Virginia State Corporation Commission eFiling CASE Document Cover Sheet

Case Number (if already assigned) PUE-2011-00092

Case Name (if known) Application of Virginia Electric and Power Company In re : Virginia Electric and Power Company4s Integrated Resource Plan filing

Document Type EXBR

Document Description Summary Post-Hearing Brief of Environmental Respondents

Total Number of Pages

Submission ID

24

5851

eFiling Date Stamp 8/8/2012 4:32:04PM

J.A

10 SOUTHERN ENVIRONMENTAL LAW CENTER a cc

Telephone 434-977-4090 201 WEST MAIN STREET. SUITE 14 Facsimile 434-977-1483 0 CHARLOTTESVILLE, VA 22902-5065 0

4=1

August 8, 2012

VIA ELECTRONIC FILING

Mr. Joel H. Peck, Clerk c/o Document Control Center State Corporation Commission Tyler Building - First Floor 1300 East Main Street Richmond, Virginia 23219

RE: Virginia Electric and Power Company's Integrated Resource Plan filing pursuant to VA Code § 56-597 et seq.

Case No. PUE-2011-00092

Dear Mr. Peck :

Enclosed for filing in the above-captioned matter is the Post-Hearing Brief of Environmental Respondents.

This filing is being completed electronically, pursuant to the Commission's Electronic Document Filing system . If you should have any questions regarding this filing, please call me at (434) 977-4090 .

Sincerely,

~;&A<P_ Cale Jaffe Southern Environmental Law Center

cc : Parties on Service List Commission Staff

Charlottesville - Chapel Hill - Atlanta - Asheville - Birmingham - Charleston - Nashville - Richmond - Washington . DC

100% recycled paper

COMMONWEALTH OF VIRGINIA STATE CORPORATION COMMISSION

APPLICATION OF

VIRGINIA ELECTRIC AND POWER COMPANY Case No. PUE-2011-00092

In re : Virginia Electric and Power Company's Integrated Resource Plan filing pursuant to Va. Code § 56-597 et seq.

POST-HEARING BRIEF OF ENVIRONMENTAL RESPONDENTS

Pursuant to the Commission's directive at the close of the evidentiary hearing on

May 10, 2012 in the above-captioned docket, Appalachian Voices, Chesapeake Climate

Action Network, and the Virginia Chapter of the Sierra Club, (collectively,

"Environmental Respondents"), by counsel, submit this Post-Hearing Brief on Virginia

Electric and Power Company's ("Dominion" or the "Company") 2011 Integrated

Resource Plan ("IRP").

1. INTRODUCTION .

The primary objective of an IRP is to identify and select a mix of resources that

can reliably serve a utility's forecasted load at the lowest lifecycle cost over the planning

period . At the same time, it is well-established that an IRP "is based on a snapshot in

time." Final Order, In re : Virginia Elec. & Power Co.'s 2009 Integrated Resource Plan

filingpursuant to Va . Code § 56-597 et seq. ("2009 IRP Proceeding"), PUE-2009-00096,

at5(Aug.6,2010) . Thus, although the IRP process should lead to a long-term plan that

minimizes the total system cost of energy and ensures reliability, it is also an iterative

process in which the assumptions, methodologies, and analyses used to arrive at the plan

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are improved during each planning cycle.

Respectfully, Environmental Respondents maintain that the Commission, through

a Final Order on Dominion's 2011 IRP, should direct the Company to remedy failures in

its IRP that have been identified by multiple parties in this case . Because the IRP fails to

evaluate all resource options fairly, the Company should be directed to work with the

parties and other stakeholders through an enhanced, consensus-based stakeholder review

process ("SRP"), as recommended by Environmental Respondents' witness Jeffrey

Loiter . YAiile Environmental Respondents have appreciated the Company's willingness

to engage in the SRP in the past, a more robust process is needed . This process, in turn,

should lead to significant improvements in Dominion's 2013 IRP filing, which will

benefit the Company and ratepayers alike .

Although the interests represented by Environmental Respondents and other

respondents are diverse, in this case they animate a common theme: the Company's

process for developing the IRP improperly insulated certain choices from competition

with alternatives . All resources were not considered on a "level playing field." This fact

underlies Environmental Respondents' critique that demand side management ("DSM")

and renewable energy options were not evaluated fairly as compared to fossil fuel-fired

generation units. Similarly, the Electric Power Supply Association ("EPSA") and the

Virginia Committee for Fair Utility Rates ("VCFUR") have argued that market purchases

from non-utility generators, or NUGs, have not been considered on a level playing field

with self-build alternatives .

The Company selected six natural gas, combustion turbine generation stations

("CTs"), at 400 megawatts per plant (200 megawatts per unit), in 2020, 2021, 2023,

2024, 2025, and 2026. See IRP at 6; Tr . at 294, lines 10-24. The Company also includes

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two combined cycle natural gas plants ("CCs") in 2016 and 2019 . IRP at 6 . With the

exception of the 2016 CC, these natural gas plants appear in the Preferred Plan, despite

the fact that their locations have not been selected, pipeline capacity has not been

confirmed, and costs have not been delineated . 1 That is, these CTs and CCs are simply

(4generic" plants used as placeholders in the IRP. The Company, however, did not

evaluate a "generic" 400-megawatt DSM portfolio. The only new DSM resources

considered were programs that had already been developed for filing with the

Commission . Additional future DSM resources were not modeled at all from 2014-2026,

and DSM growth levels off after the first half of the planning period, in part due to low

market saturation assumptions.

