Dominion Power 2007 Annual Report Download - page 53

In April 2007, we filed an application with the Virginia
Commission requesting approval to add two 150 Mw natural
gas-fired electric generating units (Units 3 and 4) to our Lady-
smith power station (Ladysmith) to supply electricity during
periods of peak demand. The facility is expected to be in oper-
ation by August 2008, at an estimated cost of $135 million. The
Virginia Commission approved the application in August 2007,
and construction has commenced. In December 2007, we
received approval from the North Carolina Commission for a
related affiliate transaction.
In November 2007, we filed an application with the Virginia
Commission for approval to add a fifth combustion turbine (Unit
5) at Ladysmith at an estimated cost of $79 million.
In July 2007, we filed an application with the Virginia
Commission requesting approval to construct and operate a 585
Mw (nominal) carbon capture compatible, clean coal powered
electric generation facility (Virginia City Hybrid Energy Center)
to be located in Wise County, Virginia. We also requested appro-
val to continue to accrue an allowance for funds used during
construction until capped rates end and, beginning January 1,
2009, receive current recovery of financing costs including a
return on common equity of 11.75% together with a 200 basis
point enhancement through a rate adjustment clause. An eviden-
tiary hearing was held in February 2008. An application for a
permit to construct and operate the Virginia City Hybrid Energy
Center, in compliance with federal and state air pollution laws,
was filed in July 2006 with the Virginia Department of Environ-
mental Quality. Pending regulatory approval and necessary per-
mits, the facility is expected to be in operation by 2012 at an
estimated cost of approximately $1.8 billion.
Also in February 2008, we announced the proposed con-
version of our Bremo power station (Bremo) from coal to natural
gas as part of our plan to build the Virginia City Hybrid Energy
Center. The proposal is contingent upon the Virginia Hybrid
Energy Center entering service and receiving approvals from the
Virginia Commission and Virginia Department of Environmental
Quality. The proposed conversion project is part of our overall
effort to reduce air emissions. Subject to applicable regulatory
approvals, the conversion would occur within two years of the
Virginia City Hybrid Energy Center entering service.
We are considering the construction of a third nuclear unit
within the next twenty years at a site located at the North Anna
power station (North Anna) which we own along with Old
Dominion Electric Cooperative (ODEC). In November 2007,
the NRC issued an Early Site Permit (ESP) for a site located at
North Anna. Also in November 2007, we, along with ODEC
filed an application with the NRC for a Combined Construction
Permit and Operating License (COL), which would allow us to
build and operate a new nuclear unit at North Anna. In January
2008, the NRC accepted our application for the COL and
deemed it complete. We have a cooperative agreement with the
Department of Energy to share equally the cost of the COL. We
have not yet committed to building a new unit.
In December 2007, we announced an agreement to purchase
a power station development project in Buckingham County,
Virginia that will generate about 600 Mw. The project already has
air and water permits for a combined-cycle, natural gas-fired
power station; however such permits may need to be modified. In
addition, construction of the project is subject to approval by the
Virginia Commission, including approval under state regulations
relating to bidding for the purchase of electric capacity and energy
from other power suppliers, and the receipt of other environ-
mental permits. A gas pipeline will also be required to be con-
structed to provide gas supply to the power station. Pending a
closing under the purchase agreement and the receipt of regu-
latory approval, we plan to build a combined cycle unit with
operations expected to begin in summer 2011.
Wind Power Acquisition
In an effort to foster renewable generation development consistent
with our environmental strategy, in January 2008, we acquired a
50% interest in a joint venture with BP Alternative Energy Inc.
(BP) to develop a wind-turbine facility in Benton County,
Indiana. The facility is expected to be built in two phases and
generate a total of 750 Mw. We will jointly own 650 Mw with
BP and BP will retain sole ownership of 100 Mw. We have
committed to contribute approximately $340 million of cash at
various dates through January 2009, which includes our initial
investment and funding for the development of the first 300 Mw
phase. Construction of the second 350 Mw phase could begin as
early as 2009, with funding to be contributed to the joint venture
to maintain 50/50 ownership between the partners. Our ultimate
funding requirements may decrease to the extent that the joint
venture obtains non-recourse construction and term financing.
PJM Rate Design
In May 2005, FERC issued an order finding that PJM’s existing
transmission service rate design may not be just and reasonable,
and ordered an investigation and hearings into the matter. In
January 2008, FERC affirmed its earlier decision that the PJM
transmission rate design for existing facilities had not become
unjust and unreasonable. For recovery of costs of investments of
new PJM-planned transmission facilities that operate at or above
500 kV, FERC established a regional rate design where all
customers pay a uniform rate based on the costs of such invest-
ment. For recovery of costs of investment in new PJM-planned
transmission facilities that operate below 500kV, FERC affirmed
its earlier decision to allocate costs on a beneficiary pays approach.
A notice of appeal of this decision was filed in February 2008 at
the United States Court of Appeals for the Seventh Circuit. We
cannot predict the outcome of the appeal.
Ohio Rate Case
In August 2007, The East Ohio Gas Company (Dominion East
Ohio) filed an application to increase base rates. In this rate case,
Dominion East Ohio requests approval of an increase in operat-
ing revenues of over $73 million to provide a rate of return on
rate base of 8.72%. As part of its request, Dominion East Ohio is
proposing to install automated meter reading devices for all of its
1.2 million customers over a 5-year period and to spend up to an
additional $5.5 million per year over a three-year period on
demand side management programs if the Ohio Commission
approves a decoupling mechanism that would automatically
adjust base rates in order to maintain base rate revenues per cus-
tomer at the level approved in the rate case. In addition, Domin-
ion East Ohio is proposing to expand its gross receipts tax rider to
apply to all amounts billed for services, rather than just gas cost
recoveries, thereby excluding gross receipts tax from base rates.
Dominion 2007 Annual Report 51