amortization of AFUDC. He denied that any of the costs requested for recovery in this proceeding will be requested for recovery in any other unrelated rate proceeding of the Company. Ex. 35, at 6-7 .

Mr . Wilkinson testified that the Company proposes to recover indirect, or allocated, expenses associated with the Project in its biennial review proceedings. He testified that fuel costs related to the Brunswick Plant will be recovered through the Company's annual fuel clause provisions once the Brunswick Plant begins commercial operation . However, he testified that the Company intends to recover the cost of fuel used in the testing phase of the facility as a depreciation expense through Rider BW. Ex. 35, at 8.

At the conclusion of his prefiled direct testimony, Mr. Wilkinson explained that the Company sought at total revenue requirement of $44,605,000 for its first Rider BW RAC . Ex . 35, at 9 .

When cross-examined by the Committee, Mr. Wilkinson acknowledged that future changes to the Company's general ROE will be used when calculating future true-ups as part of Rider BW. He also indicated that Dominion Virginia Power will comply with Commission directives relative to the date/s upon which any adjustment of the ROE should be made effective for purposes of calculating the true-up. Furthermore, he agreed that he used the Company's 2011 end-of-year equity percentage (52.805%) when calculating the revenue requirement in this case and that the Company used a higher equity percentage (55 .624%) - based upon its 2012 end-of-year capital structure - in its biennial review case . He explained that the Company will use the end-of-year capital structure for 2013 when calculating the first actual true-up associated with the Brunswick Plant - which should be requested in 2014 (and will relate to the last four months of 2013). Tr. at 734-744 .

During cross-examination by Consumer Counsel, Mr. Wilkinson indicated that he was aware of the analysis of the Attorney General's Office pertaining to the financial impact of the enhanced ROE on the Company's Warren County facility (which has been approved by the Commission for ten years) . In addition, he agreed that the Warren County facility is expected to be slightly less expensive than the Brunswick Plant. He did not dispute the Attorney General's calculation of the impact of the enhanced ROE (100 basis point adder) associated with the Warren County facility (that is, $76.5 million) and believed the financial impact of the enhanced ROE would be similar for the Brunswick Plant if the Commission approves the Project (and adopts the Staff's I 0-year recommendation) . Tr . at 745-750 .

Ms. Horton testified that she is responsible for the preparation of testimony and exhibits relative to the Company's rate-design, preparation of compliance filings for approved rates and tariffs, participation on the negotiating teams for nonjurisdictionat customer contracts, and administration of tariffs . She discussed the Company's proposed allocation of its Rider BW revenue requirement among customer classes . She also sponsored the Company's Filing Schedule 46F (Statements I and 2) setting forth the revenue requirement by class and describing Dominion Virginia Power's revenue allocation methodology . Ex. 36, at 1-2 .

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Ms . Horton explained the process used by the Company to develop Rider BW rates." She C

also indicated that Dominion Virginia Power calculated'its Rider BW rates using the same methodology that it used in its 2012 proceedings for its Rider W (in connection with Dominion Virginia Power's Warren Station) ; Rider R (in connection with the Company's Bear Garden Generating Station) ; Rider S (in connection with Dominion Virginia Power's Virginia City Hybrid Energy Center) ; and Rider B (for the biomass conversions of certain generating facilities). She also prepared a schedule identifying the rates that will apply to each Company Rate Schedule (for usage

28 on or after September 1, 2013) if the Company's Application is approved . Furthermore, she testified that implementation of the Company's proposed Rider BW will increase the average residential customer's bill (for the use of 1,000 kVvh per month) by $.083 . Ex . 36, at 2-6.

When cross-examined by the Committee, Ms. Horton agreed that the rates for GS-4 customers (under Rider BW) will increase after the Brunswick Plant becomes operational in 2016 . She also indicated that the revenue requirement for the first Rider BW rate year is $44.605 million as compared to the estimated revenue requirement of $155 .2 million in 2016 . Tr . at 754-756 .

During cross-examination by Staff, Ms. Horton testified that all of the costs of the Brunswick Plant are expected to be recovered through Rider BW rather than base rates . She also understood that the Project was being developed, in part, because of retirements at the Company's Yorktown and Chesapeake facilities . She did not dispute that Dominion Virginia Power has not made any proposal for the adjustment of base rates because of the retirements . Tr . at 757-758 .

Mr. Nedwick testified that he is responsible for planning the Company's transmission system and for coordinating Dominion Virginia Power's involvement with PJM for planning and generation activities . He described the transmission facilities proposed by the Company in connection with the Project including several new 500 kV transmission lines, two new switching stations, and associated facilities in Brunswick and Greensville counties . He also sponsored and co-sponsored several portions of the Company's Transmission Appendix (attached to the Application) . Ex . 37, at 1-3 .

Mr. Ned%krick provided an overview of the Company's current transmission system and its transmission planning process. He also described the existing transmission facilities located in the vicinity of the Project . In addition, he discussed the transmission facilities proposed by the Company in this proceeding and maintained that such facilities are necessary to enable connection of the Brunswick Plant to Dominion Virginia Power's transmission system and to upgrade the network to resolve reliability violations of the North American Electric Reliability Corporation ("NERC") resulting from the connection . Ex . 37, at 3-6.

According to Mr. Nedwick, PJM has performed interconnection studies for the Brunswick Plant supporting the need for the transmission facilities proposed by the Company. He summarized the results of such studies and explained that the reports from the studies are included in the Company's Transmission Appendix . Furthermore, he summarized the NERC reliability standards applicable to the Project and maintained that the transmission facilities proposed by the Company

27 Ms . Horton detailed this methodology and her calculation of rates in a schedule attached to her prefiled direct testimony . Ex . 36 (Horton Schedule 1) . 28 Ex . 36 (Horton Schedule 2) .

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are required to ensure compliance with NERC criteria . Finally, he testified that there are no feasible M alternatives to the transmission facilities proposed by the Company in this proceeding . Ex . 37, at 6- 9.

During cross-examination by P3, Mr. Nedwick did not dispute that the Company has A identified retirements at its Yorktown and Chesapeake facilities as reasons for the needed capacity from the Brunswick Plant. He also agreed that planned

' retirements at Yorktown and Chesapeake

have necessitated certain transmission upgrades (being made pursuant to the process of PJM's Transmission Expansion Advisory Committee ("TEAC")) . He identified the Skiffes Creek transmission line project (at an estimated cost of $153 million) of one of the necessary upgrades . In addition, he provided an overview of other expected transmission upgrades (at an estimated total cost of $360 million) associated with the retirements at Yorktown and Chesapeake . Tr . at 761-769 .

When cross-examined by the Committee, Mr. Nedwick indicated that the Company analyzed the possibility of stand-alone generation as a possible alternative to the Skiffes Creek transmission line and determined that such an option would increase costs by approximately $1 .3 billion - making the transmission option more favorable for customers . Tr . at 769-774 .

When questioned by Staff, Mr. Nedwick testified that he was unaware of any transmission structures included in the Project that would be subject to local jurisdiction . He also indicated that the Company expects to energize the Project's transmission lines in 2015 - for purposes of providing back-feed power to the Brunswick Plant . Tr . at 774-777 .

On redirect examination, Mr. Nedwick clarified that the Project's transmission lines would not be constructed but for the Brunswick Plant. Tr . at 777-778.

Mr. Shevenock testified that he is responsible for the estimating and engineering design on high voltage transmission line projects from 69 kV to 500 kV. He discussed the need for the proposed transmission facilities from an engineering perspective . He also described the design characteristics of the 500 kV transmission lines included in the Project . Furthennore, he estimated the cost of the Company's proposed transmission facilities . Finally, like Mr. Nedwick, sponsored and co-sponsored several portions of the Company's Transmission Appendix (attached to the Application) . Ex . 4, at 1-5 .

Mr . Shevenock testified that the Company chose, the proposed structure of the transmission lines included in the Project because they are similar to the existing lattice towers already in the area and because they are the most economical structure type . He also opined that the proposed structures constitute a low cost and effective means to improve the aesthetics of the proposed transmission facilities . Ex . 4, at 4 .

Mr. Shevenock estimated the cost of the transmission facilities in the Project to be $79.5 million . He estimated the construction time to complete the transmission facilities to be 24 months . Ex . 4, at 5 .

Mr . Shevenock also calculated the electric and magnetic field ("EMF") levels associated with the transmission facilities and included them in the Transmission Appendix . He testified that

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the strengths of the EMIs at the edge of the right-of-way will be comparable to those created by M other common electric sources . Furthermore, he explained that magnetic field strength diminishes rapidly as distance from the source increases . Ex . 4, at 5-6 .

Mr. Spears testified that he is responsible for conceptual design, scope development, and cost estimating for new high voltage transmission line switching stations, transmission substations, and distribution substations . He described the switching station work to be performed in connection with the Project . He also sponsored portions of the Transmission Appendix (relating to proposed

29 switching stations and associated cost) . Ex . 5, at 1-5 .

Mr . Spears testified that the estimated cost of the switching station work to be done in 30 connection with the Project to be $22.5 million . Ex. 5, at 6 .

Mr. Schultis testified that his responsibilities include the identification of appropriate routes for the Company's transmission lines . He described the transmission components of the Project and

31 co-sponsored the Transmission Appendix with Company witness Johnsen . Ex. 6, at 1-3 .

Mr . Schultis summarized the process used by Dominion Virginia Power when selecting the proposed routes for the transmission lines included in the Project, including the consideration of alternative routes . He also maintained that the Company complied with statutory notice requirements set forth in § 15 .2-2202 of the Code . Furthermore, he provided an overview of the actions that have been, or will be, taken by the Company to minimize the environmental impacts of proposed transmission lines . Ex . 6, at 3-9 .

Mr. Johnsen described the professional experience of his business, NRG. Specifically, he indicated that NRG has extensive experience in perfori-ning routing and feasibility assessments for energy transportation projects . He explained that the Company engaged NRG to assist in the identification and evaluation of route alternatives for the proposed 500 kV and 230 kV lines included in the Project . He introduced and sponsored the Environmental Routing Study included with the Application . He also co-sponsored sections of the Transmission Appendix and the DEQ Supplement submitted with the Application . Ex . 7, at 1-4 .

Respondents

Environmental Respondents

The Environmental Respondents presented the testimony of David Schlissel, president of Schlissel Technical Consulting, Inc ., and Jeffrey Loiter, a managing consultant with Optimal Energy Incorporated .

Mr. Schlissel addressed the need for and the economics of the Project . He also identified the information and materials that he reviewed in connection with testimony - including the

29 Wilson 0 . Velazquez adopted the prefiled direct testimony of Mr. Spears at the hearing . See Tr. at 280-28 1 . 30 See Tr. at 282 . 31 Courtney R . Fisher adopted the prefiled direct testimony of Mr . 8chultis at the hearing . See Tr . at 282-283 .

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Application, the Company's 2012 IRP filings in Virginia and North Carolina, and Dominion Virginia Power's discovery responses in this case . Ex . .17 and 17 ES, at 1-3 .

Among other things, Mr. Schlissel reached the f6llowing conclusions relative to the Application : A

1 . Peak loads subsequent to 2006 within the DOM Zone have remained relatively flat, in contrast with the robust load growth that ihe Company has forecasted in its recent IRP proceedings . 32

2 . In most instances, the Company's forecasting methodologies have not accurately predicted Dominion Virginia Power's recent loads and the Company has not materially modified its rojected long-tefm peak load and energy sales in response to recent trends . 33

3 . Dominion Virginia Power has not provided an explanation for why its recent peak load and energy sales forecasts have consistently been too high and its short-terin peak and energy sales forecasts have been inaccurate . 34

4. The recent economic downturn is not the only cause of slower than expected 35 peak load energy sales growth .

5 . As a condition of obtaining a CPCN for the Project, the Company should be required to explain why its recent forecasts failed to contemplate a significant reduction to peak load and energy sales growth subsequent to 2006, to identify what steps (if any) it has taken to correct its forecasting methodologies, to demonstrate that its chosen modifications to its forecasting methodologies (if any) are likely to produce more accurate forecasts, and to explain why long-term peak load and energy sales growth are not likely to be dampened as a result of

36 structural factors that have lessened the loads of other utilities around the nation .

6 . The adoption of an expanded efficiency plan between 2016 and 2027 could save 88.6 million MWh in excess of the savings!contemplated by the Company's preferred resource plan, could reduce Dominion Virginia Power's projected peak loads by 3,000 MW more than the Company's proposed energy efficient programs by 2027 (that is, by 1,600 MW more than the Project), and would be

37 substantially less expensive than the Project .

32 See also Ex. 17 and 17 ES, at 5-8 . 33 See also Ex. 17 and 17 ES, at 8-15 . 34 See also Ex. 17 and 17 ES, at 19 . 35 See also Ex . 17 and 17 ES, at 20-22 . 36 See also Ex . 17 and 17 ES, at 24-25 . 37 See also Ex . 17 and 17 ES, at 25-28 ; 30-3 1 . Mr. Schlissel incorporated the incremental energy savings estimated by Mr. Loiter when reaching this conclusion . Ex . 17 and 17 ES, at 26 . Mr. Schlissel also recommended that the Company be required to work with stakeholders on adopting an expanded efficiency plan even if the Project is approved . Ex . 17 and 17 ES, at 45 .

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7. The Company has not established that the Project is needed to ensure adequate system reliability . 38

I 8 . Approval of the Project will further support the Company's heavy reliance upon fossil fuels . 39

9. There are a number of risks associated with & Company's continued adherence to its current IRP (and the associated construction of the Project), including fuel price uncertainty and volatility, the application of current and future health and environmental regulations, lower than forecasted future loads and energy sales, and the long-term expense associated with the construction of planned generating facilities (including the Brunswick Plant)."

10 . The Company's continued adherence to its current IRP (including construction of the Project) will increase its annual CO~ emissions at a significant cost to ratepayers and will fail to capture the potential benefits of renewable resources such as wind and solar . 41

11 . Dominion Virginia Power's backcast analysis does not validate the Company's projection of the Project's future befiefitS .42

I

12 . The Company's request for approval of the Project should be denied and, instead, Dominion Virginia Power should be required to work with stakeholders

43 to develop expanded efficiency and renewable energy plans .

Ex . 17 and 17 ES, at 3-5 .

Specifically with respect to uncertainties of futufle peak loads and energy sales, Mr. Schlissel noted that the Company did not conduct sensitivity analyses in its Strategist modeling of the Brunswick Plant. He also criticized the Company's sensitivity analysis of the Project within its most recent IRP - maintaining that such analysis did not include a sufficient quantity of alternatives to fully examine the potential effect of not completing the Project . In addition, he disagreed with Dominion Virginia Power's assertion that the similarity of load and energy forecasts to those made by PJM supports the approval of the Project . According to Mr. Schlissel, PJM has also significantly overestimated actual peak loads and energy sales in the DOM Zone. Ex. 17 and 17 ES, at 15-18 .

When providing surrebuttal testimony at the hearing, Mr. Schlissel maintained that Mr. Kelly's use of the economic carrying costs within the C6mpany's backcast analysis - over the limited period of five years rather than over a longer period of time - essentially deflated the costs

38 See also Ex. 17 and 17 ES, at 3 1 . 39 See also Ex . 17 and 17 ES, at 31-33 . 40 See also Ex . 17 and 17 ES, at 33-34 . 41 See also Ex . 17 and 17 ES, at 3442 . 42 See also Ex . 17 and 17 ES, at 4244 . 43 See also Ex . 17 and 17 ES, at 45 .

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of the Brunswick Plant when comparing the Project to market prices . Furthermore, in response to Ms. Scheller's critique of the Synapse C02 omissions forecast, Mr. Schlissel asserted that Synapse's use of various modeling analyses when formulating the forecast was appropriate. He also maintained he would have provided supporting data for the Synapse forecast if the Company had asked for it in discovery and that much of the data relied upon in the Synapse forecast is publicly available (as contrasted with the data used by ICF) . Furthermore, he opined that a range of costs should be considered when evaluating something as uncertain as the future regulation of carbon (something which occurred in the formulation of the Synapse forecast). Tr . at 485-489.

In response to the rebuttal testimony of Company witness Thomas (supporting the Company's load forecast), Mr. Schlissel continued to maintain that his Figure 2 44 shows only "minor" differences in the DOM Zone's peak loads from 2006-2012, when weather normalized . He denied that he arbitrarily chose historical periods of flat .actual peak load when evaluating the Company's load forecast . Instead, he explained that he focused on data from 2006 to 2012 because he perceived a change in the growth rate during that period . He also testified that growth rate reductions shown in the Itron surveY45 (the results of which he considered when evaluating Dominion Virginia Power's forecast) have been broken down by region, with a 1 .04% growth rate for the southern region (as compared to the Company's forecasted growth rate of 1 .8%). He noted that he used a comparable growth rate (1%) to the southern region when performing his analysis . In addition, he clarified that he intended the sample growth rate to include the same level of energy efficiency as was contemplated by the Company (and did not include Mr. Loiter's energy efficiency assessments) . Moreover, Mr. Schlissel disputed Mr. Thomas's reliance upon PJM forecasts as support for the validity of Dominion Virginia Power's load forecasts. According to Mr. Schlissel, PJM's load forecasts have been too high for approximately six years, thereby calling into question their legitimacy . In his assessment, the Company's overly high forecast of peak load demonstrates that there are no imminent reliability problems warranting approval of the Brunswick Plant in the near future . Tr . at 490-498 .

When cross-examined by the Committee, Mr. Schlissel clarified that Mr. Kelly's use of the Brunswick Plant's economic carrying costs (levelized over the long-term) within the backcast analysis understates the annual fixed costs of the Brunswick Plant during the early years of its operation (and overstates fixed costs near the end of the facility's life) . He also indicated that the use of a percentage of equity (within the Company's structure) that is too low would result in an understatement of the Brunswick Plant's costs in the backcast analysis . Tr . at 499-502 .

During cross-examination by the Company, Mr.,Schlissel explained that he used the data formulated by Environmental Respondent witness Loiter relating to potential renewable resources and DSM together with Dominion Virginia Power's figures relative to market purchases and annual plant costs when perfort-ning an economic analysis of the Project . He concluded that a plan for obtaining necessary capacity that includes more energy efficiency and renewable would be more economical that a plan including the Brunswick Plant . Furthen-nore, when asked about the Environmental Respondents' position with respect to the use of natural gas, Mr. Schlisset represented that he has supported natural gas power facilities in the past . He also indicated that he

44 See Ex. 17 and 17 ES, at 8 . 45 See Ex . 18 (2012 Forecasting Benchmark Survey) .

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was "troubled" regarding the results of his economic analysis because it did not support approval of the Project. Tr . at 504-512 .

With respect to his analysis of the Company's load forecast, Mr. Schlissel denied using a I% growth rate to create a forecast . Instead, he explained that he used a I% growth rate as an illustrative example demonstrating the resulting impacts on the Company's needed capacity should Dominion Virginia Power's forecast be too high . He further clarified that he did not perform his own load forecast . In addition, Mr. Schlissel agreed that he used fragments of 5,000 MW (as compared to the Company's use of 2,000 MW blocks) when illustrating the Company's peak loads from 2006-2012 (in his Figure 2)46 and in support of his conclusion that Dominion Virginia Power's load remained flat during the same period . He also acknowledged that use of 2,000 MW blocks together with peak load data that is not weather-normalized, would show historical movement in the Company's peak load from 2007 to 2012. Tr . at 512-517.

Mr. Schlissel clarified that he did not independently assess the load reductions that could be achieved in the DOM Zone through energy efficiency but, instead, relied upon Mr. Loiter's analysis of this issue . Furthen-nore, he testified that he considered dispatchability and the lower capacity factors of renewable resources such as wind or solar when concluding that renewable resources o.ffer comparable benefits to the Brunswick Plant. In his assessment, renewable resources offer comparable benefits to a natural gas generating facility - in a system (such as PJM) where there is dispatchable capacity . Tr . at 518-525 .

Mr. Loiter testified regarding the potential use of energy efficiency options as an alternative to the Project. He concluded that Dominion Virginia Power significantly underestimated the potential of efficiency and maintained that achievable levels of efficiency had the potential to defer or eliminate the need for the Brunswick Plant. He also testified that efficiency provides benefits beyond cost-savings . Ex . 19, at 3-4.

Mr. Loiter acknowledged that the Company compared the Brunswick Plant to market purchases, simple-cycle CTs, and environmental retrofits when deciding to pursue the Project . However, he opined that Dominion Virginia Power failed to adequately consider the potential for efficiency, other demand-side resources, or renewable resources as an alternative to the Project . In addition, he believed that Dominion Virginia Power's conclusions regarding the potential of efficiency (as shown in the Company's recent IRPs) are based on flawed and outdated assumptions . Moreover, he asserted that the Company has inappropriately limited its consideration of efficiency alternatives to programs that were recommended by its consultant in a 2009 market assessment (having a Total Resource Cost ("TRC") score of at least 2.0) . Instead, he opined that the Company should have considered all available efficiency resources that would meet the expected needs of Dominion Virginia Power's customers at a lower cost th.an the cost of the Project . Ex . 19, at 4-9 .

According to Mr. Loiter, the Company estimates that it can achieve 326 MW of efficiency and 290 MW of demand response by 2017 . He testified that Dominion Virginia Power's forecasted level of efficiency does not compare favorably to electricity providers in other jurisdictions . He also found it troubling that a large portion of the Company's projected efficiency is based upon its voltage conservation program ("'VCP") and testified that VCP is not often considered when

16 See Ex . 17 and 17 ES, at 8 .

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deten-nining achievable savings through efficiency programs . In addition, Mr. Loiter provided 0) examples of various efficiency programs that have achieved significant peak demand savings. Ex. 19, at 10- 15 .

Relying upon data from other jurisdictions, studies that have been performed over periods A ranging from five to 20 years, and energy savings targets adopted in other states, Mr. Loiter concluded that the Company had an achievable energy 6 fficiency savings potential of 1 .3% per year on an energy basis - assuming a period of four years for the Company to "ramp-up" to this level from existing levels . He also explained that he included Dominion Virginia Power's estimates of VCP savings in his analysis to facilitate an accurate comparison of his proposed energy efficiency savings to the Company's efficiency estimate . Mr . Loiter estimated a potential capacity contribution from DSM, including efficiency, by 2017 of 1,470 MW as compared to the Company's estimate of 616 MW. By 2027, he estimated DSM/efficiency savings of 3,840 MW as compared to Dominion Virginia Power's estimate of 821 MW. Ex . 19, at 15-19 .

Mr. Loiter testified that achieving his estimated level of energy savings would not require an aggressive level of efficiency that may be difficult or impossible to achieve . Furthermore, he maintained that the strategies and policies that support his estimated level of efficiency have been well-studied and are available for implementation in Virginia. Ex . 19, at 19-20 .