With regard to the Company's Renewable Plan (Alternative Plan D), Dominion

considered meeting 20% of the Company's energy needs by 2020 through a massive

renewable bundle of offshore wind, onshore wind, and distributed solar generation . See

IRP at 92-93 . It did not, however, consider small blocks of renewable energy in the

Renewable Plan . Dominion also did not consider each of the renewable resources

separately from the bundle, and did not evaluate renewable resources being developed on

a different timeframe, from 2021 to 2026 . Instead, Renewable Plan D effectively set up a

straw man, "all-or-nothing" approach to renewable energy development.

These deficiencies notwithstanding, the 2011 IRP does represent a step forward

from the Company's 2009 submittal . Most notably, the Company improved its analysis

of environmental compliance costs affecting coal . These costs incorporate adverse

public health and environmental impacts attributed to coal-fired generation, which are

now being internalized through regulation . Company decisions to retire coal-fired units

' The CC slated for operation in 2016 appears to be sited for Brunswick County, Virginia . See Exhibit 12 .

at Yorktown and Chesapeake and to reject new coal-fired generation as a future resource

option can be traced to a more accurate assessment of these public health and

environmental compliance costs. Nevertheless, improvements are needed to meet the

statutory requirements of "reasonable" and "in the public interest." See Va. Code § 56-

599 E.

Accordingly, Environmental Respondents submit that the Commission's Order in

this docket should address the following concerns :

1) Require the Company, prior to filing its 2013 IRP, to evaluate and model

DSM resources throughout the entirety of the planning period through existing

and developed programs in the near term, and with the addition of generic

blocks of DSM in the middle and later years of the planning period, pursuant

to best IRP practices. Dominion should continue to grow its existing

programs (through increased market saturation) as well as develop new

programs .

2) Require the Company, prior to filing its 2013 IRP, to evaluate as part of the

Renewable Plan (Plan D) offshore wind, onshore wind, and solar energy

blocks, phased in throughout the entirety of the planning period of the IRP.

Specifically, the Commission should reject the Company's "all or nothing"

approach to developing a Renewable Plan alternative .

3) Adopt Mr. Loiter's recommendations for improving the SRP, which will help

ensure that all DSM and renewable options, along with market purchases, are

allowed to compete fairly against traditional, fossil-fuel resources in the 2013

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IRP . Mr. Loiter's approach outlines a path forward to correcting all of the

deficiencies identified by various parties.

H. INTEGRATED RESOURCE PLANNING IN VIRGINIA.

Current Virginia law on integrated resource planning was established in 2008.

See Va. Code § 56-597 et seq. Electric utilities first filed RPs under the new law in

2009 and must file updated plans "at least every two years thereafter." Va. Code § 56-

599 B, C. Dominion's 2011 IRP is the second filing required under Va. Code § 56-597

et seq. 2

An IRP is defiried as "a document developed by an electric utility that provides a

forecast of its load obligations and a plan to ineet those obligations by supply-side and

demand-side resources over the ensuing 15 years to prornote reasonable prices, reliable

service, energy independence, and environmental responsibility," Va. Code § 56-597 .

Utilities must evaluate investments in both demand- and supply-side resources, including

purchased and self-generated options. See Va. Code § 56-599 D; § 56-598 . An fRP

should contain a recommended plan to rneet forecasted demand in a reliable manner,

considering risk and cost of the resources and the Comrnonwealth Energy Policy . Va .

Code. § 56-598 .

The Comn-iission must deten-nine whether the IRP is "reasonable and is in the

public interest ." Va . Code § 56-599 E . The "reasonableness" inquiry has traditionally

required utilities to operate "under efficient and economical management." See Bluefield

2 The Commission's IRP Guidelines also require updates relating to "any significant event necessitating a major revision to the most recently filed W, including adjustments to the type and size of resources identified ." See Order Establishing Guidelinesfor Developing 1ritegrated Resource Plans, Attachment B, I E, PUE-2008-00099 (Dec . 23, 2008). Pursuant to this section, Dominion filed a copy of its 201 0 North Carolina IRP with this Commission in PUE-2010-00107 .

Water Works & Improvement Co. v. Public Serv. Comm'n of West Virginia, 262 U.S .

679, 693 (1923) . In the IRP context, the reasonableness inquiry encourages an open,

competitive analysis of various resource options, examining whether the recommended

plan provides adequate and reliable service at the lowest life cycle cost, which is

commonly referred to as "least cost planning ." For an IRP to be in the "public interest"

the plan must consider, in addition to cost, impacts to public health and the environment,

economic development, and other factors affecting the public interest . See, e.g., Va.

