Dominion’s offer lower rates, but don’t review our profits business newsadvance.com gas in california

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Two types of power — electrical and political — are mixing with large amounts of money and strict federal regulations. The way Dominion Virginia Power generates electricity for its 2.4 million customers is changing, as the company shifts slowly away from coal and more toward natural gas or renewable sources.

The changes come as the U.S. Environmental Protection Agency seeks to cut dramatically carbon dioxide emissions from power plants in the next 15 years. That would force Dominion Virginia Power, other utilities and state regulators to consider how to meet those targets while keeping the lights on.

The change in rules also would affect Appalachian Power, which serves about 1 million customers in western Virginia. Appalachian Power would see a rate freeze until 2018. It was not originally part of the rate-freeze proposal, but Senate Bill 1349 was amended to include the utility.

In the Lynchburg area, Dominion Virginia Power serves about 10,000 customers, primarily in Appomattox and Campbell counties. Appalachian Power serves most of the rest, although Central Virginia Electric Cooperative and Southside Electric Cooperative have presences in the region.

Sen. Frank W. Wagner, the Virginia Beach Republican who sponsored of the bill, and Dominion Virginia Power said the rate freeze will give the company time to develop a plan to comply with the strict EPA rules. Dominion Virginia Power has said it may have to close five of its coal-fired power plants to comply with the rules.

Dominion Virginia Power also has agreed to speed up its fuel cost filings, which are expected to lead to a 5 percent reduction in a residential customer’s bill and a 10 percent decrease in bills for big industrial customers. Industrial customers get a bigger price break, because fuel is a bigger part of their bill than it is for residential customers.

Dominion Virginia Power doesn’t make any profit on fuel costs. Customers are getting a reduction in their bills because the costs of coal, oil and natural gas have been lower than expected and are projected to stay low in the next two years.

Virginia would be forced to reduce its emissions by about 38 percent, and its emissions target is lower than that of neighboring states. West Virginia and Kentucky, for example, would be producing more than twice as much carbon dioxide per megawatt hour of power, compared with Virginia.

“The Clean Power Plan will put in place a consistent national framework that builds on work states are already doing to reduce carbon pollution — especially through programs that encourage renewable energy or energy efficiency,” EPA spokeswoman Enesta Jones said in an email.

State Sen. A. Benton “Ben” Chafin Jr., R-Russell, has urged the attorney general’s office on several occasions in recent weeks to join the suit. But attorneys from the office have said they don’t believe the state should join the lawsuit when the final rules have not yet been released.

Dominion Resources Inc., the parent company of Dominion Virginia Power, gave $1.5 million to Virginia politicians in 2013 and 2014. About $700,000 went to Democrats and about $800,000 to Republicans, according to data compiled by the Virginia Public Access Project.

Norment owns $50,000 to $250,000 in Dominion Resources stock, as does Sen. Walter A. Stosch, R-Henrico. Both voted in favor of the bill when it was before the Senate’s Commerce and Labor Committee. Lt. Gov. Ralph S. Northam, a Democrat, reported owning $10,000 to $50,000 in stock.

The League of Conservation Voters raised just shy of $2 million and gave all but $10,000 to Democrats. McAuliffe’s campaign received $1.7 million; Northam’s campaign got $97,000; and Attorney General Mark Herring’s campaign received $111,000.

Power companies must be prepared to deliver a relatively stable amount of power on most days, while also standing ready to handle spikes in use — say on a very hot or very cold day, when customers are using lots of energy to cool or heat buildings.

At Dominion Virginia Power, the company’s nuclear power plants in Louisa County and Surry County provided about one-third of the electricity used by customers in 2013, even though those plants represent about 17 percent of the company’s capacity if all plants are operating at the same time.

The difference occurs because nuclear plants are extremely expensive to build but relatively cheap to operate. It’s most efficient to leave nuclear reactors and coal-fired power plants running all day, every day. Natural gas- or oil-fired plants are easier to turn on and off when demand grows or shrinks.

“We may buy power from the grid if it’s cheaper to use that power than turning on an expensive plant,” Dominion Virginia Power spokesman Dan Genest said. “So if we can buy generation for less than we can produce it, it saves our customers money.”

The company’s fleet of oil-powered plants is a good example of that practice. Those plants represent 11 percent of Dominion Virginia Power’s capacity but barely were used in 2013, when oil was expensive. Instead, the company purchased power from the wholesale market.

These two new natural gas-fired plants will replace coal-fired power stations in Chesapeake and Yorktown, with some new capacity to spare. The Chesapeake facility already has been retired, Genest said, and the Yorktown plant is slated to close this year.

It also calls for the company to build a third nuclear reactor at North Anna. The new reactor could produce 1,450 megawatts of power, about what one of the new natural gas-fired plants produces and slightly below the 1,890 megawatts generated by the two existing reactors at North Anna.

Company officials have told the state Senate in recent days that the earliest the new reactor could enter service would be 2028. The company doesn’t expect to have federal regulatory approval to build the new reactor until 2016 and at that point would make a final decision on whether to proceed with construction.

Dominion Virginia Power already has spent about $600 million preparing for the new reactor. Last year the General Assembly passed a law allowing the company to count that expense against its profits when state regulators determine if the company is earning too much money.

The company ultimately might adopt a strategy that mixes the two plans it submitted in 2014. New advances in energy efficiency might reduce demand, or faster-than-expected growth in the number of residential and industrial customers might mean future demand is higher than forecast.