Mr. Loiter next estimated the cost of achieving his recommended higher levels of efficiency . Using estimated costs from potential studies, actual costs from leading efficiency programs, and an assessment of cost-effectiveness, he developed a projected average first-year cost of $0.239/kWh (in 2013 dollars) for his efficiency estimate - resulting in an efficiency investment of approximately $1 .1 billion for the years 2013 through 2017 (present value) . He testified that expanded efficiency investment through 2022 would cost approximately $2.1 billion (present value) . Ex. 19, at 20-22 .

Thereafter, Mr. Loiter identified several additional benefits to the Company and its ratepayers, apart from cost considerations, that would result from efficiency and renewable resources as compared to the Brunswick Plant . Specifically, he testified that the use of efficiency and renewable resources would mitigate load forecast and fuel price risks and would promote jobs and stimulate the economy. He also indicated that the adoption of increased energy efficiency would reduce the need for transmission and distribution upgrades, would reduce the cost of purchased power by reducing demand, and would facilitate greater customer participation in efficiency programs . Ex . 19, at 22-24 .

Mr . Loiter acknowledged that the adoption of greater efficiency may increase the rates and bills of certain customers who chose not to participate in efficiency programs . However, he maintained that cost of constructing the Brunswick Plant (and of operating it over its expected period of service) should be compared to the cost of investing in resources with lower total costs for Virginia's ratepayers . He also opined that the properly calculated lost revenues associated with achieved energy efficiency do not represent the true cost of efficiency programs to ratepayers. Ex . 19, at 25-26 .

Mr . Loiter also discussed what could be done if increased efficiency and renewable resources were implemented instead of the Project and if the Company's load were to exceed its

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current forecasts . He testified that Dominion Virginia Power could make relatively minimal additional market purchases to address increased load . He also suggested that the Company could construct smaller, less expensive generation units; make additional investments in demand response measures; adopt time-of-use rates; and increase the use of customer-sited generation to address higher than expected load increases. Ex . 19, at 26 . A

At the conclusion of his prefiled testimony, Mr. Loiter summarized his conclusions relative to the Application . Specifically, he again opined that the Company has significantly underestimated its assessment of achievable energy efficiency when evaluating the Project . He also testified that achievable levels of efficiency combined with short-term market purchases have the ability to meet Dominion Virginia Power's stated need, that efficiency constitutes a low-cost alternative for meeting the Company's load requirement, and that efficiency provides benefits beyond cost-savings . Therefore, he recommended the use of efficiency options as an alternative to the construction of the Brunswick Plant . Ex. 19, at 26-27.

At the hearing, Mr. Loiter responded to Company witness Newcomb's suggestion that he failed to consider Commission guidance relative to assessing the costs and benefits of energy efficiency programs . Mr . Loiter maintained that his recommendation for the consideration of increased energy efficiency as an alternative to a specific supply-side resource is not contrary to the Commission's consideration of the various costibenefit tests (and any possible preference for the Ratepayer Impact Measure ("RJM") test) . Moreover, he suggested that the approval of the Project would have a negative impact on the RIM scores of future proposed efficiency programs because of the addition of a capital intensive resource to the Company's rate base . He also testified that it was his understanding the Company has never perforined an analysis directly comparing the rate impacts of the Brunswick Plant and a portfolio of efficiency resources . Furthennore, he testified that he agreed with Mr. Newcomb's assessment that the implementation of efficiency programs passing the Utility Cost test but failing the RIM test had the potential to reduce the Company's overall revenue requirement . Tr. at 527-537 .

Mr. Loiter opined that it is appropriate to compare the Company's efficiency achievements to those made in other jurisdictions when evaluating the potential for increased efficiency in Dominion Virginia Power's territory . He also noted that one of the sources he relied upon when performing his analysis applied specifically to Virginia . Furthermore, he continued to maintain that a 360% reduction in energy usage was achievable by 2016 given the low level from which the Company would be starting . In addition, based upon the levels of efficiency that have been achieved in other jurisdictions, Mr. Loiter disagreed with Mr. Newcomb's suggestion that the 360% reduction was "hypothetical ." He maintained that his analysis, contrary to Mr. Newcomb's assertion, considers the total cost of expanded efficiency beyond 2016. Moreover, he clarified that he intended in his testimony to provide a comparison between a specific supply-side resource (the Brunswick Plant) and potential energy efficiency resources . Tr . at 537-541 .

During cross-examination by the Company, Mr.'Loiter acknowledged that he did not participate in the stakeholder review process relative to Dominion Virginia Power's IRP and, therefore, was unaware of cost/benefit test discussions that may have occurred during that process . He also indicated that the market potential/Virginia specific study that he relied upon in his analysis was completed in 2008 or 2009 and included an LED lighting proposal . He subsequently

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acknowledged, after reviewing a copy of the Commission's order from the 2011 DSM proceeding (in Case No. PUE-2011-00093), that the Commission refused to approve the Company's residential lighting program (including LEDs) . Tr . at 542-546.

Mr. Loiter agreed that his analysis compared the Company's existing DSM programs to the energy efficiency that, in his assessment, is achievable given the efficiency that has been

47 accomplished in similarly situated jurisdictions . When asked about various factors that may have an impact on achievable energy efficiency within a particular state or utility service territory (such as customer class/mix/sales ratios, winter/summer peaking issues, or existing rate levels), he maintained that such factors may be relevant to the reduction of peak demand but would have less of an impact on the overall achievable efficiency within the state/utility jurisdiction . He agreed that rate levels would have an impact on evaluating the cost effectiveness of DSM programS.48

Furthermore, he acknowledged that states with mandatory energy efficiency standards achieve greater levels of energy efficiency . 49 Moreover, he agreed that he did not compare the Company's efficiency levels to the efficiency levels of all utilities with comparable sales to Dominion Virginia Power when perfon-ning his analysis ." Tr . at 546-560.

Mr. Loiter indicated that he did not propose any particular DSM programs as part of his analysis in this case . In addition, he agreed that it was prudent for the Company to consider Commission precedent and concerns (including a concern regarding rate impacts) when planning for the implementation of energy efficiency . He further. acknowledged that the Commission previously rejected the Environmental Respondents' recommendation for the incorporation of generic blocks of DSM in Dominion Virginia Power's IRP. He was also unaware of any potential DSM program with 8 1 % of its costs fixed - in contrast to the Brunswick Plant. Moreover, he acknowledged that Maryland and Pennsylvania (data from which was used in his analysis) both have mandatory energy efficiency standards . Tr . at 561~568 .

Mr. Loiter agreed that he evaluated achievable efficiency in Dominion Virginia Power's territory to meet load and the results of his evaluation were used by Mr. Schlissel in his economic analysis . Mr . Loiter denied recommending particular levels of energy efficiency on specific years but, instead, maintained that his analysis shows a different "trajectory" of energy efficiency as compared to the Brunswick Plant. He did not dispute that his alternative trajectory contemplated an increase of energy efficiency of 90% by 2013 and a 360% increase of energy efficiency by 2016 . Furthermore, while acknowledging that his calculation of achievable energy efficiency (in total MWs) is less than the MWs expected to be provided by,the Brunswick Plant, Mr. Loiter contemplated that the Company's remaining capacity needs could be met through renewable resources and market purchases . Tr. at 568-573 .

On redirect examination, Mr. Loiter provided an overview of the energy savings per state shown on the ACEEE scorecard - with data from 2010. He noted that the scorecard showed energy

47 See also Ex . 20. 48 Mr . Loiter subsequently acknowledged that he did not compare Dominion Virginia Power's retail rates to the rates of the utilities whose efficiency levels were used to support his assessment of the Company's greater energy efficiency potential . Tr . at 554-557. See also Ex . 22 . 9 See also Ex. 2 1 .

50 See also Ex. 23 .

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Mr. Loiter testified that the 2008 ACEEE market potential study for Virginia that he relied upon in his analysis included suggestions for what could be included in DSM Programs.51 He again clarified the recommended use of the Utility Cost test in the evaluation of potential DSM - in this case wherein the Commission is considering the approval of a specific supply-side resource . Tr . at 580-587.

P3

P3 presented the testimony of Michael M. Schnitzer, a director of The NorthBridge Group, Inc . ("NorthB ridge"), a consulting firm that provides economic and strategic advice to the electric and natural gas industries . Mr. Schnitzer evaluated the reasonableness of the Project and considered whether the Company appropriately identifie

' d the resources necessary to meet its future

energy and capacity needs at the lowest reasonable cost . Ex. 38, 38 C, and 38 ES, at 1-4 .

At the beginning of his prefiled testimony, Mr. Schnitzer explained that he reached three primary conclusions relative to the Project : (1) there is n:o physical need for new capacity in the DOM Zone in 2016 and the Company's load can be reliably served with existing market resources ; (2) Dominion Virginia Power has overstated the economic benefits of the Project ; and (3) the Company failed to systematically evaluate competitive market alternatives to the Project . Given these conclusions, he recommended that the Commission deny the Application . He also opined that the Company should be required to conduct an open and transparent competitive market test to ascertain whether market alternatives to the Project would provide Dominion Virginia Power's customers with the lowest reasonable cost option for meeting their expected needs . Ex . 38, 38 C, and 38 ES, at 4-8 . 1

Relying upon the Company's 2012 IRP, Mr. Schnitzer identified the additional resources that the Company has proposed going forward - that is,

' 2,712 MW from the Brunswick Plant and

the Company's Warren County project, 1,454 MW from a third nuclear unit at North Anna, 2,175 MW of new generic gas combined-cycle and CT facilities, and 677 MW of additional supply to be provided by miscellaneous sources (including coal conversions, plant repowering, and renewable resources) . He discussed the costs associated with the traditional generation resources that have been proposed by Dominion Virginia Power. In addition, he noted that the Company has determined it will have a capacity shortfall beginning in 2015 which will grow to 5,862 MW by 2027, thereby supporting its need for the proposed resources identified in its IRP. According to Mr. Schnitzer, however, the Company's capacity shortfall does not constitute a physical reliability need - in other words, it does not require the development of new resources within the DOM Zone. Instead, he explained that the Company's request for the approval of the Project is based upon its assertion that the Brunswick Plant is a more economical alternative to market purchases . Ex . 38, 38 C, and 3 8 ES, at 8-10 .

51 See Ex . 19 (Attachment 2 at p . 13) .

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Mr. Schnitzer also provided an overview of the process for making purchases in the PJM M capacity market . He testified that there are sufficient resources in PJM to satisfy Dominion Virginia Power's expected need for capacity . Furthermore, he maintained (based upon the 2013 PJM Load Report forecast, the current generating and DSM resources available in the DOM Zone, and the Company's 2012 IRP) that the DOM Zone currently exceeds, and will significantly exceed in the foreseeable future, its reliability requirements . Furthermore, given his assessment of a 3 1% reserve margin in the DOM Zone until 2027, and his conclusion that additional capacity will not be needed in the DOM Zone until after 2022 even if the Brunswick Plant is not completed, Mr. Schnitzer suggested that the Project could be deferred until a later date with no adverse impacts. Ex . 38, 38 C, and 38 ES, at 10-14.

Mr. Schnitzer testified that the Company has not ' produced evidence demonstrating that a

significant excess capacity in the DOM Zone (created, in part, by Dominion Virginia Power's self-build options) will be beneficial to customers . In support of this assertion, he noted that the DOM Zone has never experienced higher prices than the other regions in PJM . Similarly, he maintained that Dominion Virginia Power has not shown there will be reliability issues or transmission constraints going forward if the Project is not completed . Ex. 38, 38 C, and 38 ES, at 14-15 .

Mr . Schnitzer described alternative market-based options that should be available in the DOM Zone going forward . He also concluded from his review of PJM capacity auction results that there are no constraints restricting the location from which the Company can source capacity to meet its needs . Ex. 38, 38 C, and 38 ES at 15-17 .

Mr. Schnitzer next addressed the economic benefits of the Project . He criticized the Company's reliance upon long-term market price forecasts (rather than actual market prices or market offers) when determining that the Project is a preferred alternative for meeting future needs . In addition, he maintained that the natural gas and energy price forecasts provided by the Company's consultant, ICF, are too high .52 Among other things, he noted that ICF's natural gas price forecast exceeds NYMEX forward prices and the 2013 forecast of the United States Energy Information Administration ("EIA") . He also concluded that the Company's levelized capacity price forecast is double or triple the price suggested by actual market evidence . In support of this conclusion, he noted that at least one of the NUG offers received by the Dominion Virginia Power in response to a recent solicitation appeared to be significantly lower than the market price forecast supporting the Company's request for the approval of the Project . Ex . 38, 38 C, and 38 ES, at 17-27.

Mr. Schnitzer further testified that there appeared to be an inconsistency between the cost assumptions use for the Brunswick Plant and the construction cost assumptions used by ICF when developing its capacity market forecast . Specifically, he questioned Dominion Virginia Power's assumption that it will have the ability to build a combined-cycle facility at a lower cost than other

3' At a later point in his prefiled testimony, Mr . Schnitzer further noted that Staff expressed concern in the Company's 201 1 IRP proceeding that Dominion Virginia Power's price forecasts were too high . Furthermore, he explained that he was not advocating the Commission's adoption of his forecast analysis but, instead, recommended that the Company be required to demonstrate the economics of the Project using actual competitive market evidence after conducting an open and transparent market test. Ex . 38, 38 C, and 38 ES, at 30-3 1 .

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W market participants . In addition, he maintained that the Company's market price forecast is inconsistent with the cost of new entry economics. Ex.38,38C,and38ES,at28-31 .

Mr. Schnitzer also testified that the Company failed to appropriately consider competitive market evidence when deciding to pursue the Brunswick Plant. He noted that Dominion Virginia Power did not undertake a broad solicitation to a full range of market participants but, instead, only approached three N_LJGs having existing contracts with the Company (which are due to expire in five years) . He criticized the Company's solicitation, noting that Dominion Virginia Power left the terms and conditions of the potential extensions of the contracts to the discretion of the NUGs and declined to engage in follow-up negotiations after receiving preliminary offers . In addition, he concluded that the Company's economic analysis of the NUG offers was flawed because it was based on ICF's inflated market price forecast . Mr. Schnitzer also discussed the concerns of other parties to this proceeding relative to the Company's N-LJG solicitation . Ex . 38, 38 C, and 38 ES, at 32-37 .

Mr. Schnitzer further suggested that it may be prudent for the construction of the Brunswick Plant to be deferred until after 2016 and for the Company to rely upon short-term market purchases to meet its capacity needs in the interim . He testified that Dominion Virginia Power has not conducted an appropriate market test - using actual market quotes - to ascertain whether such a deferral would save customers money . He also opined that the Company's reliance upon "market timing" - as support for its conclusion that it is better to build now than later - is inherently risky . Ex . 38, 38 C, and 38 ES, at 37-40 .

In the concluding section of his prefiled testimony, Mr. Schnitzer discussed his recommendation that the Company be required to submit the results of an open, transparent, and objective market test as a condition of approving the Project . Specifically, he opined that Dominion Virginia Power should be required to solicit competitive bids from PJM suppliers - not limited to the NUGs that were previously contacted by the Company - for an equivalent number of MW and/or MWH (to the MW and/or MWH expected to be furnished by the Brunswick Plant) and for specified periods of time to confirrn that its $1 .3 billion investment in the Project is the least-cost option . 53 Mr . Schnitzer testified that it may be possible for Company to obtain a lower price for meeting its capacity needs using a competitive solicitation process - in particular, because the capacity market is expected to have excess supply for a number of years and incumbent generators may be willing to sell capacity and energy at a discount .~ He also testified that similar market test mechanisms have been used in Louisiana, Indiana, and Kentucky when evaluating utility investments . In addition, he distinguished his recommended solicitation process for energy and capacity from the competitive bidding process used by Company for obtaining its EPC contract and other services . Ex . 38, 38C, and 38 ES, at 40-55 .

At the hearing, Mr. Schnitzer clarified that he did not consider the Company's incorporation of the ICF market price forecast into the Strategist model to be a sufficient evaluation of market alternatives to the Project. Instead, he maintained that Dominion Virginia Power, as a participant in

53 Mr . Schnitzer provided an example market test using 10-20 year and 3-6 year product terms . Ex . 38, 39 C, and 38 ES, at 44 . He later explained that he recommended an evaluation of shorter-term alternatives to assist the Commission in determining whether the proposed timing of the Project is prudent and in the public interest . Ex . 38, 38 C, and 38 ES, at 50-5 1 .

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the wholesale market, should have relied upon actual market offers for comparative purposes. He also asserted the actual offers that were received (the NUG bids made in response to the solicitation) do not corroborate the Company's market price forecast . Mr. Schnitzer also opined that Dominion Virginia Power's NUG solicitation process (described by Company witnesses in prefiled testimony and at the hearing) did not constitute an adequate evaluation of market A alternatives to the Project because the Company failed to solicit offers for a comparable amount of capacity to be provided by the Brunswick Plant and because, in his assessment, the solicitation was not actually designed to evaluate alternatives to the Project . In addition, he asserted that the evaluation of the NUG offers was flawed (in part, because it relied upon an incorrect market price forecast). Tr . at 783-788.

Mr. Schnitzer maintained that no Company witness appeared to directly challenge his conclusion that there is no physical reliability need for additional capacity in the DOM Zone by 2016 . He noted that Company witness Thomas revised one of his exhibits (including Mr. Schnitzer's reserve margin calculation showing that there was no need for additional capacity in the DOM Zone until 2022) and the revised exhibit suggested there was a need for additional capacity in the DOM Zone by 2017 . Mr . Schnitzer opined that Mr. Thomas's calculation was flawed because it failed to consider capacity from the Bath County generating facility, because it incorporated the unsupported assumption that 50% of planned demand response would not be contributed, and because it failed to consider import capabilities into the DOM Zone. Tr . at 789-791 .

When cross-examined by the Committee, Mr. Schnitzer opined that the Company would receive competitive offers if it were to issue an RFP forn.eeded capacity . He testified that he based this opinion on recent experience within PJM (relative to utility capacity RFPs) and the fact that there are a number of competitive suppliers within PJM that have generation that is not contracted over the long term . He also maintained that there is no binding transmission constraint for reliability purposes between the DOM Zone and the rest of PJM. In addition, he testified that the lack of additional generation construction in PJM supports the inaccuracy of the Company's market forecast (because the high prices set out in the Company's forecast, if accurate, would incent the construction of additional generation) . Moreover, he maintained that the Dominion Virginia Power has not fWly explored - by asking the right questions in an RFP - whether a competitive supplier/s would be willing to provide sufficient capacity (at a competitive price) to displace the need for the Brunswick Plant. Tr . at 792-797 .

During cross-examination by Consumer Counsel, Mr. Schnitzer agreed that diversity of a utility's generation mix could include diversity relative to ownership, market purchases, and PPAs. He suggested that a long-term PPA would not be particularly diverse from the ownership of the Brunswick Plant . He also identified potential benefits associated with shorter term capacity purchases (as contrasted to ownership) such as flexibility (to address possible chan es relative to carbon regulation and natural gas prices) and a lower risk relative to capital costs7 Furthermore, he confin-ned that one of his suggestions was for the Company to defer development of the Brunswick Plant beyond 2016 until after potential alternatives have been more fully evaluated . Tr. at 799-804 .

54 At a subsequent point in his testimony, Mr . Schnitzer acknowledged that certain credit and debt issues could be applied to the Company in connection with a PPA depending upon contract structure and cost recovery mechanisms . Tr. at 827-828 .

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When cross-examined by Staff, Mr. Schnitzer confirmed that he found no physical need for additional capacity in the DOM Zone through 2016 . He also indicated that there is available capacity outside the DOM Zone that could be used to meet the Company's needs . With respect to the development of additional physical capacity in the DOM Zone, Mr. Schnitzer did not believe C the Company's evaluation method was capable of identifying new capacity other than its self-build . A Tr . at 804-806 .

The Company next cross-examined Mr. Schnitzer. He acknowledged that his analysis of potential savings associated with the NUG purchases, which, in turn, was based on a comparison of the Company's capacity price forecast to an actual market price offer, did not take into account non-energy costs such as firm transportation . He also agreed that he included capacity outside of the DOM Zone (that is, from the Virginia City Hybrid Energy Center ("VCHEC") and Mt. Storm) and capacity dedicated outside of the DOM Zone when calculating a 3 1 % capacity reserve margin for the DOM Zone. Furthermore, with respect to the Company's assumption (when forecasting capacity) that 50% of the demand response bid into the PJM base residual auction could not be counted upon, Mr. Schnitzer acknowledged that PJM's market monitor and P3 have also expressed concern regarding the speculative or "phantom" nature of demand response . 55 However, he did not believe the demand response enhancements that have been adopted by PJM to address this problem will lessen the amount of demand response by 50%. Tr .~ at 807-828 .

On redirect, Mr. Schnitzer clarified that the exclusion of capacity from facilities outside of the DOM Zone from the reserve margin calculation does not change his opinion that additional capacity within the DOM Zone is not needed . Tr . at 829.

Consumer Counsel

Consumer Counsel presented the testimony of Scott Norwood, an energy consultant and president of Norwood Energy Consulting, L.L.C .

Mr. Norwood provided an overview of the Company's Application including Dominion Virginia Power's planned in-service date, estimated capital cost, estimated initial rate impact, and forecasted annual revenue requirement for the Project. Furthermore, he summarized his conclusions and recommendations relative to the Project . Specifically, while Mr. Norwood agreed that the Company will require 1,358 MW of generating capacity to reliably serve peak demand on its system beginning in 2016, he found that Dominion Virginia Power failed to adequately evaluate market-based alternatives to the Project . Under the circumstances, he did not recommend approval of the Project . However, if the Commission ultimately decides to approve the Project, he recommended that the 100 basis point enhanced ROE remain in effect for the minimum period provided by the Code (10 years) . Ex . 44 and 44 ES, at I - 10 .

Mr. Norwood also reviewed the Company's selected design for the Project and found that it appeared to be reasonable . Similarly, he did not dispute that the EPC contractor chosen for the Project appeared reasonably qualified . Ex.44and44ES,atl0-ll,.

55 See also Exs. 40, 4 1, and 42.

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Mr. Norwood summarized the Company's use of the Strategist model to evaluate economic M alternatives to the Project. He questioned Dominion Virginia Power's operating cost assumptions for the Brunswick Plant and the Company's failure to sufficiently evaluate market purchases as means for deferring the Project. Ex . 44 and 44 ES, at I ~- 15 .