Code § 56-597 (defining an IRP as a document that, in part, establishes a plan to promote

"energy independence" and "environmental responsibility") .

The Conunission's IRP Guidelines provide further direction on developing IRPs

in accordance with Va. Code § 56-597 et seq. See Order Establishing Guidelinesfor

Developing Integrated Resource Plans, Attachment B ("Guidelines"), PUE-2008-00099

(Dec . 23, 2008). The Guidelines reflect the fundamental planning principle that all

resources must be evaluated against each other and should be considered on a "level

playing field." In this vein, the Guidelines direct all I" filings to include cost

information to "comparably evaluate various supply-side technologies and demand-side

programs and technologies on an equivalent basis." Guidelines, at T A. A utility's IRP

cannot insulate one resource from competition from other alternatives . Specifically, the

Guidelines direct utilities in their filings, to "[p]rovide detailed information on levelized

busbar costs, annual revenue requirements or equivalent methodology for various supply-

side options and demand-side options to permit comparison ofsuch resources on

equitablefooting." Id., at T F.7 (emphasis added) .

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A rigorous, comprehensive analysis of resource alternatives is essential to the IRP

process because an IR.P is the only opportunity afforded the Commission to look at all

potential resources at the same time . A Certificate of Public Convenience and Necessity

("CPCN") proceeding, by contrast, inherently focuses on only one option that has already

been selected by a utility. The IRP process examines the entire resource mix, including

resources from the supply- and demand-side of the energy picture, taking into account

"public interest" concerns identified by the General Assembly .

The IRP process can also be used to identify new initiatives and whether and how

they could fit into the existing resource mix. Indeed, recognizing the uniqueness of an

IRP, Staff Witness Walker testified that, with regard to potential changes to cost

allocation and rate design, ideas first identified through the IRP process can be

implemented later. See Tr . at . 455, lines 23-25 . ("[T]here needs to be a starting point, and

I believe that starting point could and should be in the IRP process . . .")

III. THE 2011 IRP CORRECTLY FINDS THAT CONTINUED OPERATION OF COAL-FIRED UNITS AT CHESAPEAKE AND YORKTOWN AND INVESTMENT IN NEW COAL GENERATION ARE INCOMPATIBLE WITH LEAST COST PLANNING.

Dominion's latest iteration of its IRP, while flawed, represents an improvement

over the Company's 2009 IRP with regards to the analysis of the costs of coal-fired

generation and resultant decisions to retire aging coal-fired units at Yorktown and

Chesapeake, and the rejection of new coal construction as a future resource option . The

impetus for these improvements can be traced, in part, to the Commission's Final Order

on the 2009 IRP, as explained below .

In its 2009 IRP, Dominion failed to adequately incorporate environmental

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compliance costs associated with its existing coal-fired generating units into its IRP

development process. The Company did not, for example, account for the risk of

continuing to operate existing coal plants in the face of forthcoming mercury regulations,

which have since been finalized . The IRP lacked analysis concerning the benefits, costs,

risks and uncertainties of continuing to operate its existing coal units, contrary to of the

IRP Guidelines, and assumed no large coal-fired unit retirements during the planning

period . See Guidelines, T 17 .2.(a)(viii) ("Major capital improvements, such as the addition

of scrubbers, shall be evaluated through the IRP analysis to assess whether such

improvements are cost justified when compared to other alternatives, including

retirement and replacement of such resources") .

Environmental Respondents raised these and other concerns in the proceeding on

the 2009 IRP, and requested that the Commission direct Dominion to make a compliance

filing to cure the deficiencies in its plan . See generally Corrected Testimony of William

Steinhurst, 2009 IRP Proceeding, PUE-2009-00096 (pre-filed April 1, 2010; admitted

into evidence June 8, 2010). Although the Commission did not order a compliance filing,

it did find that "the issues raised by the Environmental Respondents relating to . . .

proposed environmental control standards, such as, for example mercury, may have merit

and should be considered by the Company in itsfuture IRPs . . ." Final Order, 2009 IRP

Proceeding, PUE-2009-00096, at 6 (Aug . 6, 2010) (emphasis added) .

The 201 1 IRP, while far from perfect, contains a more accurate consideration of

the environmental compliance needs of the Company's existing coal-fired fleet. IRP at

20-2 1 . The IRP's discussion of pending ~and current environmental regulations suggests

that the Company acknowledges at least some of the costs and risks associated with

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continuing to operate traditional coal-fired generation . See HU at 2 1, Figure 3.1 .3 . 1 .

The IRP also briefly discusses the Company's analysis of the costs to retrofit, repower or

retire its older coal-fired units that have limited environmental controls . IRP at 8, 22 .

Moreover, unlike the 2009 plan, which assumed no retirements of large coal-fired

units, Dominion's 2011 analysis, which is based on environmental regulations and

market conditions, resulted in a planning decision to retire or retrofit all coal-fired units at

its Chesapeake and Yorktown plants . Id. at 22-23, AP-32; Tr . at 219, lines 13-25

(discussing the impact of public health and environmental regulations on coal-unit

retirements) . Of course, the analysis is not without error. For example, the IRP does not

examine a scenario where carbon costs would be higher than estimated in Extraordinarily

Sensitive Figure 4 .4.2 . IRP at 52, 53 ; see also Direct Testimony of Jeffrey Loiter

("Loiter Direct-) at 21-22 (pre-filed March 15, 2012; entered into evidence on May 9,

2012). Nevertheless, the planned retirements are well-justified and reflect an improved

planning process .

