Dominion prepares for costs of EPA CO2 rule

OREANDA-NEWS. Dominion Resources' Virginia generation business will be shaped by state efforts designed to minimize cost impacts from the Environmental Protection Agency's (EPA) proposed greenhouse gas regulations, the company said.

Dominion's Virginia operations would be guided by an annual integrated resource plan to be submitted to the Virginia Corporation Commission charting the utility's compliance strategies for the EPA plan, which "will allow the continuing use of coal as an energy resource in our state," Dominion chief executive Thomas Farrell said during a quarterly earnings call yesterday.

"The [EPA] plan would impose some of the strictest CO2 emission standards in the eastern US on Virginia," Farrell said.

Compliance costs associated with the EPA plan could be \\$5-6bn, according to a commission report, with another \\$2bn in potential coal retirements, the company said.

Dominion plans to file its integrated resource plan with the commission on 1 July.

EPA's Clean Power Plan would require each state to meet a CO2 emissions rate target by 2030, with interim targets for 2020-29. EPA says it will allow a broad range of measures to meet the targets, including more renewables and energy efficiency. Under the proposal, Virginia would have to meet a 810lb CO2/MWh target by 2030, a 37.6pc reduction from its 2012 rate of 1,297lb/MWh.

The prospect of tighter limits on power sector emissions has given rise to a suite of legislative initiatives intended to help Dominion recover costs associated with the EPA standards, while it develops the resource plan, which will feature more renewable capacity, and declining coal-fired capacity.

Among the initiatives signed into law by Virginia governor Terry McAullife (D) includes a bill that effectively locks in Dominion's base rates through 2020. The new laws allow Dominion to recover costs associated with solar development, which will facilitate the company's plan to deploy 400MW of new solar by 2020.

The company will move forward with construction of its 1,200MW combined cycle natural gas plant in Greensville County, Virginia, for an estimated \\$1.3bn. The Greensville plant, expected to begin service in late 2018, could help the company compensate for as much as 3,500MW of coal retirements by 2030 because of the EPA regulations. The actual capacity needs and retirement numbers will depend on the on the nature of the EPA's final rule, expected to be released this summer.

"I am highly confident that we will need more generation construction in Virginia post-Greensville County as a result of the Clean Power Plan," Farrell said. "How much and what it will look like? We will have to see how the final rule comes out."