More specifically, Mr. Norwood criticized the Company's failure to conduct a broad solicitation process to identify market alternatives to the Project . He explained that market purchases will no longer constitute a meaningful portion of Dominion Virginia Power's capacity requirements if the Project is approved (dropping from approximately 15% of the Company's total system capacity in 2012 to approximately 1 .5% of its forecasted total system capacity by 2020). Mr . Norwood questioned whether Dominion Virginia Power thoroughly pursued opportunities to renew its purchased power agreements with NJJG suppliers and suggested that the Company may have been able defer (or displace) the need for the Project if it had negotiated cost-effective extensions of existing N_LJG contracts . Furthermore, he maintained that Dominion Virginia Power failed to adequately consider short-term PJM market capacity purchases as an alternative to the

56 BrunswickPlant. Ex.44and44ES,atl3-21 .

With respect to the Company's operations and maintenance ("O&M") cost assumptions, Mr. Norwood explained that Dominion Virginia Power's forecasted costs are lower than several other independent forecasts - including the forecast of its consultant, ICF. He testified that he was concerned the Company's forecasted costs of the Project are significantly understated, thereby resulting in corresponding overstatement of the Project's benefits . Furthermore, he explained that Dominion Virginia Power's ratepayers are likely to bear the risk of such higher costs . Ex. 44 and 44 ES, at 21-23 .

At the conclusion of his prefiled testimony, Mr. Norwood addressed the Company's proposed Rider BW. He acknowledged that Subsection A 6 provides for an ROE incentive of 100 basis points over a period ranging from 10 to 20 years in connection with the construction of a natural gas-fired combined cycle facility . Because the Brunswick Plant (if approved) will employ relatively mature and proven technology, a significant portion of the Brunswick Plant's costs are fixed, and there may be other alternatives to meet the Company's need for capacity, Mr. Norwood recommended that the enhanced ROE be allowed to remain in effect for the I 0-year, minimum period . Ex . 44 and 44 ES, at 24-25 .

At the hearing, Mr. Norwood again opined that the Company's solicitation of three NUGs for the possible extension of PPAs together with Dominion Virginia Power's analysis, through Strategist, of market purchases did not constitute adequate consideration of alternatives to the Project . Moreover, he maintained that the Commission would establish bad precedent if it were to approve such an expensive Project without full information relating to market alternatives . He also disputed Mr. Wood's conclusion that the Brunswick Plant represents the clearest, least cost alternative for meeting the Company's needs . According to Mr. Norwood, the Company's conclusion that the Project is the least cost alternative is based upon a market price forecast that is too high . Furthermore, although he acknowledged that the results of the Company's NUG solicitation appeared to support some savings associated with the Brunswick Plant ($226 million on

56 Mr . Norwood also identified a specific NUG contract that, if extended, would have been competitive with the Brunswick Plant . Ex . 44 and 44 ES, at 19-20 .

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W a a present value basis over a 36-year period), he testified that such savings represent only a very M

small fraction (.25%) of the Project's total cost as modeled in Strategist over 36 years. Tr. at 831 - 836 .

Mr. Norwood identified several sample RFPs showing the types of proposals that could have been used by the Company as an alternative to the telephone calls that were made to three NUGs. 57

In addition, he testified that Dominion Virginia Power could have evaluated alternatives to the Project more effectively through a broader solicitation of known power suppliers (and not through a fori-nal RFP) . He also maintained that the heat rate advantage of the Brunswick Plant will not be as great as the Company has suggested because, if operational, the Brunswick Plant will displace energy that would have been provided by other combined-cycle units with good heat rates. Furthen-nore, he disputed the Company's assertion that its planned reduction of purchased capacity (from 15% to 1 .5%) is not significant. Tr . at 836-842.

When questioned by Staff, Mr. Norwood indicated that the Company could not have solicited new capacity within the DOM Zone for delivery by 2016 using the NUG solicitations that were made in 2012 . Tr . at 845-846 .

During cross-examination by Dominion Virginia Power, Mr. Norwood acknowledged that Appalachian Power Company ("APCo") did not conduct a broad market solicitation in connection with an affiliate transaction proceeding that is currently pending before the Commission (Case No. PUE-2012-00141) but has issued broad RFPs in other situations . He also agreed that he is not contesting the Company's need for additional capacity by 2016 . Similarly, he did not dispute the reasonableness of the technology or EPC contractor chosen for the Project . Moreover, he agreed that there should be local economic benefits associated with the Project . He then confirmed that his primary concern regarding the Application was the Company's failure to adequately consider market alternatives to the Project . Tr . at 846-858 .

Mr. Norwood explained that he did not thoroughly evaluate the Company's use of the Strategist model when forming his conclusions in this case because, in his opinion (and regardless of what the Strategist runs showed), Dominion Virginia Power failed to fully explore actual, potential alternatives to the Brunswick Plant. He did not, however, dispute that Strategist constitutes a reasonable modeling mechanism - depending upon how the model is run and the assumptions that are inputted into the system . He also maintained that the particular application of the Strategist model can force it to reach results that are non-optimal . By way of example, he noted that the Company forced the model to select PJM capacity purchases for the market option rather than allowing it to select whatever may have been available in the short or long term . He further maintained that Dominion Virginia Power's NUG solicitation constituted its only true consideration of market alternatives to the Project because the Company's Strategist modeling used administratively determined market price forecasts rather than actual offers or bids . Mr. Norwood did not believe it was appropriate for the Company to make such a substantial investment without first sufficiently soliciting actual alternatives to the Project . Tr. at 859-868 .

57 See Exs . 45 and 46 .

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It was Mr. Norwood's understanding, after reviewing the Company's direct testimony, that M no Strategist runs were made considering the costs of deferring the Brunswick Plant for five years and relying upon short-term capacity purchases in the interim. He recognized that certain deferral runs were referenced in the Company's rebuttal testimony but testified that he did not know enough about results of those runs to comment upon them. He also discussed his own analysis of short-terrn capacity purchases which compared the revenue requirements for the Brunswick Plant over the first several years of its operation to the market price of capacity in PJM for the same time period . 58

He acknowledged that the revenue requirements for a generating facility will be higher in the first years of its operation. In addition, he agreed that the Strategist model frequently uses a levelized capacity recovery factor in its analysis - thereby considering the value of a facility over its entire life . Furthermore, he acknowledged that rising construction costs or inflation could increase the potential costs of deferral . Mr. Norwood also acknowledged that he did not consider the energy benefits/fuel cost savings of the Brunswick Plant in his deferraUshort-term purchases analysis . Tr. at 868-879.

Mr. Norwood next addressed his assessment of t ' he Company's O&M cost estimate

associated with the Project . According to Mr. Norwood, Dominion Virginia Power's O&M cost estimate was significantly lower (by 200%) than the cost data from other utilities and from the Company's own consultant, ICF. He testified that he highlighted this variance as a possible flaw in the forecast used by the Company to establish the benefits of the Project relative to the solicited NUG offers . Nevertheless, he also acknowledged that the variance may be explainable depending upon the precise cost classifications used by the Company in its analysis . Tr . at 879-889 .

Specifically with respect to the N_UG solicitation, Mr. Norwood indicated that he understood the Company contacted three NUGs with PPAs set to expire within the next three to five years. He agreed that these NUGs provide 60% of the Company's contracted capacity . In addition, he did not dispute that Dominion Virginia Power considered and weighed the NUG offers in comparison to the Project and determined, using Strategist, that customers would be $226 million worse off if the N_LJG offers were accepted and the Brunswick Plant was deferred for two years. However, Mr. Norwood continued to maintain that the $226 million calculation was not significant given the uncertainty of the forecasts incorporated into the Strategist analysis . He also suggested that the magnitude of the investment required by the Brunswick Plant warranted further negotiation with the solicited NUGs . Moreover, he maintained that the Company's solicitation of proposals (as potential alternatives to the Project) should have been broader . He suggested that a broader solicitation would have provided additional, real market data (as contrasted with the forecasted infon-nation used by the Company in its Strategist modeling) that could have been compared to the costs of the Brunswick Plant . Tr . at 889-905 .

On redirect examination, Mr. Norwood clarified that he found the Company's peak demand forecast to be reasonable and did not dispute the Company's need for additional capacity . However, he did not believe there is a physical reliability need for new capacity in the PJM region . He also believed the Company may have been able to obtain third-party offers for capacity and energy from alternative combined-cycle resources . Furthermore, he indicated that it is difficult to quantify the precise economic benefits associated with the Project . In addition, he continued to support his

58 See also Ex. 44 and 44 ES (Exhibit SN- 10) .

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calculation of capacity benefits (net of fuel cost savingS)59 associated with short-term market purchases . Tr. at 906-910.

Mr. Norwood suggested that any type of broad solicitation for additional capacity - even by email or press release - would have encouraged contacts that could have been documented and used 4 to establish a lack of reasonable alternatives to the Project. He also opined that the issuance of an RFP (comparable to the RFPs reflected in Exhibits 45 and 46) would not have been burdensome for the Company to administer . Tr . at 911-915 .

Doswell

Doswell presented the testimony of Nathan E. Ijanson, vice president of LS Power Development, LLC ("LS Power") .

Mr . Hanson explained that LS Power is a privately held company engaged (through its subsidiaries) in the acquisition, management, and development of electric transmission and generation infrastructure throughout the United States . He testified that he is responsible for the management of eight of LS Power's generation facilities, including Doswell (a combined-cycle facility located in Ashland, Virginia, that is connected t6 the Company's transmission system) . Ex . 54 and 54 ES, at 1-3 . 1

According to Mr. Hanson, Dominion Virginia Power has an existing PPA with Doswell that will expire in May 2017 . He discussed the Company's representation that the Company actively solicited quotes for the extension of existing NUG contracts (such as the PPA with Doswell) when evaluating the customer value of the Brunswick Plant . Furthermore, he provided an overview of the Company's solicitation process and described Dominion Virginia Power's rejection of Doswell's proposals . Ex . 54 and 54 ES, at 3-5 .

Mr. Hanson testified that he had extensive prior experience dealing with RFPs from utilities seeking N_UG offers for energy and capacity . He maintained that Dominion Virginia Power's solicitation differed from a typical NUG RFP. Specifically, he testified that the Company - unlike a typical utility soliciting energy and capacity from a NUG - failed to provide a written solicitation identifying the parameters for the type of product and the contractual tenns that it was seeking. Furthermore, because Dominion Virginia Power did not express an interest in proposals relating to facilities that were not covered by current PPAs, Mr. Hanson maintained that the Company's solicitation was not designed to obtain the lowest-cost alternatives to meeting its generation needs. Ex . 54 and 54 ES, at 5-8 .

Mr . Hanson next described Doswell's response to Dominion Virginia Power's solicitation . He testified that Doswell presented three alternative proposals for the Company's consideration (for 10, 15, and 20-year extensions of the current PPA). He explained that each proposal included the conversion of the PPA into a physical tolling arrangement at the conclusion of the PPA's term. He also indicated that Doswell included additional options within its proposals that, in his opinion, increased the potential value for the Company's customers . Ex.54and54ES,at8-10.

59 See also Tr . at 914-915 .

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According to Mr. Hanson, Dominion Virginia Power informed Doswell that its proposals were being rejected because the Doswell PPA was "underwater"/above market and, as such, produced a negative value to the Company and its customers . He testified that Doswell responded to the Company's concern by offering Dominion Virginia Power the option of negotiating a buy-out and early termination of the existing PPA. He testified that the Company rejected Doswell's suggestion of attempting to negotiate a buy-out. Furthermore, although Mr. Hanson acknowledged that Dominion Virginia Power left open the possibility of negotiating a buy-out in the future, he testified that Doswell does not view this is a likely scenario . Ex . 54 and 54 ES, at 10-13 .

Mr. Hanson testified that Dominion Virginia Power's 201 1 IRP is relevant to this case because the Company's preferred IRP relied almost exclusively on self-build options rather than NUG contracts . Furthermore, he opined that the Company's execution of contracts relative to the construction of the Project prior to the second quarter of 2012 reflected Dominion Virginia Power's lack of genuine interest in competitive alternatives to the Project . Ex . 54 and 54 ES, at 13-14 .

Mr. Hanson noted that in the Company's 2011 IkP case, the Commission highlighted the consideration of market alternatives as condition of approving a future request for a CPCN. He maintained that Dominion Virginia Power's failure to adequately consider such alternatives will drive up costs for the Company's customers . Ex . 54 and 54 ES, at 14-15 .

At the hearing, Mr. Hanson testified that the construction of a generating facility provides economic benefits to the local area where it is built . However, with respect to a facility constructed by the Company, Mr. Hanson maintained that such benefits are funded by Dominion Virginia Power's ratepayers throughout the state . He also suggested that comparable benefits to unit ownership could be created through the terms of a PPA - such as the inclusion of a buy-out option . In addition, he discussed various options proposed by Doswell during the Company's NUG solicitation process and maintained that Doswell did not receive feedback from Dominion Virginia Power relative to those options after its proposal was rejected . Moreover, he asserted that Doswell would have benefited from receiving more direction in the solicitation (in particular, with respect to fuel transportation issues) . Furthermore, he testified that Doswell asked the Company - during the solicitation process and when exploring the possibility of restructuring its PPA - if Dominion Virginia Power would consider proposals from Doswell's affiliates (members of the LS Power group) and was advised that the Company would not accept such proposals . According to Mr. Hanson, Doswell affiliates would have submitted proposals if they had been solicited to do so. Tr . at 969-98 1 .

When cross-examined by the Committee, Mr. Hanson indicated that the capital structure of an independent power producer's contracted asset generally includes from 60% to 70% equity . He maintained that Dominion Virginia Power does not have an inherent cost advantage over a large independent power producer when obtaining an EPC contract, access to pipeline capacity, or access to natural gas . Furthermore, he asserted that a NUG using the same type of technology proposed by the Company in the Application should be able to achieve the same heat rate as the Brunswick Plant. Tr . at 982-984 .

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Mr. Hanson confirmed that he has had extensive experience responding to utility RFPs . He 0 indicated that such RFPs typically specify the type of product that is being solicited and the overall parameters of the solicitation . He also indicated that utilities often use third-party consultants to oversee their RFPs. When asked to review a recent RFP from Duke Energy Kentucky ("Duke RFp,,),60 Mr. Hanson indicated that he had seen similar terms to those in the Duke RFP in the past - A including a provision representing that proposals would be compared to the utility's self-build option . Furthermore, he testified that N_UGs constructing contracted generation generally bear the risks associated with construction and equipment costs. In addition, he indicated that environmental risks may be subject to negotiation in a PPA. Tr . at 984-992 .

During cross-examination by Staff, Mr. Hanson explained that there are two combined-cycle facilities and one CT unit at the Doswell site . He testified that Doswell offered to convert the CT unit to a combined-cycle facility as part of its proposal to Dominion Virginia Power and explained that such a combined-cycle unit would have provided an additional 140 MW to the Company . He also indicated that Doswell offered, as an alternative, to contract with the Company for the capacity of the existing non-converted CT unit (that is, 155 MW). In addition, he indicated that LS Power does not currently have any generating units under construction (or proposed to be constructed) within the DOM Zone. Furthermore, he clarified that the Company contacted Doswell in late August 2012, after already informing Doswell that its PPA extension offer had been rejected, and informed Doswell that Dominion Virginia Power continued to be interested in the possible restructuring of the PPA. In Mr. Hanson's assessment, the Doswell PPA is currently below market (as contrasted with the Company's characterization of the PPA as being "underwater") . Tr . at 992-998.

When cross-examined by the Company, Mr. Hanson agreed that LS Power has both an investment arm and a development arm. He also confirmed the investment goals of LS Power and agreed that its business model includes purchasing and divesting generating assets . 6 1 He further indicated that LS Power has, over time, acquired 25,000 MW of generating capacity but currently owns only 9,000 MW of generating assets . He agreed that the sale of generating assets has occurred as a means of providing a return to investors . Moreover, he acknowledged that LS Power sometimes retains ownership of generating assets for a relatively short period of time . Tr. at 1000-1018 .

When asked about LS Power's purchase of Doswell from NextEra in November 201 1, Mr. Hanson explained that the Doswell acquisition was part of the purchase of a portfolio of generating assets - including the purchase of facilities in California ("Blythe Facility"), Alabama, and South

62 63 Carolina . He agreed that LS Power decided to sell the Blythe Facility in March 2013 . In addition, he acknowledged that the debt on Doswell has recently been refinanced - and that the refinancing has enabled, among other things, the issuance of a one-time dividend to investors .

60 See Ex. 46 . 61 See also Ex . 55 . 62 Mr . Hanson subsequently agreed that Dominion Virginia Power also submitted a bid for the purchase of Doswell from NextEra . Tr. at 1027 . 63 See also Ex. 58 .

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Furthermore, Mr. Hanson acknowledged there is a pending auction for the sale of Doswell .64 Tr . at 1018-1033 .

MT. Hanson indicated that he was aware of an RFP recently completed by ODEC wherein ODEC sought proposals for a combined-cycle facility . He was also aware of ODEC's representation that the results of the RFP supported its decision to self-build the facility . With respect to Dominion Virginia Power's NUG solicitation in 2012, Mr. Hanson acknowledged that the Company is well-aware of the Doswell facility's charac

' teristics (including its -605 MW output).

However, he maintained that he was unclear of the type of customer value being sought by the Company in the solicitation . Furthermore, although he did not mention a meeting in his prefiled testimony, Mr. Hanson acknowledged that Company personnel met with a Doswell representative in late March or in April 2012 after the initial telephone call soliciting an offer from Doswell . He testified that he participated in the meeting by conference call and that he had hoped the meeting would enable Doswell to better assess the Company's needs. However, he denied receiving substantive guidance in the meeting. Tr . at 1033-1042 .

Mr. Hanson agreed that Dominion Virginia Power directed Doswell in the 2012 solicitation to make its best, final offer and communicated that there would be no counteroffer . He maintained that the "no counteroffer" restriction was not typical in the industry . He also indicated that Doswell proposed its best price for the PPA extension and, in addition, made a tolling arrangement proposal (to turn over fuel responsibility to the Company) together with proposals relative the CT unit and a purchase option . 65 He acknowledged that the Company asked a number of clarifying questions after receiving Doswell's proposal . However, he indicated that Doswell did not receive feedback from the Company regarding its alternative options (relative to the CT, tolling arrangement, or buyout). Mr. Hanson also confirmed that Doswell received an email from Dominion Virginia Power on the same date that the Company rejected its PPA extension proposal indicating that the Company may engage in PPA extension negotiations in the future . Tr. at 1042-1050 .

Mr. Hanson maintained that the Commission's approval of the Project would not necessarily have a negative impact on the profitability of the Doswell facility . However, he agreed that lower capacity prices within the DOM Zone - if facilitated by the operation of the Brunswick Plant -would negatively impact Doswell's profitabil ity.66 Tr . at 1050-1051 .

On redirect examination, Mr. Hanson clarified Doswell's position in this case - that is, that Doswell is not claiming its PPA extension offer should have been adopted but, instead, asserts that the Company failed to adequately consider third-party market alternatives to the Project. He characterized the Company's comparison of a combined-cycle unit (the Brunswick Plant) in a low-cost gas environment to other potential types of generating facilities (such as coal retrofits or peaking units) as an "apples to oranges" comparison . In, contrast, he maintained that Dominion Virginia Power should have compared the Brunswick Plant to actual proposals for other combined-cycle units (in or out of the state of Virginia). He also suggested that the use of a structured RFP would have helped to insure an "apples-to-apples" comparison . Tr. at 1057-1059 .

64 See Ex . 59 . 65 Mr . Hanson subsequently explained that the Doswell facility is 25 years old . Tr. at 1046 . 66 On redirect examination, Mr . Hanson explained that the addition of capacity to the DOM Zone from the Brunswick Plant would not necessarily lower capacity prices . Tr. at 1068 .

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Mr. Hanson identified the Company's employee Robert Trexler as Doswell's primary point of contact during the NUG solicitation in 2012 but indicated that Mr. Morgan also attended the meeting with Doswell. In addition, he indicated that Dominion Virginia Power's follow-up questions (following Doswell's submission of its PPA extension offer) related to the operations of the Doswell facility, accounting issues, and guarantees that may be included in the PPA. He denied that the Company asked any questions regarding the refinancing of the facility . Furthermore, he maintained that LS Power's investors assume the risk of cost recovery when it develops or acquires a generating unit . He also opined that a broad solicitation should obtain the most competitive pricing. In addition, he maintained that there are benefits associated with the purchase of an older facility (associated with the infrastructure and developed site) which will continue to exist even after the end of the facility's service life . Tr. at 1059-1068.

Staff

Staff presented the testimony of five witnesses : Michael W. Martin, a principal utilities engineer in the Commission's Division of Energy Regulation ; David R. Eichenlaub, assistant director in the Commission's Division of Energy Regulation ; Lawrence T. Oliver, deputy director in the Commission's Division of Utility Accounting and Finance; Gregory L. Abbott, a principal utilities analyst in the Commission's Division of Energy Regulation ; and Carol B. Myers, a principal utility accountant in the Commission's Division of Utility Accounting and Finance .

Mr. Martin sponsored the Staff Report pertaining to the transmission interconnection facilities included within the Project. The Staff Report Provided an extensive overview and analysis of the transmission facilities (including their various components, anticipated construction period, cost, proposed routes (and alternatives), need, rights-of-way, economic development benefits, and environmental impacts. The Staff Report also discussed various statutory provisions and laws applicable to the relevant transmission facilities . Ex . 48, at 1-17 .

Among other things, the Staff Report included a',comparison of the proposed and alternative routes for the transmission line portions of the Project providing as follows :

Une Residences Residences Wetland Line #591 miles within 100 101-500 ft Crossed (acres) Proposed D 13 .5 0 15 4 .6 First Alternate G 14 .1 0 46 2 .7 Second Alternate F 14 .3 0 39 2.1

LOOR Proposed C 4.7 1 8 1 .8 Alternate B 3 .8 0 6 2.4

Ex . 48, at 12 .

Staff concluded that the transmission facilities included within the Project are needed to interconnect the Brunswick Plant to the Company's transmission system . Furthermore, Staff did not oppose the Company's choice of routes for the transmission lines included within the Project . Ex . 48, at 17 .

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Mr. Eichenlaub addressed the need for the Project by evaluating the Company's load and commodity price forecasts . He also discussed Dominion Virginia Power's forecasting methodologies and the BrunsvAck Plant's expected impact on economic development in Brunswick County . Ex . 5 1, at 1 .

Mr . Eichenlaub opined that the methodologies used by the Company to create its forecasting models and to prepare its forecasts are generally sound and appropriate . Similarly, he testified that Staff supports Dominion Virginia Power's use of the Strategist model and believes the results of the Company's modeling constitute a reasonable proxy of future system operations . In addition, he testified that Dominion Virginia Power's load forecast appears reasonable and that it reasonably reflects market conditions and trends at the time of the forecast . Ex. 5 1, at 2-4 .