Dominion's IRP also reflects an improved understanding and consideration of the

risks and costs associated with new coal-fired generation . In the 2009 IRP, Dominion

included circulating fluidized bed ("CFB"), pulverized coal ("PC") and coal-fired

integrated-gasification combined cycle ("IGCC") among potential future resource options

in its busbar analysis . 2009 IRP at 5-5 . The 201 1 IRP, in contrast, includes improved

planning assumptions that acknowledge the likelihood of EPA regulation of carbon

dioxide following the Supreme Court's mandate in Massachusetts v. EPA, 549 U.S . 497

(2007) . The IRP, therefore, did not include CFB, PC or IGCC among its busbar resource

options. IRP at 66 . Specifically, the Company rejected as potential busbar resources new

coal generation options that could not meet EPA's proposed New Source Performance

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3 Standard ('NSPS") for Greenhouse Gases. Id. at 66, 69; Tr . Vol. at 554-55, 560 . The

IRP included as busbar resources coal-fired generation employing carbon capture and

sequestration ("CCS") technology, specifically PC and IGCC with CCS . IRP at 66 .

However, the Company's analysis shows that coal with CCS is not cost competitive. See

IRP at 68, Figure 5 .2 . 1 .

These improvements in the IRP are not just necessary to provide an adequate

analysis of the options before the Company; they are also needed to comport with the

Guidelines on "Comparative Cost of Options." See Guidelines, at T F.7 . That is, to allow

various options to compete against each other, all of the costs associated with any option

must be factored into the Strategist model . This is true whether comparing supply-side

versus demand-side options, self-build versus market purchases, or renewables versus

traditional fossil fuels. The improved consideration of environmental compliance costs

will lead to more accurate analyses, which are essential to least cost planning in all

resource evaluations conducted during the IRP process.

These improvements notwithstanding, the Company's 2011 IRP still suffers from

critical deficiencies . Moreover, the IRP overall fails to meet the Commission's

Guidelines and best practices for integrated resource planning . As explained in the

testimony of Jeffrey Loiter, a more robust stakeholder and IRP development process can

help remedy these defects . See Loiter Direct at 4-5; Tr . at 356-57 .

3 Ajust-released, peer-reviewed scientific study linking individual weather extremes to climate change raises the likelihood of additional greenhouse gas regulation and/or the establishment of a price on carbon dioxide in the future, and further justifies the Company's decision to exclude non-CCS coal from the list of potential busbar resources. See J. Hansen, M. Sato, R. Ruedy, Perception of Climate Change, PROCEEDINGS OF THE NATIONAL ACADEMY OF SCIENCES, at 6, available online at litti) ://www.pnas.orp,/content/earl~L/2012/07/30/1205276109 ("The increase ofthese extreme anomalies, by

more than an order of magnitude, implies that we can say with a high degree ofconfidence that events such

as the extreme summer heat in the Moscow region in 2010 and Texas in 2011 were a consequence ofglobal warming .") ; J . Hansen, "Climate change is here-and worse than we thought," Washington Post (Aug . 3,

2012) .

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IV . THE 2011 IRP REMAINS FLAWED IN IMPORTANT RESPECTS.

A. DSM is not Allowed to Compete Fairly Against Supply-Side Options.

A hallmark of a best practice IRP process is the competitive and fair evaluation of

resources, both on the supply- and demand-side of the energy picture, taking into account

public interest factors. See, e.g., Loiter Direct at 5 ; Guidelines, at T A; Va. Code § 56-

597 (highlighting "environmental responsibility" as one goal of integrated resource

planning) . Although the Company continues to develop its DSM resources, the 2011

IRP, like the inaugural plan filed under the new IRP law, does not adequately compare

DSM to supply-side resources or integrate them into the long-term resource mix. As a

result, the plan falls short on energy and capacity savings from DSM.

Indeed, in stark contrast to its treatment of natural gas-fired capacity, Dominion

did not model nor did it contemplate any additions to its DSM portfolio over the fifteen-

year planning period beyond programs implemented next year, in 2013 . Rather than

treating DSM as a flexible, dynamic resource that can respond to energy and capacity

needs by continuing to grow throughout the planning horizon, the Company limited the

role of this low-cost, low-risk resource in all alternative plans considered, including the

Preferred Plan . As such, the IRP does not let DSM compete with supply-side resources,

putting ratepayers at risk for bearing the cost of unnecessary supply-side additions .

1 . Energy efficiency and other DSM resources reduce the cost and risk of a utili!y's resource mix.

