Evidence in this case relevant to the factual question of prudency includes that listed below.
• Customers bear almost all of the risks of this Project.
• Customers bear the risk of potential cost overruns.
Customers bear the risk of a lack of Project performance.
• Other utilities involved in offshore wind have done so through a power purchase agreement ("PPA") model, which generally places all or some of the risk on the developer.
• The Company, however, proposes a construction model, which places essentially all the risk on Dominion's customers.
• The Company asserts that it may seek additional cost recovery from customers if the Project exceeds $300 million.
• Based on Dominion's prior CVOW risk assessments, the contingency amount built into the projected $300 million appears low.
• Dominion's "ratepayers bear almost all the risk of a project design failure except for a limited amount of risk retained by the EPC contractor during the limited warranty period."
• Dominion estimates that the capital cost of the CVOW Project is approximately $300 million, excluding financing costs.
• Dominion's customers will pay the costs of this Project.
• Dominion asserts that the annual and total revenue required from customers, and the impact on customers' bills, is not relevant to the Commission's prudency review in this case.
• The proposed Project is not the result of a competitive bidding process.
• The $300 million construction cost estimate for the Project is largely based on a negotiated contract with two EPC vendors without competing bids, after two previous attempts by the Company to obtain competitive EPC bids for the Project were unsuccessful.
• CVOW has by far the highest levelized cost of energy of new resources evaluated in Dominion's Integrated Resource Plan ("IRP").
• The forecasted levelized cost of energy from the CVOW Project is 78.00/kWh.
CVOW cost compared to other offshore wind
• CVOW's energy cost is 9.3 times greater than the average cost of the Vineyard Wind offshore wind project off the coast of Massachusetts, which is 8.40/kWh.
CVOW cost compared to other resource options
• CVOW's energy cost is 13.8 times greater than the cost of new solar facilities, which is 5.60/kWh.
• CVOW's energy cost is 8.3 times greater than the cost of new onshore wind facilities, which is 9.40/kWh
• CVOW's energy cost is 11.5 times greater than the cost of new 2x1 combined-cycle natural gas facilities, which is 6.8^/kWh.
• CVOW's energy cost is approximately 26 times greater than purchasing energy from the market, which is in the 3.00/kWh range.
CVOW cost uncertainty
• Dominion admits that it does not have detailed information on construction costs for other recent offshore wind projects to confirm the reasonableness of the CVOW Project cost
• The Company has not demonstrated the reasonableness of the estimated CVOW Operations and Maintenance ("O&M") costs by comparison to O&M costs of other similar projects
• The estimated O&M costs for the Project appear to be relatively high and are significantly higher than the Company's total all-in levelized cost for solar generation alternatives.
• Comparing the reported construction cost for the 30 MW Block Island Project (i.e., the only other commercial scale offshore wind project in the United States) to the estimated construction cost of the 12 MW CVOW Project raises questions regarding the reasonableness of the CVOW Project cost estimate that are difficult to answer.
• "|T|t is unusual for a regulator to make a prudence determination for a major generation investment before the investment is made by the utility, and without reliable information to confirm project cost and performance estimates."
• "This [(i.e., a pre-construction prudence proceeding)] is particularly true in instances involving generating projects, such as the CVOW, that are not selected through a competitive bidding process, and for which project cost and performance estimates are not guaranteed in some manner."
The Commission has considered the entire record. The Commission finds - as a purely factual matter based on this record - that the proposed CVOW Project would not be deemed
prudent as that term has been applied by this Commission in its long history of public utility regulation or under any common application of the term. The Commission further finds,
however, that as a matter of law the new statutes governing this case subordinate the factual analysis to the legislative intent and public policy clearly set forth in the statutes quoted above and, thus, the instant Petition should be - and is hereby - approved.