Mr. Eichenlaub also discussed the process used by the Company in developing its forecast of fuel prices (including prices for natural gas, nuclear fuel, and coal) . Among other things, he acknowledged that the Company performed a sensitivity analysis in the summer of 2012 when developing its 2012 IRP Update that provided a better reflection of fuel prices than the forecasts included in the Company's prior IRPs . Nevertheless, he also noted that the Company's forecast of ftiel prices is somewhat higher than forecasts monitored by Staff. In addition, he indicated that Dominion Virginia Power's estimate of power market prices initially falls within the upper range of PJM current prices and then rises somewhat faster than he would expect . Ex . 5 1, at 5-9 .

Mr. Eichenlaub next addressed the Company's effluent price forecast - that is, expected costs associated with S02, C02, and NO, He testified that the Company's forecast of effluent prices did not appear unreasonable . However, given the current uncertainty relative to ' environmental regulations and carbon legislation, he wa's unable to reach a definitive conclusion as to the relationship between market allowance prices and the Company's forecast . Ex . 5 1, at 9- 10 .

Mr. Eichenlaub noted that the Company expects some form of carbon control legislation or regulation to be implemented by 2023 . Furthermore, he acknowledged that carbon controls are likely to influence fuel prices, effluent prices, and market prices and to have an impact on the value of renewable energy credits ("RECs") and the cost and value of DSM programs . Nevertheless, he suggested that it may be premature to expect significant carbon restrictions . In addition, given the relatively young status of the REC market, Mr. Eicheniaub was unable to reach a definite conclusion regarding the relationship between market REC prices and the prices forecasted by the Company . He did not, however, conclude that the Company's REC forecast was unreasonable . Ex. 51, at 11-12 .

Mr. Eichenlaub identified several factors that supported the Company's decision to use natural gas as the fuel source for the Brunswick Plant . Among other things, he recognized that natural gas, combined-cycle facilities are highly efficient ; current conditions of national and global natural gas markets are favorable and should remain relatively stable for the foreseeable future given the increased volume of shale gas ; and uncertainty surrounding environmental requirements/restrictions pertaining to coal and oil support natural gas as a fuel source . He also recognized that the Brunswick Plant will have access to gas supplies from the Gulf Coast to the Marcellus Shale supply regions via the VSSE. For all of these reasons, Mr. Eichenlaub concluded

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that Dominion Virginia Power's use of natural gas for the Brunswick Plant appears reasonable . Ex. 51, at 13-14 .

Mr. Eichenlaub also considered the likely economic impacts of the Project. He recognized various regional benefits associated with the Project but also noted that the costs of the Project will be borne by the Company's ratepayers (and, as such, courld presumably preclude spending on other activities or investment). Mr. Eichenlaub ultimately concluded that economic impacts of the Brunswick Plan appear reasonable and proportionate to4riformation provided in other CPCN applications . Ex. 5 1, at 15-17 .

At the conclusion of his prefiled testimony, Mr. ' P-ichenlaub testified that Staff generally

agreed with the Company's load and energy price forecasts and with the conclusion that a need exists to increase Dominion Virginia Power's resource capacity portfolio . Ex. 5 1, at 17-18 .

When cross-examined by the Environmental Respondents, Mr. Eichenlaub testified that he considered recent trends and alternative, publically available forecasts (such as forecasts from EEI and FERC) when assessing the reasonableness of the Company's load forecasts . He also indicated that he took into account when the Company's load forecast was developed . He noted that the Company's load growth forecast (as shown in the 2012 IRP) has been reduced from 2 .0% to 1 .5% . In his assessment, this reduction is consistent with what other forecasts are projecting . Tr. at 921-928.

Mr. Eichenlaub provided an overview of the various fuel price forecasts monitored by Staff. He indicated that the Company's base fuel forecast (without sensitivities) did not appear to consider the possibility of LNG exports . Furthermore, he acknowledged that the accuracy of the Company's fuel forecasts could be significantly impacted by future carbon regulation . In his assessment, the potential for carbon regulation (and for its implementation sooner rather than later) actually supports Dominion Virginia Power's contention that the Brunswick Plant should not be delayed . Tr. at 928-933 .

During cross-examination by the Company, Mr. Eichenlaub confirmed that he believed the technology to be used at the Brunswick Plant was a good selection given the current landscape (and, in particular, forecasted natural gas prices) . He agreed that the Brunswick Plant should provide fuel savings given its capacity and heat rate . He also acknowledged that the Strategist model is capable of providing a reasonable proxy of future system operations - depending upon the inputs used in the model . Tr. at 935-937 .

Mr. Oliver testified regarding the Company's proposals with respect to ROE and capital structure . He also addressed Dominion Virginia Power'.s request for an enhanced ROE (of 100 basis points) for the first 15 years of the Brunswick Plan~t's service life . Ex. 53, at 1-2.

Mr . Oliver supported Dominion Virginia Power's use of its actual December 31, 201 1, end-of-period ratemaking structure and cost of capital to determine the revenue requirement in this case . In addition, he supported the Company's use of a placeholder 11 .4% ROE . Furthen-nore, Mr. Oliver noted that the true-up component of the Company's Rider BW could be used in the future to

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account for any change to the ROE that may be approved in Dominion Virginia Power's next 0 biennial review . Ex . 53, at 3-4 .

Mr. Oliver did not agree with the Company's request for an enhanced ROE (in accordance with § 56-585 .1 A 6 of the Code) for the initial 15 years of the Brunswick Plant's service life . A While acknowledging that the Project -vvil] require a substantial investment, he maintained that the risks associated with the Brunswick Plant have been mitigated . He also noted that there was broad local support for the Project. Moreover, he recognized that the Company has been given a statutory right to recover its costs associated with the Project (together with an enhanced ROE) . In sum, he concluded that there is no compelling reason from a risk perspective for the Commission to set the first portion of the Brunswick Plant's service life for more than 10 years. Ex . 53, at 4-8.

Mr. Abbott provided an overview of the Project, discussed the Company's need for additional capacity, described alternative resources available to Dominion Virginia Power, discussed the adequacy of the Company's review of third-party market alternatives, discussed the appropriate time period for an enhanced ROE associated with the Brunswick Plant, and addressed the mechanics and design of Dominion Virginia Power's proposed Rider BW. Ex. 52 and 52 ES, at 1-2 .

Mr. Abbott noted that the Company expects to become capacity deficient in 2017, and remain capacity deficient thereafter, without the Brunswick Plant. Furthermore, he explained that Dominion Virginia Power expects the Brunswick Plant to satisfy the Company's capacity needs through 2019, with deficits thereafter. It was his understanding that the Company would address future capacity deficits through additional capacity additions and market purchases . Ex. 52 and 52 ES, at 3-5 .

Mr. Abbott described the various generating alternatives considered by the Company when deciding to pursue the Project . He testified that Staff developed screening curves (using estimated levelized capacity and production costs) to reflect the total annual levelized cost per kW at varying capacity factors . He explained that Staffs screening curve chart showed the Brunswick Plant to be a low-cost unit at higher capacity factors . However, he recognized that screening curves do not consider the interaction of generation alternatives with the Company's entire portfolio of generating facilities . He explained that the Company performed more comprehensive modeling of overall system and associated production costs and determined that the Project is expected to produce NPV savings of $1 .3 billion when compared to market purchases, $898 million when compared to CTs, and $1 .5 billion when compared to the retrofit of Chesapeake Units 1-4 and Yorktown Units 1-2 . Furthen-nore, he indicated that the Company conducted sensitivity studies taking into account the possibility of increased environmental compliance costs, higher and lower fuel costs, and higher than expected construction costs - the results of which demonstrated that the Project will produce estimated NPV savings (compared to alternatives) of between $0.749 billion and $1 .626 billion . In Mr. Abbott's assessment, the Company's savings estimates do not present an accurate view of the true benefits of the Project - because Dominion Virginia Power's projected savings are based on forecasts of a number of factors that are difficult to predict with any accuracy . Nevertheless, he also opined that the Project compares very favorably to other self-build options . Ex . 52 and 52 ES, at 5-10 .

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Mr. Abbott acknowledged that the Company informally solicited certain NUGs and compared the Brunswick Plant to forecasted PJM wholesale market prices for capacity and energy . Furthermore, he discussed Commission precedent which, in his assessment, confirmed that Dominion Virginia Power was not obligated to issue a formal RFP when soliciting the NUGs . Moreover, he testified that it was unclear whether the Company adequately considered third-party market alternatives - to satisfy the "adequately considered" standard established by the Commission in its Final Order in Case No. PUE-2011-00092 (entered October 5, 2012) . However, he also indicated that the Commission's approval of Dominion Virginia Power's request to abandon its bidding program (by Final Order dated May 18, 20 10, in Case No. PUE-2008-00078) suggested that a more narrow solicitation of proposals and a less rigorous level of analysis than would be performed through a formal RFP may meet the Commission's "adequately considered" standard ., Ex . 52 and 52 ES, at 10-14 .

Mr. Abbott testified that Staff was concerned regarding the informal nature of the Company's solicitation of N_LJG offers from particular NUG operators - which were initiated by conference call and followed-up by email . Furthen-nore, he testified that Staff was unable to confirm the specific parameters of the Company's solicitations (including a "no counter offer" condition) because they were made by telephone . He also expressed concern regarding the Company's execution of a contract to purchase the equipment for the Brunswick Plant just prior to Dominion Virginia Power's solicitation of offers from N_LJG offers . He opined that Dominion Virginia Power's execution of the equipment purchase contract before issuing its NUG solicitation suggested that the Company had already committed to the build option and may not have seriously considered third-party market alternatives . Ex. 52 and 52 ES, at 14-16 .

Like Staff witness Oliver, Mr. Abbott recommended that the Commission reject the Company's request for an enhanced ROE during the initial 15 years of the Brunswick Plant's service life . He explained that Subsection A 6 requires the Commission to consider the "criticality" of the Brunswick Plant when determining the appropriate length of time for the enhanced ROE. He also testified that the Brunswick Plant is not the ordy possible solution to the Company's capacity deficit . Furthermore, he opined that the Brunswick Plant is not more critical than the Company's Bear Garden and Warren County facilities - in connection with which, the Commission awarded Dominion Virginia Power an enhanced ROE for only 10 years . Ex . 52 and 52 ES, at 16-18 .

Mr. Abbott explained that Dominion Virginia Power used the same general methodology to calculate its Rider BW rates as was approved by the Commission in connection with the Company's Warren County, Bear Garden, and VCHEC generating facilities . He also explained the allocation factors/al location method used by the Company . He recommended that Company's Rider BW charges be adjusted proportionately if the Commission approves a different revenue requirement than what was proposed by Dominion Virginia Power. Furthermore, he indicated that Staff does not oppose the approval of a CPCN for the Brunswick Plant if the Commission concludes that the Company adequately considered third-party market alternatives to the Project . Ex . 52 and 52 ES, at 19-21 .

When cross-examined by the Environmental Respondents, Mr. Abbott explained that Staff used the Company's levelized capacity and production costs when developing screening curves to show the total annual levelized cost per kW at varying capacity factors. He also indicated that he

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used the Company's cost values in his analysis (together with a discount rate of 1 1 .416%) . Furthermore, Mr. Abbott testified that Staff did not evaluate whether demand-side resources could be used to address any portion of the Company's expected capacity shortfall . Tr . at 940-943.

During cross-examination by the Company, Mr. Abbott agreed that the results of his screening curve analysis were very similar to the analysis perfon-ned by Company witness Kelly. He also agreed that his analysis showed a combined-cycle unit/3x I (such as the Brunswick Plant) was shown to be the lowest cost alternative at reasonably expected capacity factors - except at very low capacity factors when a CT is the best alternative. In addition, he confirmed that his analysis showed the addition of the Brunswick Plant would satisfy the Company's capacity deficiency as of 2016 . Furthermore, he indicated that his analysis focused on capacity rather than energy benefits associated with the Project. Tr. at 944-946.

With respect to the NUG solicitation, Mr. Abbott indicated that there was an issue as to whether the Company considered enough market alternatives to the Project . He believed this was a policy issue to be resolved by the Commission. Putting this issue aside, he opined that the Brunswick Plant was the best self-build option available to the Company. Tr . at 947-949 .

Ms. Myers addressed the Rider BW revenue requirement for the rate year September 1, 2013, through August 31, 2014 ("2013 Rate Year"); the Company's methodology for allocating indirect overhead costs to generation capital projects ; and the impact on the 2013 Rider BW should the Commission agree with Staff that an enhanced ROE does apply to infrastructure associated with the Brunswick Plant . She also sponsored four schedules and an appendix that were attached to her prefiled testimony . Ex. 50 and 50 ES, at 1-2 .

Ms. Myers explained that the Rider BW RAC fo ' r the 2013 Rate Year includes a Projected

Cost Recovery Factor (calculated to recover $43 .12 Million in this proceeding) and an AFUDC Cost Recovery Factor (calculated to recover $1 .49 million in this proceeding) . She testified that Staff does currently take issue with the costs that have projected by the Company but will continue to monitor such costs (through the review of supporting documentation) . Furthermore, she indicated that the Projected Cost Recovery Factor should be reduced by $275,000 and the AFUDC Cost Recovery Factor should be reduced by $12,000 if the Commission agrees with Staff that the enhanced ROE provided by § 56-585 .1 A 6 does not apply to the transmission infrastructure associated with the Project . Ex . 50 and 50 ES, at 3-5 .

Ms. Myers indicated that in January 2012 the Company changed its accounting methodology for allocating indirect overhead costs (consisting, primatily, of DRS labor and related costs charged to the Company) to generation capital projects . Specifically, she explained that the Company discontinued its use of a labor-based methodology and began using a broader methodology based on total spending . She testified that the change in methodology led to a smaller amount of indirect overhead costs being recognized as base rate expense on Dominion Virginia Power's books . According to Ms. Myers, the Company's use of its new total spending methodology results in the calculation of $31 .7 million indirect overhead costs associated with the Project as compared to a calculation of approximately $43,000 using the Company's former, labor-based methodology . She also explained that the Company previously agreed, in recent proceedings related to the Warren County facility, the VCHEC facility, and biomass conversions, to remove the incremental impact of

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the Company's new methodology on the associated revenue requirements pending resolution of Dominion Virginia Power's 2013 biennial review proceeding (at which time the Commission will consider the new allocation methodology) . Ms. Myers recommended that the incremental impact of the new allocation methodology should be removed from the 2013 Rider BW revenue requirement - consistent with other recent Commission proceedings. Ex . 50 and 50 ES, at 5-1 0. 4

At the conclusion of her prefiled testimony, Ms. Myers testified that Staff recommends a revenue requirement of $43 .19 for the Company's 2013 Rider BW - that is, $41 .75 million for the Projected Cost Recovery Factor and $1 .44 million for the AFUDC Cost Recovery Factor . She explained that Staff s recommended revenue requirement includes a reduction of $1 .12 million to remove the incremental impact of the Company's new allocation methodology for indirect overhead costs and a reduction of $287,000 to excluded enhanced ROE associated with transmission infrastructure . Ex. 50 and 50 ES, at 10 .

The Company's Rebuttal

On rebuttal, the Company presented the testimony of Mr. Wood; Mr . Kelly ; Gregory J . Morgan, Dominion Virginia Power's managing director of cost allocation and pricing ; Robert G. Thomas, director of energy market analysis and integrated resource planning for DRS; Maria F. Scheller, a consultant with ICF; Mr . McKinley ; Mr. Nedwick; Ripley C . Newcomb, manager of demand-side planning for the Company; Courtney R. Fisher, a senior siting and permitting specialist in the Company's electric transmission right-of-way group; and Mr. Wilkinson .

Mr. Wood responded to the testimony of Messrs. Abbott, Norwood, Schlissel, Loiter, Schnitzer, and Hanson. Specifically, he addressed the testimony of Staff and the Respondents relative to Dominion Virginia Power's resource planning process and the appropriate period for an enhanced ROE in connection with the Project. Ex. 62 and 62 ES, at 1-3 .

Mr. Wood noted that Staff and Consumer. Counsel do not generally disagree with the Company's conclusions with respect to the need for additional capacity, the technology chosen for the Brunswick Plant, and the chosen location of the Project . However, he acknowledged the concerns of Staff and Consumer Counsel regarding the sufficiency of the Company's consideration of third-party market alternatives . Furthermore, he suggested that the conclusions of Doswell and P3 relative to third-market alternatives were based, primarily, on their respective economic interests . 67 Ex . 62 and 62 ES, at 3-6 .

Mr. Wood maintained that the Company compared the Brunswick Plant to market alternatives and confirmed that the Project was the least cost alternative to meet the needs of Dominion Virginia Power's customers . Specifically, he asserted that the Company's solicitation of N_UG contract extensions, which were evaluated using the Company's lRP/CPCN evaluation methodology, confirmed that the NUG offers, individually or combined, did not constitute a lower cost option for meeting the needs of Dominion Virginia Power's customers . In addition, he denied that the Company predetermined its decision that the Project constituted the lowest cost option to

67 At a later point in his prefiled rebuttal testimony, Mr . Wood suggested that the Commission has recognized the potential financial incentive of a participant in the wholesale power market to preclude the addition of new and competing capacity in the DOM Zone. Ex . 62 and 62 ES, at 10 .

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address Dominion Virginia Power's needs for additional capacity beginning in 2016 . Ex . 62 and 62 M ES, at 6-8 .

Mr. Wood opined that ownership of the Brunswick Plant (as compared to wholesale market alternatives) will contribute to producing reliable and stable power supplies over the long service life of the facility by offering the Company greater flexibility and control, less risk, and predictability . He also indicated that power will be produced more efficiently with lower emissions, and with higher capacity factors at the Brunswick Plant than at older units . According to Mr. Wood, the General Assembly recognized such factors when passing the -2007 Regulation Act . Ex . 62 and 62 ES, at 9-10 .

Mr . Wood disputed Mr. Schnitzer's suggestion that new capacity is not needed in PJM and, more specifically, in the DOM Zone. He testified that such new capacity is needed because of anticipated load growth and expected retirements of certain generating units . He also disagreed with Mr. Schnitzer's recommendation that the Company be required to conduct a forinal RFP in connection with each "buy vs . build decision." He noted that the Commission previously released the Company from any obligation to maintain a bidding program. Ex . 62 and 62 ES, at I I - 1 2 .

Mr. Wood also disputed Mr. Norwood's conclusion that the extension of existing NUG contracts, as compared to the near-terrn construction of the Brunswick Plant, may reduce customer risks associated with potentially escalating construction costs . He testified that 81% of the construction costs associated with the Project, other than financing costs, are fixed thereby minimizing any potential risk . He also maintained that the Company's fuel procurement process is designed to ensure a market competitive rate associated with the Brunswick Plant . Furthermore, he indicated that achieving the operation of the Brunswick Plant before May 1, 2016, will help to ensure compliance with existing and expected environmental regulations . Moreover, he opined that the delayed construction of the Brunswick Plant may decrease the Company's ability to leverage expenses relative to construction, equipment, and gas markets. Ex . 62 and 62 ES, at 12-13 .

Mr . Wood denied that the Company failed to seriously negotiate the extension of Doswell's current PPA .68 To the contrary, he maintained that the Company is always willing to consider N_UG assets as an alternative to self-build options when NUG alternatives are in the best interest of Dominion Virginia Power's customers. Furthermore, he explained that the Company executed the contract with Fluor (the EPC contractor for the Project) after obtaining NUG extension offers but before fully evaluating such offers . He maintained that it was appropriate for the Company to execute the contract with Fluor based upon the outcome of its Strategist modeling -because the Company continued to have the option of slowing or halting the Project's development following its full evaluation of the NIJG extension offers . Similarly, he maintained the Company's execution of a turbine supply agreement in February 2012 did not reflect a lack of genuine interest on the part of the Company with respect to the solicitation of potential N_LJG extension offers . Ex . 62 and 62 ES, at 13-16 .

Mr. Wood disagreed with Mr. Norwood's suggestion that NUG contract extension offers were economically competitive with the Company's preferred, self-build option because the cost

68 Mr . Wood also testified that the Company may yet reach an agreement for the extension of Doswell's NUG contract, which is not set to expire until 2017 . Ex . 62 and 62 ES, at 16 .

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difference between the two alternatives is relatively small - that is, forecasted as a difference of $226 million over time . He maintained that the Company appropriately chose the Brunswick Plant as the lowest cost option . He also disputed Mr. Norwood's conclusion that the Company could not adequately ascertain the lowest cost alternative without a broader solicitation . According to Mr. Wood, the Company appropriately targeted existing NUG contracts that were expiring in the next A three years. Moreover, he defended the Company's modeling process and its evaluation of market alternatives to the Project . Ex . 62 and 62 ES, at 16-18 . ,

Mr . Wood testified that Mr. Norwood was incortect when he suggested that the Company could reduce capacity costs by deferring the Project . He testified that Mr. Norwood failed to consider the energy cost savings that the Project will provide (as compared to market purchases and other alternatives) when making this suggestion . Ex. 62 and 62 ES, at 18-19 .

Mr. Wood also disputed Mr. Norwood's assertion that the Company underestimated the O&M costs associated with the Project . He maintained that Dominion Virginia Power's forecast of O&M expenses in this case is consistent with experienced O&M costs relative to Bear Garden . Ex . 62 and 62 ES, at 19 .

Mr. Wood further maintained that expanded energy efficiency/DSM and a greater use of renewables could not serve as a cost-effective alternative to the Project . Among other things, he opined that the recommended plan of Messrs . Loiter and Schlissel (witnesses for the Environmental Respondents) would be more expensive and risky to Dominion Virginia Power's customers . He also asserted that the addition of the Brunswick Plant tothe Company's system (by 2016) will help to ensure that no single unit loss will result in power failures . Furthermore, he testified that the Company appropriately excluded DSM programs that were not likely to be approved by the Commission from its modeling . Ex . 62 and 62 ES, at 19-21 .

Mr. Wood also disagreed with Mr. Loiter's suggestion that the Company should develop a "consensus IRP" after working with various stakeholders . He stressed that Dominion Virginia Power has the legal obligation to file for the approval of an IRP every other year in Virginia . Similarly, he noted that the Company alone has the legal obligation to provide reliable service to its customers . However, he represented that Dominion Virginia Power will continue to meet with stakeholders to discuss its IRP and will continue to evaluate the viability of additional DSM programs . Ex. 62 and 62 ES, at 22-23 .

At the conclusion of his prefiled rebuttal testimony, Mr. Wood addressed the Company's request for an enhanced ROE during the first 15 years of the Brunswick Plant's service life . He maintained that granting the enhanced ROE for a 15-year period was consistent with goals of the incentives established by § 56-585.1 A 6 of the Code - specifically, to incent the construction of generation facilities to ensure adequate supply and promrote economic development . He also testified that Staff witness Oliver failed to adequately consider the risks associated with the Project . Ex . 62 and 62 ES, at 23-25 .