Energy efficiency is a least-cost resource that serves as an important hedge

against costly and risky traditional supply capacity . As the Company stated in its IRP,

"[d]emand-side resources encourage the more efficient use of existing resources and

delay or eliminate the need for new supply-side infrastructure." IRP at 25 ; Tr. at 238,

I I

lines 15-18 . Commission Staff witness Mark Carsley testified that the Company's DSM

programs "narrow" the Company's capacity and energy gaps, Tr . at 433, lines 1-4, which

is another way of saying that DSM resources offset the need for supply-side alternatives .

Energy efficiency narrows the capacity and energy gaps at low cost . As Mr.

Loiter explained, the levelized cost of energy efficiency is significantly lower than the

cost of marginal supply-side options. Loiter Direct at 7, 22; see also Tr. 342-43 and

Exhibit 16 (Utility cost per lifetime kWh saved, Massachusetts Program Administrators) .

Traditional supply-side resources, however, add up to billions of dollars in capital costs,

fuel costs, and significant ROE premiums . See, e.g ., Tr . at 172, lines 10- 1 4 (Dominion

witness Wood testifying that "these larger [CCs] cost a billion, a billion two, it's very

expensive up front capital. However, over their life the amount of fuel consumed even in

today's gas prices are four or five times that . . .") . Aggressive use of DSM resources can

reduce the amount of these expenses . Indeed, the DSM resources in the Preferred Plan

appear to have displaced gas-fired CC and CT units. See Tr. at 634-35 . Increased

investment in DSM resources could displace the need for some of the CC and CT units

built into the Company's Preferred Plan in the 2019-2026 timeframe, providing

additional generation, transmission, ftiel, and distribution savings. See Tr . at 520-22 .

2. Dominion did not even evaluate a plan to meet the Commonwealth's 10% savings goal .

The significant cost savings and other benefits associated with reducing the

electricity demand and consumption underscore the importance of Virginia's statewide

goal of reducing retail electric consumption through demand-side resources by ten

4 percent of 2006 consumption levels by 2022 . Dominion has called this goal

4 See Enactment Clause 3, Chapter 888, Va . Acts of Assembly (2007) .

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"realistically accomplishable" over 15 years, 5 and during the course of this and other

proceedings has maintained its commitment to reaching it . See, e.g., Tr . at . 260, lines 4-

9; Wood Rebuttal at 3 . Yet, Dominion remains far from achieving ten percent savings by

2022, and its 201 1 IRP, which covers the entirety of the goal period (i.e. through 2022)

plus four additional years to 2026, does not evaluate, let alone select, a plan for meeting

the ten-percent target .

Instead, Dominion projects achieving energy savings through its DSM programs

6 equivalent to only 64 percent of the target goal . Tr. at 260-6 1 ; Newcomb Rebuttal at 2 1 .

Moreover, Dominion's energy savings projections decrease significantly, to

approximately 24% of the target, or 2.4% of 2006 load, by 2026, if the planned voltage

conservation program is removed from the plan . See Loiter Direct at 25 .

These underachieving percentages do not just apply to Dominion's Preferred

Plan ; rather they represent DSM savings in every alternate plan Dominion considered in

its IRP. The reason for this is simple-Dominion did not vary the level of DSM in any of

the alternative plans considered in the IRP. See Tr. at 262, lines 15-19 (noting that all

four plans evaluated in the IRP assume "the same level" of DSM resources, which is not

projected to hit the ten-percent goal). It is troubling that Dominion would fail to even

evaluate an "Energy-Efficiency Alternative Plan" that meets or exceeds the 10% goal .

As shown below, the Company could have developed such an Alternative Plan as part of

its IRP by continuing to grow the efficiency resource over the course of the planning

5 Va . State Corp . Commission, Report : Study to Determine Achievable and Cost-effective Demand-side management Por~folios Administered by Generating Electric Utilities in the Commonwealth, at 10 (Nov . 15,2009) . 6 This amount likely will decrease in light of the rejection of two of the programs Dominion proposed in its second DSM application . Tr . at 261, lines 21-22 (Witness Newcomb testified that Dominion will "still be in that same range of 60 to 64 percent"); see also Tr . at 519 (Witness Wood testifying to a similar range) .

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period . The Company's failure in this regard should be remedied prior to the 2013 IRP

filing .

3 . The IRP contains no new DSM additions after 2013 and DSM impacts level off duriniz the first half of the planning period .

Dominion does not project that it will reach the 10 percent goal in large part

because of the way it models the DSM resource in its IRP. DSM, as contained in the

Preferred Plan and in all other Alternative Plans considered, consists of three buckets,

DSM-1, DSM-2 and DSM-3, which combine to provide roughly 940 megawatts of

capacity through the end of the planning period . Tr . at 239-40 . DSM-1 represents the

programs that were approved by the Commission during the proceeding on the

Company's first DSM filing7 ; DSM-2 represents programs that were proposed in

Dominion's second filing 8 ; and DSM-3 represents six future programs that Dominion has

developed with specificity, but has not yet submitted to the Commission for approval . Id.