At the hearing, Mr. Wood again maintained that the Company adequately considered third-party market alternatives to the Project through its use of ICF market price forecasts and comparison/weighing of supply and demand-side options ; through its solicitation of three of its

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W largest NUGs for the extension of PPAs; and through its use of backcast analysis to determine how the Brunswick Plant would perforrn relative to the market (based upon actual, historic market data). He did not believe it was necessary for the Company to .issue an RFP given the transparent IRP planning process and Dominion Virginia Power's ability to obtain actual bids for 1,000 MWs of capacity within the DOM Zone (from the three NUGs). Furthen-nore, he noted that market participants were well aware of the Company's plans topursue the Project. Mr. Wood also noted that the Code (in particular, Subsection A 6) protects customers through restrictions on cost recovery and limitations on rates of return when a generating facility is self-built . He suggested that such protections would not apply to capacity purchased from a merchant generator. In addition, he denied that the Company's development was ever locked-in to the planning process and maintained that Dominion Virginia Power would have taken a different course if the results of the NLJG solicitation presented an attractive option for customers. Tr . at 1072-1083 .

When cross-examined by P3, Mr. Wood agreed that the analysis used to support the Company's IRP and the Application relied upon ICF price forecasts (as inputs into the Company's modeling) but that the results from the 2012 NUG solicitation were not considered in the IR.P planning process . He also acknowledged that information provided in connection with the Company's 2012 IRP shows Dominion Virginia Power's purchases of NUG capacity decreasing to zero in less than 10 years. 69 Furthermore, he agreed that there will be certain financial consequences to the Company should the Commission deny the Application . Tr. at 1085-1092 .

Mr . Wood acknowledged that there could be disadvantages associated with the long-term ownership of a generating facility . He indicated that lower than expected load growth could justify the deferral of a generating unit . However, he maintained that customers would receive benefits from the construction of a generating plant (that is utility owned) even if actual load growth is lower than predicted because the plant will continue to have value . He also agreed that lower than predicted market prices would make market purchases more attractive . However, he maintained a self-build option may be preferable to market purchases, even if market prices are lower than

70 forecasted, if the generating facility is highly efficient. Tr . at 1092-1096 .

During cross-examination by the Committee, Mr. Wood maintained that the cost recovery provisions of Subsection A 6 are a "good model" for the Company's customers - as contrasted with the purchase of capacity through PPAs. He explained that PPAs are not subject to a regulated rate of return . However, he also acknowledged that Dominion Virginia Power will be required pursuant to Subsection A 6 to pay the Project's costs even if they exceed what has been projected by the Company . Tr . at 1097-1100 .

When cross-examined by Doswell, Mr. Wood explained that the transparency of the PJM market has made it possible for the Company to gain a good understanding of available market options . However, he denied that the transparency of the market would necessarily forestall the Company from ever using a broad solicitation to procure capacity . Instead, he asserted that the necessity of a broad-based solicitation varies depending -upon the specific factual scenario in play at the time of the capacity need . Tr . at I 10 1 - 1106 .

69 See also Ex . 28 . 70 See also Tr. at 1121-1135 (P3's extraordinarily sensitive cross-examination of Mr. Wood pertaining to the Company's bidding plans in PJM's next base residual auction) .

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Mr. Wood was next questioned by Consumer Counsel at which time he acknowledged that the Company's shareholders will benefit from any equity return earned on the Project (but would not earn such a return if the needed capacity were to be obtained through a PPA). In addition, he agreed that the Company had decided to file the Application before it initiated the N-UG solicitation in March 2012 . Furthermore, he indicated that Dominion Virginia Power would expect ratepayers to pay any penalty associated with the cancellation of the turbine supply agreement (if the Commission were to deny the Application) because, in his assessment, it was prudent for Dominion Virginia Power to enter into the agreement . Tr . at 11 07-1114 .

During cross-examination by Staff, Mr. Wood again indicated that the Brunswick Plant is expected to provide energy savings in the amount of $96 million during its first year of operation . Furthermore, he agreed that the Brunswick Plant is expected to go online within the same time period as the implementation of new environmental regulations impacting coal units . Tr . at 1115-1118 .

Mr. Kelly responded to the testimony of Consumer Counsel, the Environmental Respondents, and P3 relative to the need for the Project, Dominion Virginia Power's planning process, and the Company's evaluation results. He also sponsored a rebuttal schedule (public and extraordinarily sensitive versions) summarizing Dominion Virginia Power's NTJG solicitation process in 2012 . Ex . 63 and 63 ES, at 1-2.

Mr. Kelly noted that Staff and Consumer Counsel agree that the Company's load forecast supports the need for additional capacity resources by 2016 . Furthennore, he testified that the Environmental Respondents did not appear to contest the Company's need for additional capacity but, instead, maintained that the Project was not the best alternative to meet Dominion Virginia Power's needs. According to Mr. Kelly, P3's witness, Mr. Schnitzer, is the only witness who has disputed the Company's need for additional capacity . Ex . 63 and 63 ES, at 3-6 .

Mr . Kelly provided an overview of Dominion Vi . rginia Power's resource planning process .

Among other things, he maintained that the Company did not prejudge the need for the Project . He also explained that the Company included available cost-effective DSM programs in its analysis (using the Strategist model) and, using such analysis, ultimately produced its final 2012 least cost plan ("2012 Least Cost Plan") for meeting Dominion Virginia Power's forecasted needs . He testified that the 2012 Least Cost Plan is heavily dominated by gas-fired combined-cycle and CT units and maintained that this was not surprising given the low cost of natural gas in today's market . In addition, he testified that Mr. Norwood was mistaken when he concluded that the Company did not evaluate short-term market purchases as an alternative to the Project . Specifically, he explained that the Strategist model considered PJM capacity purchases . Furthermore, he testified that the Company developed its preferred 2012 plan ("Preferred Plan") by incorporating resources in addition to natural gas facilities, such as nuclear and renewable, to ensure fuel diversity . Ex. 63 and 63 ES, at 6-9 .

Mr . Kelly agreed with Mr. Schlissel that environmental resources should play a role in the Company's planning process . However, he maintained that wind and solar resources are not currently cost-competitive with the Pro ect . He also opined that the Company's Preferred Plan j appropriately takes into account projected costs of greenhouse gas regulation . Moreover, he

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testified that the Project has significant environmental benefits because the Brunswick Plant will be one of the cleanest units in Dominion Virginia Power's System . Ex . 63 and 63 ES, at 10- 1 2 .

Mr. Kelly testified that the Company performed additional analysis, beyond what was used to fon-nulate its Prefer-red Plan, in connection with its request for a CPCN in this case . Specifically, he explained that the Company performed supplemental analysis comparing the Project to market purchases, simple-cycle CTs, and retrofits at Dominion Virginia Power's Yorktown and Chesapeake facilities . In addition, he testified that the results of the Company's recent NUG solicitation, when inputted into the Strategist model, showed that extending any single NUG contract would not defer the need for the Project . Furthermore, although Mr. Kelly acknowledged that the extension of all three NUG contracts (that were subject to the solicitation) would defer the need for the Project to 2019, he testified that these extensions would meet expected needs at a significantly higher cost to the Company's customers . 7 1 Ex . 63 and 63 ES, at 12-14 .

Mr. Kelly also maintained that Dominion Virginia Power's backcast analysis (using historical market prices in addition to forward forecast and NUG contract evaluation) demonstrated that the Project's benefits would have exceeded its carrying costs in four out of five years - thereby helping to confirm that the Project is the preferred alternative for meeting the expected needs of the Company's customers . Furthermore, he disagreed with Mr. Schlissel's assertion that Dominion Virginia Power used incorrect carrying costs in its backcast analysis . According to Mr. Kelly, Mr. Schlissel's analysis is flawed because it compares the initial years of the Project (with the highest costs) to the years with the lowest benefit . Ex . 63 and 63 ES, at 14-15 .

Mr. Kelly next discussed the results of the Company's analysis, using the Strategist model, taking into account the possible delay of the Project until 2017 or 2018 (and relying upon PJM market purchases in the interim) . Based upon this analysis, he concluded that delay of the Project by one year would increase customer NPV costs by $149 million and delay of the Project by two years would increase customer NPV costs by $187 million . Furthermore, he testified that Mr. Norwood inappropriately considered only capacity costs and benefits when concluding that the Company could save capacity costs by delaying the Project . According to Mr. Kelly, Mr. Norwood failed to consider fuel savings/energy benefit in his analysis . Ex . 63 and 63 ES, at 15-17 .

Mr. Kelly disputed Mr. Norwood's conclusion that Dominion Virginia Power will only achieve "relatively small" savings by pursuing the Project now rather than using N_LJG extensions to delay the need for the Project. He maintained that $226 million (the amount to be saved by constructing the Project now) constitutes a significant savings given the fact that the Project could only be delayed by three years even if the NUG extensions were implemented. In addition, he disputed Mr. Schnitzer's contention that Dominion Virginia Power's evaluation of N_OG extensions was biased because it relied upon a capacity price forecast that is too high . According to Mr. Kelly, even if the Company's capacity price forecast was too high or too low, it would not materially affect the comparison of one option to another. Ex . 63 and 63 ES, at 19-20 . 1

Mr . Kelly also disagreed with Mr. Schnitzer's contention that the Company's gas forecast overstated the value of the Project. He noted that Staff found Dominion Virginia Power's gas price

71 Mr . Kelly provided further detail regarding the Company's evaluation of NUG contracts on pages 17-19 of his prefiled rebuttal testimony . Ex . 63 and 63 ES, at 17-19 .

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forecast to be reasonable . Furthermore, he noted that data relied upon by Mr. Schnitzer in his testimony actually reflects higher forward gas prices than the ICF forecast relied upon by the Company . Moreover, he indicated that Dominion Virginia Power analyzed the Project using multiple fuel price sensitivities and found significant customer value from the Project under all scenarios . Ex . 63 and 63 ES, at 20-21 .

At the conclusion of his prefiled rebuttal testimony, Mr. Kelly summarized his conclusions relative to the Project, representing that (1) Dominion Virginia Power's reserve margin is expected to fall below its planning reserve margin by 2016 ; (2) the Project constitutes the best alternative to meet the Company's expected need ; (3) the Project will provide customer value under a range of market price sensitivities ; and (4) the Brunswick Plant will use the best-in-market heat rate to provide almost $100 million in projected fuel savings during its first full year in operation . Ex . 63 and 63 ES, at 21-22 .

At the hearing, Mr. Kelly maintained that the Company's analysis of the Project's benefits included more than just a comparison of the value of the Brunswick Plant to market purchases . Furthen-nore, he testified that, as part of the Company's analysis, the Company removed the Project from its modeling as an option for meeting needed capacity as of 2016 . He asserted that after the removal the modeling continued to select the Brunswick, Plant in subsequent years at increasing costs with the passing of time . He believed the energy efficiency offered by the Brunswick Plant helped to explain this result. With respect to the Company's modeling of the N_UG solicitation offers, he clarified that the model continued to select the Brunswick Plant as the preferred option following a two-year deferral achieved through PPA extensions at an additional cost to customers of $226 million . Contrary to Mr. Norwood, Mr. Kelly believed such additional cost was a "huge amount of money" given the short deferral that would be achieved through the PPAs. In addition, he provided a comparison of the Brunswick Plant to the Doswell facility that, in his assessment, further supported the Company's decision to pursue the Project rather than rely upon an extension

72 of the Doswell PPA . Tr . at 1137-1154 .

The Environmental Respondents next questioned Mr. Kelly relative to the Company's consideration of DSM options in its modeling and the use of cost/benefit tests . Mr. Kelly explained that he passes his optimized assessment of fossil and renewable generation resources to Company witness Newcomb and Mr. Newcomb then tries to "beaV'/defer such generation resources with cost-effective DSM. With respect to the deten-nination of cost-effectiveness, Mr. Kelly believed that Mr. Newcomb concentrated on the RIM test . Tr. at 1189-1193 .

When cross-examined by Doswell, Mr. Kelly agreed that the Brunswick Plant is expected to provide 1368 MWs of capacity, as compared to the solicited NUGs which only provide about 900 MWs of capacity . He indicated that the Company was aware of the N_UGs outputs when it solicited the PPA extensions . However, he also testified that Dominion Virginia Power believed the N1JGs

72 Mr . Kelly also provided additional background regarding the Company's decision to reject the NUG PPA extension offers and a critique of P3 witness Schnitzer's Figure 8 (Ex . 38, 38 C, and 38 ES at 26) using additional information not considered by Mr . Schnitzer during an extraordinarily sensitive portion of the hearing . Tr . at 1155-1180 (extraordinarily sensitive) . See also Exs . 64 ES and 65 ES . Mr. Kelly was allowed to provide his critique of Mr . Schnitzer's Figure 8 over the objections of P3 and the Committee - as surrebuttal to testimony provided by Mr . Schnitzer during the hearing - despite P3's assertion that Mr . Kelly could, and should, have included such analysis in his prefi led rebuttal testimony . See Tr. at 1161-1167 ; 1172-1175 (extraordinarily sensitive) ; 1187-1188 .

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W may offer lower heat rates (resulting in increased capacity) through the solicitation . He acknowledged that even with lower heat rates the N_LJGs would not be able to provide as much capacity as the Brunswick Plant. He further explained that the Company did not evaluate the NUG C extension offers "head to head" with the Brunswick Plant. Instead, he testified that the Company evaluated the NUG offers on a portfolio basis. Tr . at 1 194-1199 .

With respect to the various options proposed by Doswell, Mr. Kelly testified that Doswell's offer of the capacity from its CT unit was reasonable but that the Company did not accept it because it was tied to Doswell's proposal relative to its combined-cycle facilities . He also indicated that Doswell did not propose a price for the conversion of the CT unit to a combined-cycle facility. Mr . Kelly acknowledged that it may be possible to incorporate certain benefits of unit ownership into a contractual relationship . However, he maintained that it would have been pointless for Dominion Virginia Power to issue an RFP for such a contract because the Company knows power market participants would make more money selling capacity through the market than by contracting with Dominion Virginia Power. Mr . Kelly also believed a merchant power producer is less likely to participate in future RFPs once its bid has been refused by a utility . Tr . at 1199-1208 .

When cross-examined by Consumer Counsel, Mr. Kelly clarified that his revisions to Mr. Schnitzer's Figure 8 '73 previously discussed in an extraordinarily sensitive session of the hearing,74 relate to the best bid that was received by the Company in connection with the 2012 NUG solicitation . He also indicated that such bid was lower than forecasted market prices . Furthermore, with respect to a recent ODEC RFP, Mr. Kelly suspected that bids for energy and capacity came fTom within PJM. Tr . at 1208-1213 . 75

Mr. Morgan explained that, although he is currently responsible for rate and pricing matters, he was the Company's managing director for energy supply in August 2012 . He provided additional infori-nation relative to the Company's NUG solicitation in 2012. He explained that the Company decided in 2012 to pursue a consolidated solicitation for the possible extension of three NUG contracts as part of its planning process and in recognition of its forecasted capacity and energy gaps that it was facing in the future . He testified that Dominion Virginia Power considered a prior recommendation made by Staff in connection with the Company seeking a CPCN for the Warren County generating facility suggesting that the Company should develop a more formal and better documented process for exploring bilateral opportunities when structuring the NUG solicitation process in 2012 . He also indicated that the Company's NUG solicitation was not pursued, specifically, as an alternative to the development of the Project but, instead, was considered as part of a portfolio of possible resources to be used in meeting the needs of Dominion Virginia Power's customers . Ex . 67 and 67 ES, at 1-4 .

Mr . Morgan identified the seven steps taken by Dominion Virginia Power when soliciting the three NUGs chosen by the Company for the possible extension or modification of purchased

" See Ex . 64 ES . 74 See Tr . at If 55-1181 (extraordinarily sensitive) . 75 Mr. Kelly was also cross-examined by P3 and Staff in extraordinarily sensitive session relative to the Company's evaluation of the NUG PPA extension offers and his creation of exhibits 64 ES (revised Schnitzer Figure 8) and 65 ES . Tr. at 1216-1238 . See also Ex . 66 (discovery response wherein Dominion Virginia Power acknowledged that it did not proactively contact any supplier not currently having a contract with the Company) .

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W power agreements: (1) identifying required activities ; (2) establishing an appropriate timeline; (3) requesting a firm and final price from each counterparty ; (4) applying consistent treatment to all parties; (5) documenting communications ; (6) implementing a structured evaluation process; and (7) documenting the results of the Company's evaluation . He testified that the Company concluded a high level of formality (or RFP) was unnecessary given the Company's long-standing relationship with the relevant NUGs. Furthen-nore, he maintained that Dominion Virginia Power needed to acquire only a minimal amount of information from the N_UGs, that is, the term, price, and any material changes to contractual terms and conditions desired by each NUG. Ex. 67 and 67 ES, at 4-

Mr. Morgan explained that Dominion Virginia Power communicated the solicitation to the NUGs by individualized conference calls, followed by additional calls and emails . He testified that the relevant representations from the N_UGs did not express confusion regarding the terms of the solicitation . He also indicated that the NUG bids conformed to the Company's expectations . Ex. 67 and 67 ES, at 6-7 .

Mr . Morgan testified that Dominion Virginia Power's evaluation of the N_LJG extension offers showed that the offers did not compare favorably from an economic perspective to the Company's Preferred Plan . He also maintained that it was unnecessary for the Company to provide guidance to the NUGs relative to an appropriate length of time of an extension . Furthermore, he testified that no counter offers were made to the NUGs because the Company made it clear - orally and in writing - that it was seeking offers upon which a .final determination would be made. Ex. 67 and 67 ES, at 7-8 .

Mr. Morgan testified that Mr. Norwood used incorrect capacity figures that were based on average annual ratings rather than the summer rating when concluding that the Company could defer or displace the need for the Project by negotiating cost-effective NUG contract extensions . Furthermore, he testified that Dominion Virginia Power will continue to negotiate with N_UG providers in the future for new contracts and for the mod ification/extension for existing PPAs. He maintained that the Company will require additional resources in the future and anticipates that NUGs could be part of the resources used to meet such needs . Ex. 67 and 67 ES, at 8-10 .

At the hearing, Mr. Morgan disputed the suggest ' ion made by various participants that the

Company's NUG solicitation was not serious . He testified that the Company put a great deal of thought into the structure of the solicitation including the no counteroffer condition that, in his assessment, prompts participants to make their best offers up front . He maintained that the Company seriously considered all proposals that were made . He also indicated that he was present during the meeting with Doswell's representatives . He testified that the meeting lasted several hours and was producfive . In addition, he maintained th

' at options were discussed and guidance was

provided to Doswell during the meeting . By way of example, he testified that he encouraged Doswell to consider converting its PPA into a tolling agreement . Furthermore, he indicated that the Company intends to participate in the auction for the purchase of the Doswell facility . Mr. Kelly also opined that a broader solicitation would not have been effective given the state of the market (both within and outside of Virginia) . Tr . at 1242-125 1 .

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During cross-examination by P3, Mr. Morgan described the Company's process leading to the 2012 solicitation of the N_UGs. He indicated that his group first conducted a number of meetings relating to the scope of the solicitation, at which time the solicitation of suppliers not currently under contract was considered and the group subsequently recommended to Dominion Virginia Power's senior management that three specific NUGs (with PPAs scheduled to expire in the near future) be solicited . He testified that more meetings occurred after the scope was determined, at which time the actual structure of the solicitation was designed . Tr. at 1251-1256.

With respect to Staffs recommendation for the Company to employ a more fon-nalized/ better documented process when identifying potential bilateral opportunities (made in the case approving the Warren County facility, Case No. PUE-2011-00042), Mr. Wood noted that the Company did not engage in any solicitation associated with its consideration of the Warren County unit . He also agreed that the Company did not solicit NTJGs in 2012 as an either/or alternative to the Brunswick Plant. Moreover, he acknowledged that the Commission's order approving Dominion Virginia Power's 2011 IRP, wherein the Commission indicated that the consideration of market alternatives was appropriate in a CPCN proceeding, was not entered until October 5, 2012, after the N_UG solicitation was completed. Tr. 1256-126 1 .

Mr. Morgan acknowledged that it would not have been difficult for the Company to prepare and distribute a more formalized RFP associated with the NUG solicitation . However, he did not believe such a document was necessary given the Company's relationship with the NUGs . He indicated that Dominion Virginia Power would have prepared an RFP with more detailed instructions if the scope of the solicitation had been broader. Furthermore, Mr. Morgan did not interpret the concerns of Staff witness Abbott as being comparable to the concerns voiced by Cody Walker in the Warren County proceeding. In his assessment, Mr. Abbott appeared to be concerned regarding the lack of guidance claimed by Doswell witness Hanson - as contrasted with Mr. Walker's concern regarding the Company's failure to solicit any bilateral options . Tr . 1261-1265 .

When cross-examined by Doswell, Mr. Morgan agreed that there appeared to be a disagreement between the Company and Doswell regard

i ing the level of guidance that was provided

during the NUG solicitation . He also acknowledged that he did not reference the face-to-face meeting with Doswell when describing the solicitation process in his prefiled testimony. Tr. at 1266-1270 .

During cross-examination by the Committee, Mr. Morgan agreed that the Company previously had a formal bidding process associated with qualifying facilities ("QFs") and independent power producers ("IPPs") . He also recalled that, when following the fon-nalized bidding process, Dominion Virginia Power weighted price factors at 70% and nonprice factors at 30% (comparable to benefits of ownership) . He acknowledged that it would have been possible to list nonprice factors in an RFP if the Company had elected to issue a broader solicitation in the context of evaluating the Project . Tr . at 1271-1275 .

When questioned by Consumer Counsel, Mr. Morgan clarified that the scope of the NUG solicitation was decided by his superiors with his input . He indicated that he had more independent authority relative to the process of the solicitation . He also described his experience with RFPs while working for the Company in various different job§ . Furthermore, he agreed with Mr. Wood's

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characterization of the NUG solicitation process as being "formal," despite previously testifying in M his prefiled testimony that a formal solicitation process was unnecessary . He explained that he considered the NJJG solicitation to have been less formal than an RFP process . Tr . at 1275-1285 .

Mr. Morgan testified that the no-counteroffer/best price restriction adopted in the 2012 NUG solicitation was typical in Company solicitations (including RFPs) . He also differentiated the Company's no counteroffer restriction from the post-bidding negotiations that occur when defining the terms and conditions of a contract . Tr. at 1286-1291 .

During cross-examination by Staff, Mr. Morgan testified that the Company was aware of Mr. Walker's concerns about the consideration of bilateral contract options (expressed in testimony filed in November 201 1) before it initiated the NUG solicitation in March 2012. He also agreed that the Company was aware of the Commission's October 5, 2012, IRP order containing statements regarding the consideration of market alternafives when seeking a CPCN before it filed the Application . He confirmed that the Company believed it had adequately considered market alternatives when it filed the Application in November 2012 . He also believed Mr. Walker's concerns were similar to the Commission's comments in the October 5, 2012, IRP order. Tr . at 1291-1299 .

Mr. Thomas testified that he is responsible for f6recasting commodity prices and the Company's load . He also indicated that he is responsible for Dominion Virginia Power's DSM and integrated resource planning . He responded to the testimony that was provided by several parties and Staff relative to the Company's load forecast and capacity and reserve margins . In addition, he sponsored a rebuttal schedule (attached to his testimony) pertaining to the forecasted reserve margin in the DOM Zone. Ex. 70 and 70 ES, at 1-2 .

Mr . Thomas began his prefiled rebuttal testimony by supporting the Company's load forecasting methodology . He noted that only one witness has challenged Dominion Virginia Power's load forecast - Mr. Schlissel, a witness for the Environmental Respondents . 76 According to Mr. Thomas, Mr. Schlissel's criticisms are based on selective, historical data that should not be relied upon by the Commission. Similarly, he asserted that P3's witness Schnitzer was incorrect when he concluded that there is excess capacity in PJM. Ex . 70 and 70 ES, at 2-3 .

Mr . Thomas provided an overview of the Company's load forecasting methodology . Among other things, he explained that Dominion Virginia Power uses econometric models relating energy demand and usage to customer characteristics and economic valuables (under the assumption of normal weather patterns) to develop its load forecast . He also indicated that the Company has maintained and used the same modeling system for more than 20 years. He further testified that Staff agrees with the Company's load forecasting methodology that was also used in connection with the Company's 2012 IRP. Ex. 70 and 70 ES, at 3-4 .

Mr. Thomas testified that Mr. Schlissel inappropriately relied upon selective time periods -comparing 2006 (showing load at the end of a significant economic boom) to 2012 (showing load at a time wherein the economy has not yet normalized from a significant recession) - to support his

76 Mr . Thomas subsequently clarified that Mr . Schlissel did not appear to directly challenge the Company's load forecast . Ex. 70 and 70 ES, at 5 .

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conclusion that the Company's peak load has been relatively flat . In contrast, he indicated that the M Company's method for estimating future peak and energ . y requirements relies upon significantly longer periods of data . Mr. Thomas maintained that Mr. Schlissel's analysis fails to take into account year-to-year fluctuations or long-term growth estimates relative to Dominion Virginia Power's load . He also disputed Mr. Schlissel's conclusion that the ups and downs of the A Company's load growth have been "minor." Furthermore, he stated that Mr. Schlissel was incorrect in his assertion that the Company has not materially modified its long-term forecast to take into account recent load growth. Instead, Mr. Thomas testified that Dominion Virginia Power re-estimates the model's parameters annually using an additional year of data including the most recently completed historical year . Ex . 70 and 70 ES, at 5-8 .

According to Mr. Thomas, Mr. Schlissel relied upon recent industry articles and statements from utility professionals pertaining to regions other than the Company's service territory as support for his conclusion that peak and energy forecasts grow approximately I% a year. He testified that industry literature considering load in the Southeast contemplates higher load growth (approximately 1 .5% average annual growth from 2013-2021 ; approximately 1 .6% average annual growth from 2013-2017) in the DOM Zone. He noted further that Mr. Schlissel failed to specify whether his growth rate estimate was restricted (without including DSM resources) or unrestricted . Mr. Thomas testified that the failure to consider the difference between restricted and unrestricted loads would almost always result in the determination of a load forecast that is higher than actual loads . Ex . 70 and 70 ES, at 9-12 .

Mr. Thomas also disagreed with Mr. Schlissel's assertion that the sensitivities performed in connection with the Company's 2012 Preferred Plan - showing a variation in the growth rate of plus or minus 0.5% - contemplate only "minor" potential changes in the Dominion Virginia Power's load forecast . Mr. Thomas asserted that a 0.5% change in the growth rate creates a significant difference in the load forecast . Furthermore, he disputed Mr. Schlissel's assertion that PJM's forecast of the DOM Zone's load is too high . Ex . 70 and 70 ES, at 13-14 .

Mr. Thomas next discussed reserve margins . He noted that neither Staff nor Consumer Counsel appear to contest the Company's need for additional capacity to reliably serve peak demand beginning in 2016. Furthen-nore, he disputed the conclusion of P3's witness Schnitzer that PJM currently has significant excess capacity above its targeted reserve margin . Among other things, he testified that use of PJM's unrestricted forecast reserve for 2016 (that is, the load forecast that does not factor in demand resources) results in a reserve margin of 6.6%, which is 9% lower than PJM's target reserve margin of 15 .6% . According to Mr. Thomas, reliance upon demand resources, which, in his assessment, are relatively new and somewhat unproven, to meet a large share of PJM's resource needs adds a potential reliability risk to the Company's customers . He also discussed a study performed by PJM's market monitor and maintained that the results of this study call into question the overall reliability of demand resources . In addition, Mr. Thomas applied case sensitivities to the forecast calculations made by Mr. Schnitzer - excluding Dominion Virginia Power's planned builds beyond the Warren County plant, assuming that 1,600 MW of PJM's planned demand resources are not actually realized, and excluding First Energy's share (1,200 MW) of the Company's Bath County facility . He testified that the results of his sensitivity analysis show reserve margins will drop to below PJM's target of 15.66/o in 2016 and beyond if the Brunswick Plant is not completed . Ex . 70 and 70 ES, at 15-19 .

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Mr. Thomas also took issue with Mr. Schnitzer's! assessment of the Company's ability to purchase capacity from other regions within PJM. While acknowledging that the DOM Zone has not been constrained historically, Mr. Thomas indicated that the large number of expected coal unit retirements from 2015 to 2016 may lead to increased constraints and limited import capability within the DOM Zone. Moreover, although he did to not dispute Mr. Schnitzer's assertion that PJM recognizes the availability of internal resources in the DOM Zone, Mr. Thomas explained that PJM's conclusions regarding internal resources are based, in part, on the construction of the Brunswick Plant. Ex . 70 and 70 ES, at 19-21 .

Mr. Thomas agreed with the assertion of Staff wi tness Eichenlaub that forward traded markets have moved subsequent to the Company's completion of fuel and energy price forecasts used when filing the Application and when submitting its 2012 IRP. He indicated that Dominion Virginia Power was providing more current fuel market information relative to its forecasts through Company witness Scheller . Ex . 70 and 70 ES, at 21-22.

At the hearing, Mr. Thomas maintained that Mr. Schlissel inappropriately relied upon the Itron survey 77 (and, in particular, inforination in the survey relative to the Southern region of the United States) as support for the assertion that the Company's load forecast was too high . He noted that information in the survey pertaining to the Southern region included data from states that were hit much harder by the recession than Virginia . Similarly, he opined that Mr. Schlissel's criticism of PJM's load forecast (as also being too high) was misplaced . According to Mr. Thomas, PJM relies upon both long-term and short-term time frames when preparing its forecast - as contrasted with Mr. Schlissel who used only a short-term period to support his lower forecast of load growth . In addition, Mr. Thomas asserted that the PJM load forecast constitutes an independent analysis operating as a good "check" on the Company's data . Moreover, he maintained the Company is somewhat bound by PJM's load forecast given Dominion Virginia Power's capacity obligations within PJM. Tr . at 1340-1345 .

Mr . Thomas next addressed Mr. Schnitzer's calculation of a 3 1 % reserve margin in the DOM Zone. He maintained that Mr. Schnitzer overloaded the DOM Zone to reach this figure by including 100% of the Bath County facility even though part of it is dedicated elsewhere and by including capacity from facilities out of the zone . Furthermore, he asserted that Mr. Sch~itzer should not have included 100% of the demand response capacity bid into the PJM base residual auction or 100% of the potential builds included in the Company's IRP. Mr. Thomas agreed with Mr. Schnitzer's conclusion that the Company has the ability to import capacity from outside of the DOM Zone. However, he testified that the Company needs to be mindful of the DOM Zone's potential separation from the market if importsgrow too high prompting higher capacity prices . Mr . Thomas maintained that a report from PJM's TEAC Committee ("2011 TEAC Report") highlighted this potential danger. Tr . at 1345-1349 .

During cross-examination by the Environmental Respondents, Mr. Thomas acknowledged that the Company's load growth has been sluggish as the country has been coming out of the recession . Furthermore, he agreed that it is sometimes appropriate to rely upon weather-normalized data when analyzing demand . However, he maintained that Mr. Schlissel's reliance upon weather-normalized peak demand data for a short, six-year period was inappropriate . In addition, he

" See Ex . 18 .

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W 0 explained that his reference to data from an earlier six-year period in his prefiled testimony was not 0

intended to support the Company's load forecast but, instead, was included to demonstrate the Sj varying results that can be obtained within a load growth analysis when arbitrarily selecting short periods of data . Tr. at 1350-1356.

Mr. Thomas acknowledged that over the last four years the Company has revised forecasts for load and energy downward in part because the growth forecast data it has received from Global

78 Industries and Moody's has also been revised downward . Specifically, he indicated that Dominion Virginia Power reduced its load forecast by 1 700 MWs from 2008 to 2013, that is, by more than the capacity that would be provided by the Brunswick Plant. He acknowledged comparable reductions in the Company's energy forecasts, which, in part, have been based on the Company's actual sales and annual revisions to its econometric model. Mr. Thomas did not believe Dominion Virginia Power's overall forecasting model was flawed . Instead, he maintained that the information the Company has received from third-party, independent forecasters over the last several years - upon which the Company's forecasts are based - has been higher (or more optimistic) than what has actually occurred in the economy. Furthen-nore, Mr. Thomas believed that it is likely that the Company's Strategist model would continue to pick the Brunswick Plant as the preferred option for meeting the needs of Dominion Virginia Power's customers even if the Company were to reduce the load forecast and increase the potential for meeting capacity needs through market purchases . He reached this conclusion based upon the high heat rates of the Brunswick Plant. Tr. at 1356-1370.

When questioned by P3, Mr. Thomas confirmed that the 2011 TEAC Report concluded the DOM Zone would have separated from the market but for the addition of the Company's Warren County facility . He also agreed that 1300 MWs will be added to the DOM Zone through the Warren County facility . Tr. at 1370-1371 .

On redirect examination, Mr. Thomas distinguished the load forecast for the DOM Zone ftom the Company's overall requirements as a load serving entity . He noted that approximately 88% of Dominion Virginia Power's service obligations are within the DOM Zone . He also agreed that the Company will have a capacity gap of 4,000 MWs (to meet its reserve margin of I I%) without the Brunswick Plant . Furthermore, he maintained that the Company will continue to have a capacity gap over time even with the addition of the Brunswick Plant .79 Tr . at 1372-1375 .

Ms. Scheller testified that she is the head of ICPs modeling practice area and that she has extensive experience in assessing generation and wholesale power market issues . She responded to the testimony of Messrs . Schlissel and Schnitzer relative to the need for capacity additions in PJM, market price forecasts, the potential for reliance upon market futures contract pricing, and the financial implications of relying upon long-term contracting versus self-supply . She also maintained that the consideration of market forecasting and integrated resource planning is essential in this proceeding . Furthermore, she provided an overview of the types of services provided by ICF. Ex. 72 and 72 ES, at 1-6 .

78 See also Ex. 7 1 . 79 See also Ex. 14 and 14 ES, at 7 (Figure 2) .

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W Ms. Scheller first took issue with Mr . Schnitzer'q assertion that the need for capacity

identified by the Company is not a physical need . She testified that the need for new capacity in PJM over the next several years is supported by the following factors : (1) the forward outlook of unit retirements (precipitated by environmental requirements and low gas prices) ; (2) the uncertain construction of new facilities that have already cleared prior capacity market auctions ; (3) potential fatigue issues associated with demand resources ; and (4) potential demand growth . Furthermore, while acknowledging the uncertainty surrounding the various parameters that support the need for additional capacity, she indicated that the results of associated stress tests further support the necessity of for the Brunswick Plant . Specifically, she testified that Dominion Virginia Power has evaluated the Project under several potential market conditions and has ascertained that the Brunswick Plant provides value even under scenarios reflecting bearish market conditions . Ex. 72 and 72 ES, at 6-7 .

According to Ms. Scheller, ICF's independent forecasts support a need for new capacity in the PJM market area in order to maintain roughly a 15% reserve margin over the next few years . Similarly, she indicated that ICF's modeling supports th6 need for additional new generation in PJM and the DOM Zone by 2018 . She identified the primary drivers for new capacity in PJM as supply and demand . Furthermore, she explained how expected retirements and demand-side resources factored into her analysis including, among other things, reliability concerns associated with demand-side resources and the slow development of capacity resources throughout PJM. Ex . 72 and 72 ES, at 8-13 .

Ms. Scheller testified that Dominion Virginia Power employed a scenario and sensitivity analysis that is consistent with industry practice to evaluate the performance of the Brunswick Plant under a set of projected market conditions . She testified'that it is important to consider a range of market outlooks but also cautioned that the uncertainty of any individual forecast should be recognized . She disagreed with Mr. Schnitzer's recommendation for the use of several market forecast sources when assessing long-term uncertainty . According to Ms . Scheller, use of multiple forecast sources would fail to capture the range of risks facing Dominion Virginia Power's resource portfolio over the long-term . Ex . 72 and 72 ES, at 13-15 .

Ms . Scheller agreed, in part, with Mr. Schnitzer's conclusion regarding the use of forward/futures price series to forecast power and natura

' I gas prices . Specifically, she opined that

the limited use of futures price series is reasonable in the near term, provided the series has significantly liquidity.83 She testified that, where appropriate, the Company used forward pricing to supplement its long-term fundamentals-based forecasts . She also provided a comparison of long-term fundamentals forecasts and forward/futures markets noting, among other things, that futures pricing is tied to current spot market conditions and, as such, has limited predictive value . In contrast, Ms. Scheller maintained that fundamental s-based forecasts, which are based on principles of engineering and market operations, provide outlooks of the future market taking into account changing marketplace supply and demand conditions . Ex . 72 and 72 ES, at 15-18 .

In response to Mr. Schnitzer's suggestion that IC , F forecasts are too high because they

exceed the forecasts of the EIA, Ms. Scheller explained that ICF used the same "bottom-up"

go Ms . Scheller subsequently explained that there was no liquid series available for the period wherein the Brunswick Plant is expected to go online . Ex . 72 and 72 ES, at 18 .

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forecasting method as the EIA but relied upon different assumptions (relative to load growth, environmental regulations, and nuclear unit life expectancies) . She maintained that the differences between the forecasts of ICF and the EIA were not significant because both forecasts show a migration to more natural gas units and increasing prices over time . In addition, she asserted that the Brunswick Plant would perforrn similarly under an analysis using NYMEX future rices of gas

0 p

to the analysis that was performed using ICF's forecast . Ex. 72 and 72 ES, at 19-20 .

Ms. Scheller provided an overview of ICF's fundamentals-based modeling approach that was used by the Company when formulating its 2012 IRP and when preparing the Application for the Project . She disagreed with Mr. Schnitzer's assertion that the Company's estimate of the Project's capital costs appears high in comparison to PJM's estimated cost of new entry ("CONE") . She explained that the Brunswick Plant will use a 3x I configuration while most new entrants use a 2x I configuration . She also maintained that the 3x I configuration provides a cost savings of approximately 10-20% relative to the 2x I configuration on a per kW basis . Moreover, she explained that Dominion Virginia Power, as a regulated utility, has advantages when it comes to obtaining financing for the construction of a unit using the 3x 1 . Furthermore, Ms. Scheller supported ICF's forecast of capital costs as being aligned to the forecasts of other forecasters such as the EIA . Ex. 72 and 72 ES, at 21-27 .

Ms . Scheller defended ICF's capacity price forecasts and disputed Mr. Schnitzer's assertion that they are too high . She identified the factors that, inber opinion, are driving up capacity prices (uncertainty regarding the construction of future units, lack of market rule clarity, increasing CONE values, and increasing gas capacity resulting in higher clearing prices) . She also indicated that PJM's current outlook continues to support ICF's capacity forecast . In addition, she described the three market price scenarios/sensitivities that were provided to Dominion Virginia Power in connection with its evaluation of the Brunswick Plant (a high fuel price sensitivity case, a low fuel price sensitivity case, and a no carbon cost scenari 0).8 1 Ex. 72 and 72 ES, at 27-3 1 .

Ms. Scheller next summarized ICF's forecast of CO, allowance prices and timing . Among other things, she explained that ICF's base case incorporates the probable impact of carbon controls (in the nature of cap and trade) impacting the power sector by 2023 . She also testified that the delayed start date reflects the current lack of appetite in the political sector for carbon controls. Furthermore, she opined that Mr. Schlissel's CO, emission forecast is unreasonably high because it was developed without the application of any standard analytical method. In addition, she maintained that Mr. Schlissel relied upon outdated studies in his analysis . Ex . 72 and 72 ES, at 32-36 .

At the conclusion of her prefiled rebuttal testimony, Ms. Scheller disputed Mr. Schnitzer's conclusion that purchasing capacity provides lower risk for customers in terms of cost than constructing capacity . Among other things, she identified market risk, counterparty credit exposure, risk of default, and liquidity risk as factors that may lead to higher costs for customers associated with purchases of capacity . Furthermore, she testified that self-supply offers greater control and flexibility in a utility's development of its facilities . Finally, she maintained that long-terrn PPAs

81 Ms . Scheller later explained that the high fuel price, low fuel price, and no carbon cost sensitivities did not span the range of possible assumptions but, instead, focused upon key price drivers . Ex . 72 and 72 ES, at 36-37 .

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transfer financial risk from the seller to the buyer and ultimately to the customer . Ex . 72 and 72 ES, at 37-40 .

At the hearing, Ms. Scheller acknowledged that aspects of ICF's modeling system are proprietary and, as such, are not available to the public . However, she indicated that the formulation driving ICF's IPM model (including cost assumptions) is reviewed by participants in the industry, including academia, and is subject to peer review . She also disputed Mr. Schnitzer's assertion that the ICF market price forecast has not been corroborated by an increased number of suppliers "flocking" to the market . Ms. Scheller stated that the amount of gigawatts for active capacity currently in the PJM queue actually shows that developers are flocking to the market thereby believing that they are likely to eam good returns . Moreover, she maintained that the market evidence, including a report from PJM's independent market monitor, supports the need to reduce the amount of demand response included within the Company's forecast . Tr . at 1379-1388 .

During cross-exami nation by the Environmental Respondents, Ms. Scheller indicated that the Synapse Energy Economics Report discussed by Mr.. Schlissel in his testimony reported on several different CO, forecasts. She was unaware of the Company using any CO, forecast, other than ICF's forecast, in its analysis . Tr . at 1389-1391 .

Ms. Scheller testified that ICF provides renewable resources cost data to the Company when requested by Dominion Virginia Power and depending upon the Company's needs. She indicated that ICF updates its renewable cost data regularly, relying upon sources such as published studies and press releases . It was her understanding that the Brd,ttle Group report does not include cost data relative to renewable resources but, instead, provides cost information on CTs and combined-cycle facilities . Tr . at 1391-1394 .

When questioned by P3, Ms. Scheller indicated that approximately 30% of the project development included within the PJM queue has, historically, been developed . She agreed that ICF modeling is complicated and that there is a high amount of uncertainty involved in forecasting future market prices . She maintained that such uncertainty emphasizes the importance of sensitivities . Ms. Scheller also acknowledged that actual market prices could be very different than those included within the forecasts relied upon by the Company in this case . Furthermore, she agreed that actual market offers provide valuable inforrn

' ation but she maintained that those offers

should be supplemented by forecasts . In addition, Ms. Scheller believed the Company would have an advantage over other entities - with respect to costs per kW - when it came to the construction of a three-by-one facility versus a two-by-one facility . Tr . at 1395-1402 .

During cross-examination by the Committee, Ms . Scheller agreed that short-term market purchases potentially offer the benefit of flexibility to a utility . Furthermore, she testified that the cost risk associated with a PPA for new construction would typically be priced into the contract terms. She further indicated that there are benefits and detriments associated with PPAs and self-builds . With respect to self-builds, she agreed that revenue requirements are typically higher during the beginning of a facility's service life potentially leading to customer migration . In comparison, she acknowledged that PPAs may provide the benefit of more levelized costs . Moreover, she agreed that, over time, a generation portfolio benefits from consideration of multiple sources of generation including self-builds and potential market purchases . Tr . at 1406-1415 .

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Mr. McKinley addressed the concerns raised by various witnesses relative to the operation of the Brunswick Plant. He also explained the timing of the Company's contractual comirnitments and purchase of generators associated with the Project. Ex . 68 and 68 ES, at 1-2 .

Mr . McKinley noted that Consumer Counsel's witness Norwood and P3's witness Schnitzer expressed concerns regarding possible cost overruns related to the Project. He opined that cost overruns are unlikely given a number of factors. Among other things, he testified that (i) 81% of the Project's costs were already fixed when the Company entered into its agreement with Fluor, the EPC contractor ; (ii) the agreements with Fluor and for the purchase of the Brunswick Plant's turbines contain performance guarantees ; and (iii) the Company took into account actual experiences with the Bear Garden and VCHEC facilities when negotiating the terms of the EPC contract . Ex . 68 and 68 ES, at 2-4.

In response to Mr. Schnitzer's skepticism regarding the Company's ability to build a combined-cycle facility at a lower cost that other market participants, Mr. McKinley explained that Dominion Virginia Power took advantage of economies of scale to obtain a significantly lower cost per kW associated with the construction of 3xI unit (rather than employing 2xl combined-cycle technology) . He also testified that Dominion Virginia Power took advantage of favorable construction and equipment markets . Furthen-nore, he disagreed with Mr. Schnitzer's suggestion that it may be appropriate to defer the Brunswick Plant . According to Mr. McKinley, the Company is likely to lose the favorable contractual terms that it has obtained (relative to the EPC and turbines) if it delays the Project . Ex . 68 and 68 ES, at 4-6 .

With respect to the Company's forecast of O&M costs for the Brunswick Plant, Mr. McKinley testified that Consumer Counsel witness Norwood appeared to misinterpret certain values provided by the Company during discovery when concluding that Dominion Virginia Power may have under- estimated such costs . He explained that the Strategist model, used by the Company in forecasting costs, only labels a few types of costs as O&M expenses as compared to the sources relied upon by Mr. Norwood in his analysis . Furthermore, he maintained that the actual 2012 O&M costs for the Bear Garden facility support the reasonableness of Company's forecasted O&M expenses for the Brunswick Plant . Ex. 68 and 68 ES, at .6-7 .