The IRP does not assume any ftiture DSM programs beyond the six programs

identified as part of DSM-3. See Tr . at 252. Taking the three DSM buckets together,

Dominion assumes that no new programs will come online after 20139 and the load

impact of DSM (the capacity and energy savings) will level off in 2018 for the remainder

of the planning period . Tr . at 253-55, 266, lines 21-25; IRP at 76-77, AP-50.

7 Order, In re: Application of Virginia Elec. & Power Co . for approval to implement new demand-side management programs andfor approval of two rate adjustment clauses pursuant to §56-585.1 A 5 of the Virginia Code, PLTE-2009-00081 (March 24, 201 0) . 8 In its final order on Dominion's second DSM filing, the Commission approved four of the six proposed programs, subject to cost caps contained in the order. Order, In re : Application of Virginia Elec . &Power Co . 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 Virginia Code, PLJE-2011-00093 (April 30, 2012). 9 In the IRP, five of the six future programs are listed as beginning in 2013 . IRP at 76-77; Tr . at 253. The sixth program, the Voltage Conservation Program, began as a demonstration project in 2009 and the Company assumes that the program will be approved as a full program in 2013 . Id. at 253-54 .

14

The Company explained that it will look for additional programs and measures

during each planning cycle and the DSM resource may differ in the future from what is in

the current IRP. Tr. at 252, 255; see also Wood Rebuttal at 4 . While Environmental

Respondents encourage Dominion to continue to research and develop additional DSM

measures and programs, and are fully committed to working with the Company through

the SRP, the absence of continued growth of the DSM resource in the current plan

reflects critical deficiencies in the way Dominion treats demand-side resources .

The Company should have modeled the continued growth and improvement of

existing DSM resources and development of new DSM resources (e.g., DSM-4, DSM-5,

and DSM-6, etc.) throughout the planning period . This could have been done by

expanding and increasing penetration rates of existing programs, and incorporating

"generic" DSM blocks to represent future programs .

With regards to existing programs, the Company improperly assumes that its

program offerings will reach full market saturation after just five years, which for some

of the programs, means a total penetration of just one percent of eligible customers. See

Loiter Direct at 26 (citing Dominion's Reply Comments at 16, footnote 15); Tr . at 353,

lines 9-12 ("1 think it's fair to say that only reaching one percent of the customers with an

efficiency program is . . . aiming low.") . Dominion should model increased market

saturation from the existing programs that the Commission has already approved . Loiter

Direct at 27-28; see also Tr. at 352-53 . As Mr. Loiter testified, ten percent penetration

would be "quite reasonable" and would be "a dramatic difference in the size of the

resources that would be available" to meet the energy and capacity needs claimed in the

IRP. Id. at 3 5 3.

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Dominion should also account for ftiture DSM resources in its resource plan by

modeling generic DSM blocks to serve as placeholders . As Mr. Loiter explained, there

were "a number of ways" to model future DSM resources . See Tr. at 330, line 16 . There

are concrete options to build in savings from generic, placeholder DSM resources in the

middle and later years of the forecast, which should be discussed further in the

stakeholder process. See Tr . at 330. For example, Dominion "could make assumptions

about plans and portfolios of DSM that have been delivered successfully in . . .

neighboring jurisdictions ." Id. Moreover, a broader assessment of the energy efficiency

potential in Dominion's service territory, in addition to the narrower program

development process identified by the Company, could help Dominion grow the

efficiency resource throughout the entire planning horizon. See Exhibit 9 (noting the lack

of an energy efficiency potential assessment "other than the evaluation of the potential

DSM programs presented within the IRP document and at the stakeholder review

meetings") and Tr. at 248, lines 7-9 (Witness Newcomb confirming that there is no

potential study apart from the program development process) .

In sum, rather than flattening out, the DSM resource should continue to grow due

to increased market saturation from and improvements to existing programs throughout

the planning period and implementation of new DSM programs .

4 . Dominion's unequal treatment of DSM, as compared to traditional supply-side generation, results in a plan that undervalues this critical resource .

Dominion's Preferred Plan contains eight CC and CT resource additions . IRP at

100. One of these, the CC addition in 2016, has been identified as the Brunswick County

proposal . See Exhibit 12 . From 2019 through 2026, a new CC or CT comes online each

year with the exception of 2022, during which North Anna Unit 3 is scheduled to come

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online . IRP at 100. These seven remaining gas units are unidentified, generic units; as

Exhibit 12 illustrates, the Company has not allocated any money for these resource

additions, selected sites for the units, or confirmed pipeline capacity.

Dominion's practice of adding generic CC/CT placeholders in the out-years of the

plan stands in stark contrast to the way the Company models the DSM resource . As

described above, future demand-side resources are only modeled and incorporated into

the plan if they have been fully developed and are effectively ready for submittal to the

Commission for approval . There is no generic placeholder for DSM in the future .

Where, as here, one resource type is modeled only in final form and the other is

modeled as a generic placeholder, with no associated cost estimates, the playing field is

unlevel between the two. This is precisely what Dominion's IRP reflects-generic

supply-side resources are added in seven of the fimal eight years of the planning period,

while the future of DSM is limited to new programs in 2013, the second year in a 15-year

planning period . Put simply, DSM appears to be non-competitive with its supply-side

counterparts in the out-years of the planning period because Dominion fails to

"comparably evaluate various supply-side technologies and demand-side programs and

technologies on an equivalent basis ." Guidelines T A.