Like Company witness Wood, and in response to concerns expressed by Doswell witness Hanson, Mr. McKinley noted that Dominion Virginia PO: wer did not execute the EPC contract with Fluor until after receiving and reviewing the NUG extension offers . In addition (and in response to concerns raised by Staff witness Abbott), he maintained that it was appropriate for the Company to enter into contracts relative to turbines for the Brunswick Plant before reaching a final decision regarding possible NUG extensions in order to secure favorable contractual terms . He also indicated that the gas turbine contract required no payment from Dominion Virginia Power and allows the Company to terminate the contract at any time for a predeten-nined percentage of the contractual value . Ex . 68 and 68 ES, at 7-9 .

At the hearing, Mr. McKinley continued to defend the Company's estimate of O&M costs associated with the Brunswick Plant . He maintained that Dominion Virginia Power's cost assessment falls within the range referenced by Mr. Norwood (depending upon the "buckets" into which various types of costs are placed) . He also noted that the estimated costs of the Brunswick

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Plant are approximately double the cost of Bear Garden- a unit that is about half the size of the M Brunswick Plant . Furthermore, he explained that all of the various "buckets" of estimated costs for the Brunswick Plant were used in the Company's Strategist modeling . Tr . at 1302-1304 .

When cross-examined by the Environmental Respondents, Mr. McKinley discussed the data -A relative to renewable resources that is included on the "green sheets" used in the Company's modeling process . He testified that the Company relies upon its own experience in the renewables market when developing such data and also consults with other utilities that have developed renewable facilities .82 He also indicated that his group compiles this data (generated by various divisions of the Company) and comes up with an "educated guess" as to the pricing of renewable resources . In addition, it is his understanding that the Company's internal data is compared to ICF assumption sheets and a Brattle Group report (with a focus on the Company's geographic region) . Furthermore, he indicated that the green sheet/renewable resources data is updated with each cycle of Dominion Virginia Power's IR.P . Tr. at 1304-1319 .

During cross-examination by P3, Mr. McKinley testified that both the EPC contract and the turbine supply agreement provide for penalties in the event of termination but do not include provisions relative to delay . He testified that the Company may attempt to renegotiate these contracts if the Commission were to decide that the Brunswick Plant should be deferred . He expected that the Company would be required to pay more for labor if the EPC contract were to be renegotiated given rising labor costs . Tr. at 1319-1323 .

When questioned by Consumer Counsel, Mr. McKinley confirmed that the Company continues to have the option of terminating the turbine supply agreement but that the penalty will continue to grow as more time passes . He also indicated that the Company could decide to take delivery of the turbines (for use in a subsequent project), in lieu of the penalty, even if the Brunswick Plant is not approved . Tr . at 1323-1326 .

On redirect examination, Mr. McKinley maintained, based upon the value of the projects that have been defined and are being developed, that there are 250 MWs of onshore wind available to the Company . Tr . at 1326-1327 .

Mr. Newcomb testified that he is responsible for evaluating Dominion Virginia Power's DSM programs . He responded to the testimony of Mr. Loiter, a witness for the Environmental Respondents, relating to the Company's assessment of the potential for energy efficiency . He also sponsored four rebuttal schedules . Ex . 73, at 1-2 .

Mr . Newcomb provided an overview of the criteria considered by Dominion Virginia Power including parameters established by the General Assembly and the Commission when deciding to include DSM programs in the Company's IRP. Furthermore, he maintained that Mr. Loiter failed to adequately consider the potential for upward pressure on average rates when he suggested that the Company underestimated available energy efficiency . Mr . Newcomb opined that the level of energy efficiency in the Company's 2012 IRP is appropriate . He also explained that Dominion Virginia Power has evaluated the market potential for DSM through a thorough, phased evaluation

82 Mr . McKinley subsequently acknowledged that Dominion Virginia Power does not have significant experience with large scale wind or solar projects . Tr . at 1317 .

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process . In addition, he testified that the Company employs a stakeholder review process for the consideration of additional DSM and remains amenable to the consideration of new stakeholder proposals . Ex . 73, at 2-1 1 . 40

Mr. Newcomb next addressed Mr. Loiter's proposed plan for the use of expanded efficiency as an alternative to the Brunswick Plant. He opined that Mr. Loiter's proposal for the addition of a generic portfolio of DSM programs based upon programs implemented in other jurisdictions to achieve an incremental reduction of approximately 1 .3% a year is unrealistic and fails to take into

84 consideration Virginia's relatively low electric rates or Virginia's cost-effectiveness requirements . He also maintained that Mr. Loiter's proposal lacks specificity . Furthermore, he asserted that the four year ramp-up process contemplated by Mr. Loiter is unlikely given the approval process required in Virginia . Ex . 73, at 12-18 .

At the hearing, Mr. Newcomb disputed Mr. Loiter's conclusion that the Company has not fully pursued all of its DSM options . He maintained that Dominion Virginia Power pursues all cost-effective DSM. He also provided an overview of the energy reductions that have been achieved by the CompanY85 and Dominion Virginia Power's energy reduction targets .86 Furthermore, he believed it unlikely that-the Company could reach higher energy reduction targets without negatively impacting the RIM scores of its DSM programs . Moreover, he maintained that the Company's status as a low-cost producer negatively, impacts the cost-effectiveness of various DSM programs . He did not believe the energy reductions that have been achieved in other states through DSM are particularly illustrative relative to what can be achieved by the Company; however, DSM programs need to be considered in the context of Dominion Virginia Power's actual avoided costs and unique attributes . Tr. at 1419-1434 .

During cross-examination by the Environmental Respondents, Mr. Newcomb explained that the Company is still attempting to reach its voluntary 10

. % energy reduction by 2022 through DSM

proposals to the Commission although he acknowledged that the Company has fallen behind in reaching its goal . He also suggested that the comparison of the energy reduction data shown on the 2012 ACEEE Score Card (attached to Mr. Loiter's testimony) 87 and the Company's energy reduction data shown on Exhibit 74 was an "apples to oranges" comparison given the varying parameters of the information . He testified that DSM programs often target specific subsets of a rate class or, in some instances, are geared toward a specific rate class . In addition, he agreed that, on a portfolio basis, an increase of DSM should decrease the number of non-participating customers . However, he explained that the Commission generally determines the cost-effectiveness of the Company's DSM proposals on a program-by-program basis rather than by portfolio . Tr. at 1435-1451 .

93 For similar reasons, Mr . Newcomb disagreed with Mr . Schlissel's conclusions relative to the use of energy efficiency as an alternative to the Brunswick Plant . See Ex . 73, at 13 . 84 Mr. Newcomb also described the "slightly relaxed TRC threshold" evaluation that was performed by the Company in connection with its 201 1 IRP . He testified that the inclusion of programs with a TRC score of 1 .0 or greater (reduced from the threshold of 2.0) increased the overall Utility Cost test score while significantly reducing the IUM score . According to Mr. Newcomb, this analysis showed that the addition of energy efficiency would have a detrimental effect on average rates . Ex. 73, at 15-16 . " See Ex . 74 . 16 See Ex . 75 . 87 See Ex . 19 (Loiter Exhibit 3) .

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Mr. Newcomb acknowledged that it may be helpful for the Company to consider the way that other states have implemented various DSM programs and to run such programs through the Company's operating system to test their cost-effectiveness . He also clarified that the Company tests the cost-effectiveness of DSM programs, under both the RIM and TRC tests, by comparing each DSM program to the supply-cost options within Dominion Virginia Power's overall supply -A portfolio . 88 He maintained that the Company will continue to have a significant capacity gap even if the Brunswick Plant is constructed and such gap could be filled, in part, by future DSM. Furthermore, Mr. Newcomb was not sure Mr. Loiter was correct when he suggested that it will be harder for future DSM programs to pass the RIM test if the Brunswick Plant is approved . He did, however, acknowledge that going forward no future DSM program will be able to achieve the capacity benefit of avoiding the Brunswick Plant . Tr . at 1451-1460 .

Mr. Newcomb testified that the Company has relied on ICF's assessment of potential DSM as its only source for DSM alternatives over the last five years. He indicated that the most recent full report from lCF assessing DSM was prepared in 2009 . However, he also represented that the ICF updates its assessment annually . In addition, he denied that the Company has exhausted its identification of potential DSM in its service territory . Furthermore, he confirmed that no generic blocks of DSM were considered in the Company's Strategist modeling of optimal supply resources . Mr . Newcomb also opined that it would be difficult to implement sufficient DSM programs - each of which pass the RIM test - to achieve energy reductions of 15% by 2022 . Moreover, although he acknowledged that there are DSM programs addressing peak demand for both winter and summer peaking utilities, he maintained that a utility's unique characteristics (including whether it is winter or summer peaking) have an impact on the energy efficiency that is achievable by the utility . He also suggested that a state's mandatory energy standard may have an impact on the manner in which cost-effectiveness is measured within the state . Finally, he agreed that states having highper capita energy usage have greater potential for energy reductions than states having lower per capita usage . Tr . at 1460-1495 .

Ms. Fisher testified that her responsibilities include identifying appropriate routes for transmission lines and obtaining necessary governmental permits for those facilities . She indicated that she was adopting the prefiled direct testimony of Company witness Schultis . Ex . 69, at 1 .

Ms . Fisher testified that the Company agrees with the findings and conclusions of Staff relative to the transmission components of the Project . She also represented that Dominion Virginia Power does not oppose the summary of recommendations included in the Report filed by DEQ with the Commission on February 1, 2013 ("DEQ Report") except for the recommendation of the Virginia Department of Forestry ("DOF") regarding the mitigation of impacts to forestland . She maintained that the mitigation recommended by DOF - which is not accompanied by a recommended spending cap - will add to the costs of the Project that will ultimately be borne by

so At a later point in his testimony, Mr . Newcomb testified that he did not know if it would be possible for the Company to design a portfolio of DSM programs that could defer the need for the Brunswick Plant and have a lower overall revenue requirement than the Brunswick Plant . Tr . at 1497-1498 .

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ratepayers . She also indicated that the Commission recently rejected a similar recommendation by DOF in another transmission line proceeding." Ex. 69, at 2-4 .

If, however, the Commission determines that the approval of the Project should be conditioned upon the mitigation of forest land, Ms. Fisher recommended that a cap on mitigation costs should be established . She also provided a mitigation-cost estimate (based upon prior transmission line approvals) and, based upon such estimate, testified that the cost cap on any coordinated mitigation with DOF should not exceed $340,996 for the proposed transmission line routes included in the Project . Ex. 69, at 4-7 .

Mr. Wilkinson testified that the Company agrees vAth Staffs recommendation for the treatment of indirect overhead costs in this case and the associated reduction to the Rider BW revenue requirement for the 2013 rate year by $1 .12 million . He also represented that the Company would detennine the impact on its revenue requirement should the Commission agree with Staff s legal conclusion that an enhanced ROE does not apply to the Brunswick Plant's "infrastructure." Finally, Mr. Wilkinson supported the recommendation of Staff witness Abbott that any change to the Company's revenue requirement be accompanied by a proportional adjustment to Rider BW. Ex. 79, at 3-5 .

At the hearing, Mr. Wilkinson indicated that a 100 basis point change in the Company's ROE (for the first full year of the Brunswick Plant's operation in 2017) would produce a $9 million change in the revenue requirement . He indicated that a 5% change in the equity component of the Company's capital structure (for the same year) would result in a $6.9 billion change in the revenue requirement . Tr . at 1503-1507 .

DISCUSSION

The Company's Requestfor the Approval of the Project

Section 56-580 D of the Code states as follows :

The Commission shall permit the construction and operation of electrical generating facilities in Virginia upon a finding that such generating facility and associated facilities (i) will have no material adverse effect upon reliability of electric service provided by any regulated public utility, (ii) are required by the public convenience and necessity, if a petition for such pen-nit is filed after July 1, 2007, and if they are to be constructed and operated by any regulated utility whose rates are regulated pursuant to § 56-585. 1, and (iii) are not otherwise contrary to the public interest .

89 See Application of Virginia Electric and Power Company, For a certificate ofpublic convenience and necessity in King George County: Dah1gren 230 kV Double Circuit Transmission Line and 230-34.5 kV Dah1gren Substation, Case No . PUE-2011-00113 (Final Order, Oct. 4, 2012), at 11 .

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W Section 56-46.1 A of the Code states in part as f6flows:

Whenever the Commission is required to approve the construction of any electrical utility facility, it shall give consideration to the effect of that C facility on the environment and establish such conditions as may be desirable or necessary to minimize adverse environmental impact . . . . In every proceeding under this subsection, the Commission shall receive and give consideration to afl reports that relate to the proposed facility by state agencies concerned with environmental protection ; and if requested by any county or municipality in which the facility is proposed to be built, to local comprehensive plans that have been adopted pursuant to Article 3 (§ 15 .2- 2223 et seq.) of Chapter 22 of Title 15.2 . Additionally, the Commission (a) shall consider the effect of the proposed facility on economic development within the Commonwealth, including but not limited to ftirtherance of the economic and job creation objectives of the Commonwealth Energy Policy set forth in §§ 67-101 and 67-102, and (b) shall consider any improvements in service reliability that may result from the construction of such facility .

Specifically relating to generating facilities, § 56-580 D directs that "the Commission shall give consideration to the effect of the facility and associated facilities on the environment and establish such conditions as may be desirable or necessary to minimize adverse environmental impact as provided in § 56-46.1 . . . . . . .

Sections 56-46.1 and 56-580 D of the Code also,contain identical language limiting the Commission's authority, both stating as follows :

In order to avoid duplication of governmental activities, any valid permit or approval required for an electric generating plant and associated facilities issued or granted by a federal, state or local governmental entity charged by law with responsibility for issuing permits or approvals regulating environmental impact and mitigation of adverse environmental impact or for other specific public interest issues such as building codes, transportation plans, and public safety, whether such permit or approval is . . . prior to or after the Commission's decision, shall be deemed to satisfy the requirements of this section with respect to all matters'that (i) are governed by permit or approval or (ii) are within the authority of, and were considered by, the governmental entity in issuing such permit or approval, and the Commission shall impose no additional conditions with respect to such matters .

Furthen-nore, with respect to each transmission line included in the Project, § 56-46 .1 B of the Code provides that "[a]s a condition to approval the'Commission shall determine that the line is needed and that the corridor or route the line is to follow will reasonably minimize adverse impact on the scenic assets, historic districts and environment of the area concerned ." This Code provision also directs that "[i]n making the determinations about need, corridor or route, and method of

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go and reliability needs presented to justify the new line an : d its proposed method of installation ."

Also with regard to the proposed route of a transmission line, § 56-46 .1 C of the Code requires "the public service company" to "provide adequate evidence that existing rights-of-way A cannot adequately serve the needs of the company." Similarly, § 56-259 C of the Code states that "(p]rior to acquiring any easement of right-of-way, public service corporations will consider the feasibility of locating such facilities on, over, or under existing easements of rights-of-way."

Finally, § 56-596 A of the Code states that "[fln all relevant proceedings pursuant to [the Virginia Electric Utility Regulation] Act, the Commissi 'on shall take into consideration, among other things, the goal of economic development in the Commonwealth ."

Public Convenience and Necessity

The Company's Capacity Gap

As a preliminary matter, I conclude that the Company has sufficiently established its need for additional capacity by 2016 . In reaching this conclusion, I find unpersuasive the Environmental Respondents' assertion that Dominion Virginia Power's, load forecast should be rejected as too high given the Company's past overstatements of demand.91 The Environmental Respondents' lower assessment of Dominion Virginia Power's future load is based upon data from a relatively short period of time - specifically, the last seven years wherein economic growth has been significantly hindered by the recession . 92 In contrast, the Company used a much longer period of actual data (20 years) together with historic and projected econometric data from independent industry experts when developing its load forecast. 93 1

I also recognize that the Company has employed the same load forecasting methodology for more than 20 years and that such methodology has been accepted in numerous regulatory proceedings before the Commission. 94 Dominion Virginia Power's load forecast is further supported by PJM's independent projection of needed additional capacity in the DOM Zone . 95

Moreover, Staff reviewed Dominion Virginia Power's assessment of its needed capacity and found the methodologies employed by the Company to build its forecasting models and prepare forecasts are generally sound and appropriate. 96 All of these factors lead me to conclude that Dominion Virginia Power's load forecasting methodology and its assessment of a capacity gap (growing from 582 MW in 2016 to 4,056 MW in 2027 if the Project is hot completed) 97 are reasonable and should be accepted by the Commission .

90 Section 5646.1 D of the Code also explains that . . . environment"or 'environmental' shall be deemed to include in meaning 'historic,' as well as a consideration of the probable effects of the [transmission] line on the health and safety of the persons in the area concerned." 91 See ER Brief at 12-16 . 92 See Ex . 17, at 8-11 . 9' Ex . 70, at 3 . 94 Id. 95 See Ex. 14 and 14 ES, at 4 ; Tr . at 1344 (Thomas) . 96 See Ex. 5 1, at 17-18 . See also Staff Brief at 5 . 97 See Ex. 14 and 14 ES, at 5-6 .

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Technology and Execulion Plans

The evidence reflects that the 3xI, combined-cycle facility proposed by the Company in the a Application would be highly efficient." Furthermore, given the current gas market and forecasted gas prices, Dominion Virginia Power's choice of a natural gas facility appears prudent. 99 In addition, no participant in this case has challenged the reasonableness of the Project's estimated capital costs exclusive of financing costs ($1 .27 billion) - approximately 81% of which are fixed as a result of agreements negotiated by the Company - or Dominion Virginia Power's choice EPC contractor . 100

For al I of these reasons, I find the Company's choice of technology, its estimation of capital costs associated with the Project, and its plans for the execution of the Project to be reasonable .

DSM and Renewable Resources

I am also not persuaded by the Environmental Respondents' assertion that increased DSM and renewable resources have the potential to defer or di

I splace the Company's need for the

additional capacity expected to be provided by the Brunswick Plant .

With respect to DSM, the Environmental Respondents suggest that the revenue requirement for an expanded efficiency plan (as described and analyzed by Messrs. Loiter and Schlissel) that would be sufficient to offset Dominion Virginia Power's forecasted demand would be lower than the revenue requirement for the Project and that the Utility Cost test should be ap of I ied when evaluating the potential of DSM as an alternative to a specific self-build option . 0 In reaching this conclusion, however, the Environmental Respondents essentially ignore the fact that the Company's DSM programs must be approved by the Commission in accordance with § 56-585 .1 A 5 of the Code and that the Commission's analysis of potential DSM programs is not governed, exclusively, by the Utility Cost test . To the contrary, the Commission has repeatedly indicated that the impact of a potential DSM program on the bills of non-participating customers is a relevant factor when determining whether a program is in the public interest-lu2 Moreover, § 56-576 of the Code requires that all four of the traditionally recognized cost-benefit tests - not just the Utility Cost test - be used to deten-nine whether a proposed DSM program is in the public interest and should be approved . 103

98 See, e.g., Ex . 5 1, at 13 ; Ex . 52, at 6. 99 See Ex. 5 1, at 13 . In this respect, I disagree with the Environmental Respondents' suggestion that approval of the Project would facilitate the Company's overreliance upon natural gas. See, e.g., ER Brief at 23 . In my assessment, the choice of natural gas as a fuel source is appropriate at this time given the relatively low forecasted cost . 100 See also Ex . 44 and 44 ES, at 9. 1 '0' ER Brief at 18-23, 25-30. The Environmental Respondents also assert that investment in DSM would mitigate the risks associated with the Project. Id. at 23-25 . 102 See, e.g., Application of Virginia Electric and Power Company, For approval to implement new demand-side management programs andfor approval of two updated rate adjustment clauses pursuant to § 56-585 . 1 A 5 of the Code o[ Virginia, Case No . PUE-2011-00093 (Final Order, Apr. 30, 2012), 2012 S.C.C . Ann. Rep. 298, 300. 1 3 See Section 56-576 of the Code (providing that the determination of whether a proposed efficiency program is in the public interest requires consideration of its cost-effectiveness - using the TRC test, the Utility Cost test, the Participant test, and the RIM test) .

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I find that Dominion Virginia Power appropriately considered the level of energy efficiency incorporated in its 2012 IRP104 when evaluating the need for the additional capacity and energy expected to be provided by the Brunswick Plant. Such consideration contemplated the future implementation of specific DSM programs that, in the Company's assessment, are likely to be approved by the Commission given statutory cost-benefit requirements and past Commission precedent as contrasted with the generic level of efficiency identified by the Environmental Respondents as being potentially achievable in Virginia~.

Similarly, I find that the Company adequately considered renewable alternatives to the Project . The evidence reflects that renewable resources are not yet cost-competitive with most traditional supply sources including the Brunswick Plani.105

Third-Party Alternatives

I also conclude, however, that the Company was required to establish, as one of the criteria for demonstrating the public necessity and convenience of the Brunswick Plant and for establishing that the Project is not contrary to the public interest, that, the Company adequately considered third-party alternatives to the Brunswick Plant. In my view, the Company's decision not to affirmatively explore actual, third-party alternatives to the Brunswick Plant - sufficient to meet its expected capacity deficiency - calls into question the necessity and prudence of the Brunswick Plant .

My conclusion in this regard is governed, in great part, by the Commission's recent analysis in the Company's 2011 IRP proceeding . In that case, the Commission considered the assertion -made by several participants - that the Company should . be required to evaluate actual market offers as potential alternatives to the self-build projects included within its IR.P rather than relying upon Strategist modeling as support for the reasonableness of its planning decisions .' 06 Although the Commission rejected this assertion, the Commission also distinguished the type of analysis required when reviewing a utility's proposed IRP from the type of evaluation that should be conducted when determining the necessity and prudence of a specific investment, stating in pertinent part :

We also believe that Dominion [Virginia, Power] should adequately consider third-party market alternatives as capacity resources . We do not conclude, however, that Dominion [Virginia Power] should be required to perform independent market tests as part of the IRP because, as noted by Consumer Counsel, 'the IRP is a planning document, and is not a commitment to pursue any particular investment .'[] Rather, we find that market alternatives are appropriate for consideration in cases where Dominion [Virginia Power] seeks a certificate of public convenience and necessity for specific investments .' 07

See Ex . 2 and 2 ES (Schedule 46 A, Statement 1) . See Ex . 14 and 14 ES, at 14-15 ; Tr. at 422-423 (Kelly) ; Tr . at 1506-1311 (McKinley) .

106 See Post-hearing briefs of EPSA and Consumer Counsel (filed Aug . 8, 2012) in Case No. PUE-2011-00092 . 107 Commonwealth of Virginia ex rel. State Corporation Commission, In re : Virginia Electric and Power Company's Integrated Resource Planfilingpursuant to Va. Code § 56-597 et s.eq., Case No . PUE-2011-00092 (Final Order, Oct . 5, 2012) (citation omitted), 2012 S.C.C . Ann . Rep. 296, 297 ("201 1 IRP Order").

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W Based on my reading of the 201 1 IRP Order, I conclude that the Commission expected the Company to fully investigate the possibility of actual third-party alternatives as part of its process of establishing that a particular self-build option is necessary and prudent . 108

The Company maintains that it reasonably considered and rejected as less beneficial to its customers third-party alternatives to the Brunswick Plant when it (1) updated its Strategist modeling (from modeling previously perfort-ned in connection with the IRP) for the comparison of forecasted market purchases, simple-cycle CTs, and coal retrofits at its Yorktown and Chesapeake facilities ; and (2) solicited and evaluated three NUG PPA extension offers in 2012 .109 Dominion Virginia Power's use of Strategist did not, however, compare actual third-party alternatives to the Company's proposed self-build option . Instead, Dominion Virginia Power employed in this case the same type of forecasting methodology found by the Commission to be sufficient for long-term planning but different than the type of analysis that should be conducted when seeking a CPCN.

As correctly noted by P3, most participants in tl~s case do not question the Company's use of Strategist modeling in connection with its Application ., 10 Instead, they challenge the forecasted assumptions that the Company used in the model. For example, various participants have asserted that the Brunswick Plant's cost estimates used in the Company's modeling were too low - thereby skewing the comparison of the Project's costs and the costs of potential market options."' The reasonableness of the Company's market price forecast has also been challenged . ' 12 If, however, Dominion Virginia Power had solicited actual third-party alternatives to the Project, the

'08 1 also find that the Commission's discussion of third-party alternatives in the 201 1 IRP Order is generally consistent with prior Commission precedent . See, e.g., Application of Virginia Electric and Power Company, For a certificate to construct and operate a generatingJacility for certificates ofpublic convenience and necessityfor a transmission line; Bear Garden Generating Station and Bear Garden-Bremo 230 k V Transmission Interconnection Line, Case No. PUE-2008-00014 (Final Order, Mar . 27, 2009), 2009 S.C .C . Ann . Rept 296 ("Bear Garden Final Order") ; Application of Virginia Electric and Power Company, Notification to the Commission of election to abandon the Company's bidding prograin and application to revise its cogeneration lariffpursuant to PURPA Section 2 /0, Case No. PUE-2008-00078 (Final Order, May 18, 2010), 20 10 S.C.C . Ann . Rep . 297 ("Bidding Rules Order") ; Application of Virginia Electric and Power Company, For approval and certification of the proposed Warren Counry Power Station electric generation and related transmissionfacilities under §§ 56-580 D, 56-265.2, and 56-46 / of the Code of Virginia andfor approval of a rate adjustment clause, designated as Rider W under § 56-58 1 . / A. 6 of the Code of Virginia, Case No. PUE-201 I -00042 (Final Order, Feb . 2, 2012), 2012 S.C .C . Ann . Rep . 263 ("Warren County Final Order") . I recognize that the Company did not provide evidence of its consideration of actual third-party alternatives when seeking and obtaining, a CPCN for its Warren County facility . See Warren County Final Order at 266 . However, in the Warren County case, no respondent directly challenged the Company's assessment of third-party alternatives to the generating facility . Furthermore, the Commission's approval of the Warren County facility predated its more expansive consideration in the 201 1 IRP Order of the distinction between the type of market forecast/proxy analysis that is appropriate for an IRP and the evaluation of third-party alternatives that should be conducted in a CPCN proceeding . 109 See Ex . 14 and 14 ES, at 18 ; Tr. at 633 (Kelly) . The Company also maintains that the reasonableness of its Strategist evaluation is supported by its backcast analysis of the Brunswick Plant. Company's Brief at 32 . However, I agree with P3's conclusion that Dominion Virginia Power's backcast analysis does not constitute evidence of the consideration of actual third-party alternatives to the Brunswick Plant . See P3's Brief at 40-4 1 . 1 10 See P3's Brief at 3 . . . . See, e.g., Committee's Brief at 13-14 ; Ex . 44 and 44 ES, at 21-23 . " , See P3's Brief at 5-40 .

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13 than forecasts . 1

Moreover, the evidence reflects that the 2012 N-LJG solicitation was not pursued as a potential alternative to the Brunswick Plant. To the contrary, the Company acknowledged that the decision to solicit the NUGs was made independently from its consideration of the Brunswick Plant. 114 fn addition, the extension of the three PPAs at issue in the NTJG solicitation (providing a total of approximately 1,000 MWs of capacity)' 15 would not have fully replaced the capacity expected to be provided by the Brunswick Plant as of 2016 ( 1,358 MWs of capacity) . At most, therefore, acceptance of the N_LJG extension offers had the potential to defer the need for the Brunswick Plant - not displace it . 116

Given the significant level of ratepayer investment required by the Project - and the Company's acknowledgement that there is no physical reliability need for additional capacity in the DOM Zone by 20161 17 _ I conclude that the Company should have engaged in a broader solicitation (seeking new capacity) to confirm that the Brunswick Plant is the preferable option for meeting Dominion Virginia Power's future demand .' 18 Dominion Virginia Power concedes that it would not have been difficult to conduct such a solicitation .' 19 Furthen-nore, if the Company is correct that a broader solicitation would not have produced a more favorable option than the Brunswick Plant (in terms of cost and other benefits), the results of the solicitation - unlike the Company's Strategist modeling - would have constituted actual, independent evidence showing that the Project is "required the public convenience and necessity" and is "not otherwise contrary to the public interest ."' 20

113 The lack of a viable offer in response to a broad and clear solicitation would also have constituted actual - as compared to forecasted - evidence relative to third-party options . I distinguish such a scenario from the facts of this case wherein the Company has announced its intention to pursue a specific self-build option . Furthermore, I disagree with Dominion Virginia Power's suggestion that the lack of an unsolicited offer for a more economical market alternative to the Brunswick Plant constitutes further support for the reasonableness of its decision to pursue the Project . See Company's Brief at 32 . 114 See Tr . at 1258-1259 (Morgan). See also Ex. 67, at 4 . 115 See Tr . at 385 (Wood) . 116 Having reached the conclusion that the 2012 NUG solicitation did not constitute the consideration of actual third-party alternatives to the Brunswick Plant, I make no finding relative to sufficiency of the process followed by the Company when conducting the solicitation . Various participants in this case have suggested that the 2012 NUG solicitation procedure was a proforina exercise or in some way flawed . See, e.g., Consumer Counsel's Brief at 10- 15 ; Doswell's Brief at 18 ; Committee's Brief at I 1- 1 2 ; Staff Brief at 5r6 . 117 See Tr. at 444445 (Kelly) . "8 1 do not, however, conclude that Dominion Virginia Power was necessarily required to conduct a formal, competitive RFP as a condition of obtaining a CPCN for the Project . See Bidding Rules Order at 299 (indicating that the Commission has not his'torically required competitive bidding as a condition for filing a CPCN). Instead, as suggested by Consumer Counsel's witness Norwood, a less formal (but nevertheless broad) invitation to third-party providers of capacity - wherein the Company clearly indicated that it was amenable to the consideration of alternatives to the Brunswick Plant - may have provided sufficient, actual market information to adequately evaluate the necessity and

F, rudence of the Project . See Tr. at 911-915 (Norwood) . 9 See Tr . at 1285 (Morgan). '

"0 See § 56-580 D (ii) and (iii) of the Code .

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W In sum, because the Company failed to demonsitiate the Brunswick Plant is more prudent

than third-party alternatives to the Project - the availability of which was not, in my view, adequately explored by Dominion Virginia Power - I recommend denial of the Application without prejudice. I further recommend that the Commission direct the Company to refile its Application if, IA after conducting an evaluation of actual third-party alternatives to the Project, the Company deten-nines that the Brunswick Plant represents the besto.ption for ratepayers .

Having made these recommendations, I also recognize that the Commission could reach a contrary conclusion regarding the adequacy of the Company's efforts to consider third-party alternatives . In particular, the Commission could conclude that the Company's consideration of actual market alternatives prior to filing the Application was unnecessary given the overall level of the Brunswick Plant's unique benefits (including energy savings, negotiated fix price contracts for construction and equipment, and access to natural gas) . Therefore, I address below the other statutory requirements relative to the Project and the reasonableness of the Company's proposed Rider BW.

Transmission Facilities,

If the Commission concludes that the Brunswick Plant is required for the public convenience and necessity, I recommend approval of the transmission facilities included in the Project . The need for the proposed transmission line is undisputed . I also conclude that the proposed routes of the lines are reasonable and will min'Imize adverse impacts . 122

Economic Development

In addition, I conclude that the Project, if approved, will generate significant economic benefits for Brunswick County . My conclusion in this regard is supported, in part, by the testimony of numerous public witnesses at the hearing . "' Similariy, I find that the Project, if approved, will provide economic benefits for the Commonwealth as a whole - provided that the Project is found to be the prudent, economic choice for addressing the Company's capacity needs. 124

Environmental Impact

The evidence reflects that the Project will comply with all applicable environmental regulations . 1 25 Furthermore, the Company does not oppose the summary of recommendations included in the DEQ Report submitted to the Commission on February 1, 2013, 126 except for the mitigation recommendation of the Virginia Department of Forestry ("DOF"). 127 Specifically, DOF

12 ' There is no evidence that approval of the Project would have a material adverse effect upon the reliability of electric service provided by Dominion Virginia Power . See § 56-580 D (i) of the Code . 122 See Ex . 48 (summarizing Staff's evaluation of the proposed transmission facilities) . 123 See, e.g., Tr . at 52-55 (Moore) ; Tr . at 119-122 (Burkett) ; Tr . at i23-125 (Pond) . 124 See Ex . 8, at I I (Chmura Economics and Analytics study showing that the Project will provide direct and indirect economic benefits to the Commonwealth of approximately $824 million - with about $451 million of those benefits being provided in Brunswick County) . See, also Ex . 5 1, at 17 . 121 See Ex . 3 . 126 See Ex . 49 . "' See Ex . 69, at 24.

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made the following recommendations to mitigate the loss of approximately 500 hundred acres of forested land (resulting from the transmission portion of the Project) :

" Dominion Virginia Power could reforest and protect open company lands within the Commonwealth of Virginia to create forestlandg .

" Dominion Virginia Power could work with DOF, forestry consultants, or another Virginia conservation agency or group to create a forest land conservation fund that would be used for various forestry practices . This would include tree planting (creation), management practices that improve forest productivity (restoration), and the development of conservation easements (preservation) . These practices could be within the impacted area or statewide and would ensure that the forested lands are managed and retained as forest lands in perpetuity.' 28

The Company maintains that DOF's mitigation recommendations which are not accompanied by a proposed spending cap, will add to the costs of the Project that will ultimately be borne by ratepayers . 129 Staff shares the Company's concern regarding impacts of DOF's recommendations on ratepayers . 130 Furthermore, Dominion Virginia Power maintains that the Commission recently rejected as inappropriate similar mitigation recommendations of DOF in its final order approving the construction of transmission facilities in King George County ("Dahigren Order"). 131

In my assessment, the DOF mitigation measures,, which expand the mitigation for this Project into funding for broader agency programs, are comparable to mitigation recommendations rejected by the Commission in the Dahlgren Order and are not "necessary to millimize adverse environmental impact of the Project" as contemplated by § 56-46.1 of the Code. Under the circumstances, I find that the Commission should not adopt DOF's recommendations on mitigation for clearing forested lands . In the alternative, I recommend that the Commission adopt the

132 Company's proposed cost cap of $340,996 for the implementation of mitigation measures .

The Company's Request of an Enhanced Return andfor the Approval of Rider BW

Applicable Statutory Provisions

Subsection A 6 provides in pertinent part :

To ensure a reliable and adequate supply of electricity, to meet the utility's projected native load obligations and to promote economic development, a utility may at any time, after the expiration or termination of capped rates, petition the Commission for approval of a rate adjustment clause for recovery on a timely and current basis from customers of the costs of . . . one

12' Ex . 49, at 29 . 129 See Ex. 69, at 2-4 . 130 See Ex . 48, at 16-17 . 131 See Application of Virginia Electric and Power Company, For 6 certificate ofpublic convenience and necessity in King George County : Dah1gren 230 k V Double Circuit Transmission Line and 230-34.5 kV Dah1gren Substation, Case No . PUE-2011-00113 (Final Order, Oct . 4, 2012), 2012 S.C.C . Anil . Rep . 319, 323 . "' See Ex . 69, at 5-6 .

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or more . . . generation facilities . . . . A utility that constructs any such facility shall have the right to recover the costs of the facility, as accrued against income, through its rates, including projected construction work in progress, and any associated [AFUDC], : lanning, development and p construction costs, life-cycle costs, and costs of infrastructure associated 4 therewith, plus, as an incentive to undertake such projects, an enhanced rate of return on common equity calculated as specified below. The costs of the facility, other than return on projected construction work in progress and [AFUDC], shall not be recovered prior to the date the facility begins commercial operation .

Subsection A 6 also contains specific requirements associated with the enhanced ROE, including the following :

Such enhanced rate of return on common equity shall be applied to [AFUDC] and to construction work in piogress during the construction phase of the facility and shall thereafter be applied to the entire facility during the first portion of the service life of the facility . . . . [T]he Commission shall determine the duration of the first portion of the service life of any facility, within the range specified [herein], which determination shall be consistent with the public interest and shall reflect the Commission's determinations regarding'how critical the facility may be in meeting the energy needs of the citizens :of the Commonwealth and the risks involved in the development of the facility . . . . [S]uch enhanced rate of return shall apVy only to the facility that is the~subject of such rate adjustment clause . 1 3

Period of Enhanced Return

As a preliminary matter, I address the Company I 's assertion that it should receive an

enhanced ROE (specifically, a 100 basis point adder) in connection with the Project for the first 15 years of the Brunswick Plant's service life . Dominion Virginia Power maintains that the Project's criticality and risks support an enhanced ROE at the midpoint of the range (10 to 20 years) provided in Subsection A 6 for combined-cycle facilities . 134 1 disagree .

Pursuant to Subsection A 6, the Commission is required to determine "consistent with the public interest" the first portion of a generating facility'

: s service life to which the enhanced ROE

will apply. Such a "public interest" determination requ ' ires the consideration of "how critical the

facility may be in meeting the energy needs of the citizens of the Commonwealth and the risks involved in the development of the facility.""'

133 Contrary to the assertion of Consumer Counsel, I do not find the General Assembly's 2013 amendments to Subsection A 6 to be relevant in this case . See Consumer Counsel's Brief at 6-7, 118-19 . 131 See Company's Brief at 69-72 . 135 See Subsection A 6 .

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In my view, the Company failed to demonstrate that the Brunswick Plant is "critical" for M meeting the energy needs of the Commonwealth . To the contrary, the Company has acknowledged that there is no physical reliability need for the Project by 2016 . 136 In addition, the evidence reflects that there are other alternatives available to Dominion Virginia Power for meeting its needs at a fixed cost . 137 1 also conclude that the potential risks of developing the Project are low given the statutory cost recovery mechanism provided in Subsection A 6, the Company's past experience with similar facilities, and the fixed cost contracts that the Company has entered into for the Brunswick Plant's construction and equipment . All of these factors lead me to conclude that the first portion of the Brunswick Plant's service life should be 10 years (the minimum period provided in Subsection A 6 for a combined-cycle facility) .

Enhanced Return on Transmission Infrastructure

As noted previously, Staff maintains that the enhanced ROE provided in Subsection A 6 does not apply to the costs of the Brunswick Plant's infrastructure (including the costs of the transmission facilities included in the ProjeCt).138 Among other things, Staff asserts that Subsection A 6 differentiates between "the costs of the facility" and "costs of infrastructure associated therewith." 139 Staff also maintains that Subsection A 6 limits the costs to which the enhanced ROE applies by providing that the "enhanced rate of return shall apply only to the facility that is the subject of such rate adjustment clause ." 140 Furthermore, Staff contends that its interpretation of Subsection A 6 so as to limit the application of the enhanced ROE to the Brunswick Plant (but not associated infrastructure) is consistent with the overall purpose of the statute which is geared toward ensuring the adequate supply of electricity. 141 Consumer Counsel and the Committee support Staff's position that the Company should not receive an enhanced ROE in connection with the Brunswick Plant's transmission infrastructure . 142

In contrast, the Company maintains that Subsec6on A 6 plainly contemplates Dominion Virginia Power's recovery of an enhanced ROE on all of the Project's costs including the costs of infrastructure required by the Brunswick Plant . 143 1 agree .

In my assessment, the enhanced ROE provided i ' n Subsection A 6 applies to all of a

qualifying generating facility's costs including the costs of infrastructure necessitated by the facility . Subsection A 6 states in pertinent part :

136 See, e.g, Tr . at 444-445 (Kelly) . "' See Ex . 52, at 17-18, 138 See Infrastructure Motion ; Reply (filed in support of Infrastructure Motion on April 18, 2013) ("Infrastructure Reply") . 139 See Infrastructure Motion at 4-5 ; Infrastructure Reply at 24 . 140 See Infrastructure Reply at 10-11 . 141 See Infrastructure Reply at 10-12 . 142 See Response to Motion for Ruling of Office of the Attorney General, Division of Consumer Counsel (filed April 4, 2013), Response of the Virginia Committee for Fair Utility Rates to the Motion for Ruling of the Staff of the State Corporation Commission (filed April 4, 2013) ("Committee Response") . The Committee also initially indicated that it may challenge the Company's recovery of transmission costs in a Subsection A 6 RAC . See Committee Response at 4-7 . However, the Committee subsequently clarified that it was not pursuing the transmission cost issue in this case . See Committee's Brief at 15 . 143 See Response of Virginia Electric and Power Company to State Corporation Commission Staff Motion for Ruling (filed April 4, 2013) at 6-14 ; Company's Brief at 72-77 .

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A utility that constructs any such facility'shall have the right to recover the costs of the facility, as accrued against income, through its rates, including projected construction work in progress, and any associated allowance for funds used during construction, plannin& development and construction costs, life-cycle costs, and costs of infrastructure associated therewith . . . . A

Unlike Staff, I interpret this provision as providing a list ' of the categories of a generating facility's

costs including infrastructure costs - all of which are recoverable through a Subsection A 6 RAC. Moreover, I conclude that the statute's overall purpose ~ to encourage the development of electricity supply - necessarily includes the goal of incentivizing the infrastructure required to facilitate the delivery of such supply.

Because I conclude that Subsection A 6 contemplates infrastructure costs as costs of a generating facility and because, in my view, the statute authorizes an enhanced ROE on all of a facility's costs, I recommend denial of the Staff s Infrastructure Motion .

The Company's Proposed Rider BW Revenue Requirement and Rate Design

Initially, the Company proposed a Rider BW revenue requirement of $ 44.605 million (for the September 1, 2013, through August 31, 2014, rate year). 144 The Company calculated this revenue requirement using an enhanced ROE of 11 .4%,'including the general 10 .4% ROE approved by the Commission in the Company's 201 1 Biennial Review Proceeding together with the statutory adder of 100 basis points . 145 Dominion Virginia Power .subsequently agreed - consistent with Staff's recommendation and several recent stipulations that have been accepted by the Commission in other rider proceedings - to reduce the revenue requirement for the 2013 rate year by $1 .12 million to address the impacts of the Company's new overhead allocation methodology . 146

I conclude that the Company's revised Rider BW revenue requirement of $ 43 .485 million -eliminating the financial impact of Dominion Virginia Power's new overhead cost allocation methodology - is reasonable and supported by the evidence . In reaching this conclusion, I recognize that StA the only participant in the case to provide testimony analyzing the revenue

117 requirement, does not oppose the Company's projected expenditures associated with the Project . I also find that the Company's proposal to change its methodology for allocating indirect overhead costs to generation capital projects should be deferred for consideration in Dominion Virginia Power's pending biennial review proceeding .

144 See Ex . 35 . 145 Id. 146 Company's Brief at 68-69 . See also Ex . 79, at 3-4 . 147 See Ex . 50 and 50 ES . Staff did, however, recommend the reduction of the Company's revenue requirement by $287,000 to eliminate the enhanced ROE associated with transmission infrastructure . See Ex . 50 and 50 ES, at 10. For the reasons explained above, I find this reduction to be inappropriate .

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Similarly, I conclude that Dominion Virginia Power's Rider BW rate design is reasonable 1 48 and should be accepted by the Commission if the Project is approved . As correctly noted by the

Compan ~9 ,

no participant in this case challenged Dominion Virginia Power's proposed rate design . " 9

In sum, should the Commission conclude that the Company sustained its burden of proving the Project's necessity and prudence, I recommend the Commission's approval of Dominion Virginia Power's Rider BW with a revenue requirement of $ 43,485,000- excluding the impacts of Dominion Virginia Power's new overhead cost allocation methodology but including the impacts of the enhanced ROE applicable to the Project's transmission infrastructure . I also conclude that the Company should receive an enhanced ROE for the first 10 years of the Br-unswick Plant's service life .

FINDINGS AND RECOMMENDATIONS

Based on the evidence received in this case and for the reasons set forth above, I find that :

I . The Company failed to adequately consider'third party market alternatives to the Project ;

2 . The Company failed to establish that the Project is required by the public convenience and necessity ;

The Company failed to establish that the Project is not contrary to the public interest ;

4. The request for a CPCN and for the approval of Rider BW should be denied ; and

5 . The Company should be directed to refile the Application if, after conducting an evaluation of actual third-party market alternatives to the Project, the Company determines that the Brunswick Plant is the best option for ratepayers.

Accordingly, I RECOMMEND the Commission enter an order :

ADOPTING the findings of this Report ;

2 . DENYING the Application without prejudice ; and

PASSING the papers herein to the file for ended causes .

COMMENTS

The parties are advised that pursuant to Commission Rule 5 VAC 5-20-120 C of the Commission's Rules of Practice and Procedure, any comments to this Report must be filed with the Clerk of the Commission in writing, in an original and fifteen copies, on or before July 3, 2013 .

"' See Ex . 36 . 149 Company's Brief at 68 .

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The mailing address to which any such filing must be sent is Document Control Center, P .O. Box 2118, Richmond, Virginia 23218 . Any party filing such comments shall attach a certificate to the foot of such document certifying that copies have been mailed or delivered to all counsel of record and any such party not represented by counsel .

Respectfully submitted,

A. Ann Berkebile Hearing Examiner

Document Control is requested to mail or deliver a copy of the above Report to all persons on the official Service List in this matter . The Service List is available from the Clerk of the State Corporation Commission, c/o Document Control Center, 1300 East Main Street, Tyler Building, First Floor, Richmond, VA 23219. 1

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