The Company asserts that a generic DSM placeholder is not proper because

"DSM Programs as a group has far too many variables. . . " Newcomb Rebuttal at 10; see

also Tr. Vol . 3, p. 619; Wood Rebuttal at 18 . Yet, significant variation and uncertainty

exists on the supply side, particularly in the later years of the IRP planning period . As

Mr. Wood testified, for a natural gas unit, for example, "the uncertainty grows over time"

regarding fuel costs. Tr. at 523, lines 22-24. Moreover, although the Company runs

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sensitivities and scenarios, "there's a very wide range of -- of potential outcomes." Id. at

524-25 . Indeed, the generic CT units have no specific sites, confirmed pipeline capacity,

or projected costs. W

Although some uncertainty or variation may exist regarding future demand-side

resources, there also is sufficient information about DSM to allow for a placeholder

similar to what the Company employs on the supply side . See Tr . 374 (Mr. Loiter

testifying that "there's sufficient data about efficiency programs to allow the Company to

say . . . within similar bound of uncertainty as these other types of resources [that] this is

what a DSM resource could look like at that time as well") .

Singling out the DSM resource as being too variable or uncertain-while ignoring

the uncertainties associated with traditional, fossil-fuel fired resources-results in an IRP

that fails to treat demand-side and supply-side resources on equal footing, leading to

misplaced and costly reliance on new and potentially unnecessary generation . As Mr.

Loiter explained, "all of these future options are subject to uncertainty . And I think

singling out the -- the DSM as being too uncertain to include is not equal treatment." Tr .

at 332, lines 2-5. Therefore, just as the Company accounts for uncertainty and models

future, generic resources on the supply side, Dominion should do the same on the demand

side, so the resources can be comparably evaluated on an equivalent basis.

B. Onshore Wind, Offshore Wind, and Solar Energy Resources Were Not Fairly Evaluated in the Company's Renewable Plan (Plan D).

As an alternative to its Preferred Plan, the Company evaluates a "Renewable

Plan" that would require meeting 20% of the Company's energy needs with renewable

resources by 2020 . See IRP, at 92-93 . This is an ambitious target that would see the

development of up to 3000 megawatts of offshore wind in eight years, at a time when the

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U.S . Department of Interior is still in the early stages of making offshore lease blocks

available. The Renewable Plan also assumes the construction of 248 megawatts of

"incremental onshore wind" and approval of the Company's 30 megawatt Community

Solar Power Program within the same timeframe . See IRP, at 93 .

No new renewable resources are considered as part of a "Renewable Plan" from

2021 to 2026, the last years of the planning period, and the plan fails to consider more

nuanced and varied renewable energy options throughout the entirety of the planning

period . As such, the Renewable Plan reflects more of a "straw man" approach to

renewables rather than a pragmatic, careful analysis of Virginia's renewable energy

resources .

With regard to offshore wind, Dominion has expressed its interest developing all

of the lease blocks made available by the Department of Interior . The Company

estimates that developing the entirety of this resource (the DOI lease blocks) could

provide between 1500 to 2000 megawatts of capacity "over a long, dated timeline." See

Tr. at 290, line 18 (cross examination of Robert G. Thomas). That is, the actual lease

blocks would provide only half to two-thirds of the amount of offshore wind that

Dominion considers in its Renewable Plan alternative. Even if Dominion developed one

hundred percent of the DOI lease blocks within eight years, the Company would still fall

far short of the offshore wind resources assumed as part of the Renewable Plan . The

Company did not consider any other offshore-wind resource alternative. See Tr . at 291,

lines 5-9.

Dominion's consideration of 248 megawatts of onshore wind is an achievable

target, but consideration of this resource should not be tied inextricably to the proposal to

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build 3000 megawatts of offshore wind and 30 megawatts of distributed solar generation .

Instead, the Company should evaluate onshore wind resources separately, throughout

each year of the planning period . The Company's Renewable Plan also includes a 30-

megawatt community solar program (pending before the Commission in PUE-201 I -

00117). See lRP at 93 ; Tr . at 280-81 . Missing from the Company's Renewable Plan,

however, are solar power purchase agreements from merchant power providers. As with

any new resource, solar energy is almost certain to benefit from small-business

innovators . The Company's IRP should take into account the possibility of such

innovation by modeling the purchase of small blocks of solar energy from non-utility

generators .10

In sum, rather than limiting the Renewable Plan to one, massive renewable energy

bundle (offshore wind, onshore wind, and solar, all combined), the Company should have

considered a more flexible array of possibilities : lesser amounts of offshore wind, blocks

of onshore wind, later development of renewable resources (between 2021 and 2026),

and power purchase agreements for renewable resources .

The Company defends its decision not to evaluate any Renewable Plans other

than the omnibus, 20%-by-2020 bundle, stating that the Strategist Model was free to

select individual renewable resources and that these resources were not selected "[m]ost

likely because of cost." See Tr . at 312, line 25 . This argument ignores, however, that

Virginia law requires a utility to consider other "public interest" factors outside of cost in

10 To the contrary, the Company's engagement with non-utility generators in the solar energy field has allegedly been to quash competition . See Order Dismissing Case, Petition ofSecure Futures, LLC, et al, PUE-2011-00107, at 1-2 (voluntarily dismissing the case on motion of the Petitioners after observing that "Petitioners contended that the subject controversy [had) arisen due to two 'cease and desist' letters Dominion Virginia Power sent to Secure Futures objecting to arrangements contemplated by a Solar Power Purchase Agreement").

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developing the IRP . Specifically, the Code states that an IRP should "promote

reasonable prices, reliable service, energy independence, and environmental

responsibility ." See Va. Code § 56-597 .

Renewable energy options, of course, are excellent resources for furthering the

goals of energy independence and environmental responsibility. As a result, the

Renewable Plan alternative should have included a more varied and nuanced approach

that considers how developing different renewable options, at different times and at

different capacity levels, can help further these goals . Dominion's "all-or-nothing"

approach is not a fair evaluation of a Renewable Plan and is therefore deficient .

V. CONCLUSION.

Ultimately, the IRP process is about letting resource options compete against each

other on a level playing field so as to determine the best plan to "promote reasonable

prices, reliable service, energy independence, and environmental responsibility ." See Va.

Code § 56-597 . Here, the Company's IRP process did not allow for the comparable

evaluation of all resources, whether supply-side versus demand-side (as discussed by

Environmental Respondents) or market purchases versus self build (as discussed by

EPSA and VCFUR) .

That said, the 201 1 IRP does represent an improvement over the Company's

initial filing in 2009. The analysis of environmental compliance costs affecting existing

and new coal-fired generation resources, while still flawed, does adhere to the

Commission's Order on the 2009 IRP and builds on feedback given to the Company

during the last stakeholder review process. Moreover, the totality of environmental costs

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affecting coal, including greenhouse gas regulation, is likely to increase dramatically over

time . See Hansen, et al., supra note 3 .

While Environmental Respondents acknowledge the Company's efforts in past

SRP meetings, changes are needed to correct deficiencies that have been identified . The

fRP, after all, is the product of an iterative process that should improve over time .

Accordingly, Environmental Respondents request that the Commission direct the

Company to work with stakeholders through an enhanced SRP, as detailed by Mr. Loiter.

Specifically, the enhanced SRP and the Company's 2013 IRP filing must :

(1) better evaluate DSM resources (modeling continued growth of DSM

through increased penetration of existing programs and implementation of

new programs) throughout the entirety of the planning period ; and

(2) consider a variety of Renewable Plan alternatives instead of just one straw

man, "all or nothing" approach .

Respectfully Submitted,

Caleb Jaffe (VSB #65581) Jill Tauber (admitted pro hac vice) Southern Environmental Law Center 201 West Main St ., Suite 14 Charlottesville, VA 22902-5065 Tel : (434) 977-4090 Fax (434) 977-1483

DATED: August 8, 2012

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CERTIFICATE OF SERVICE

I hereby certify that the following have been served with a true and accurate copy of the foregoing by electronic mail and deposit in U.S . mail, first class, postage prepaid:

Lisa S . Booth Robert F. Riley Dominion Resources Services, Inc. Williams Mullen Law Dept., Riverside 2 1666 K St NW Ste 1200 P.O . Box 26532 Washington, DC 20006 Richmond, VA 23261

Leeron Avnery Vishwa B. Link Williams Mullen Ashley B . Macko 200 S I Oth St Ste 1600 McGuireWoods LLP Richmond, VA 23219 One James Center 901 E Cary St Donald J . Sipe Richmond, VA 23219-4030 Todd J . Griset

Patrick R. Scanlon C. M. Browder, Jr. Preti, Flaherty, Beliveau & Pachios LLP Kiva B . Pierce 45 Memorial Circle Office of the Attorney General Augusta, ME 04332-1058 Division of Consumer Counsel 900 East Main St ., 2nd Fl . Irene A . Kowalczyk Richmond, VA 23219 MeadWestvaco Corporation

299 Park Ave, 13th FL Arlen K. Bolstad New York, NY 10 171 Bryan Stogdale Alisson 0. Pouille David J . Marshall State Corporation Commission LS Power Equity Advisors, LLC c/o Document Control Center 1700 Broadway Fl 35 P . 0 . Box 2118 NewYork,NY 10019 Richmond, VA 23218-2118

Kevin O'Donnell Louis R . Monacell Nova Energy Consultants Cliona M . Robb 1350 SE Maynard Rd Ste 101 Christian & Barton, LLP Cary, NC 27511 909 E Main St ., Suite 1200 Richmond, VA 23219-3095 Meade A. Spotts

M .F . Connell Mullins, Jr . Edward E. Bagnell, Jr. Spotts Fain PC P.O . Box 1555 Richmond, VA 23218-1555

DATED: August 8,2012

Cale Jaffe, Southern 'ironmental Law Center .,Plrl~v

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