PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON

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1 PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON At a session of the PUBLIC SERVICE COMMISSION OF WEST VIRGINIA in the City of Charleston on the 1 6th day of December CASE NO, E-P VIRGINIA ELECTRIC AND POWER COMPANY, dba DOMINION VIRGINIA POWER Petition for Ruling than an Electric Transmission Line In-Kind Replacement Project is Exempt from the Certificate Requirements of W.Va. Code $ a. COMMISSION ORDER The Commission determines that the project in question does not require a certificate of convenience and necessity. BACKGROUND On October 12,20 10, Virginia Electric and Power Company, dba Dominion Power (VEPCO) filed a petition for a ruling that an electric transmission line in-kind replacement project is exempt from the certificate requirements of W.Va. Code $ la. According to VEPCO (i) it is the owner of the Mt. Storm-Doubs 500kV electric transmission line that runs from the Mt. Storm electric generating facility in Grant County, West Virginia to a substation in Doubs, Maryland, (ii) the age and current condition of that line necessitates it be rebuilt, (iii) under W.Va. Code $ a(f), the requirement to obtain a certificate under the provisions of W.Va. Code $ a do not apply to a project that involves the construction of line facilities which will be a part of a transmission line for which any right-of-way has been acquired prior to January 1, 1973, and (iv) this project does not need a certificate because it is an ordinary extension of an existing system in the usual course of business and therefore is exempt pursuant to W.Va. Code 24-2-lla(a). VEPCO requested the Commission retain this case and issue a ruling as quickly as possible so construction on the rebuild can be accomplished by June 1, On November 24, 20 10, Commission Staff filed its Final Joint Staff Memorandum. Staff stated that the exception under W.Va. Code $ la(f) is not applicable to this project, citing the distinction between line facilities and transmission lines described by the Commission in Citizens for Responsible Wind Energy v. Nedpower Mount Storm, LLC, Case No E-C, (Commission Order August 23,2005). Staff argued that this project involves a transmission line and not simply transmission facilities and therefore the W.Va. Code $ a(f) exception does not apply. Public Semce Commission of West Vrgmia Charleston

2 Regarding the VEPCO argument that the project is exempt from the certificate requirements under $ a(a),as being an ordinary extension of an existing system in the usual course of business, Staff cited (i) Commission General Order No. 246 wherein the Commission declined to develop specific guidelines as to whether a certificate application is an ordinary extension of an existing system in the usual course of business, instead holding that such determination should be made on a case-by-case basis, and (ii) South Putnam Public Service District, Case No PSD-PC7 (Recommended Decision March 17,2004, Final Order April 6,2004) setting forth criteria for use in determining whether a project is an ordinary extension of an existing system in the usual course of business. Staff recommended the Commission (i) enter an order finding this project to be an ordinary extension of an existing system in the usual course of business and that a certificate of convenience and necessity is not necessary, (ii) enter such an order as soon as possible so VEPCO can start the necessary preparatory work that will allow construction of this project to start as soon as the TrAIL line goes into service in the spring of 201 1, and (iii) deny the request for a determination that W.Va. Code a(fj applies to this construction. On December 6, 2010, VEPCO filed a letter noting the Staff position and stating: However, the Staff did not agree that the Project is also exempt from the certificate requirement under the right-of-way exemption in W. VA. CODE lla(f) and recommends the Commission deny the Company s request for a determination that the Project qualifies for that exemption. Although the Company believes that the Project also qualifies for the right-of-way exemption under W. VA. CODE a(q, in the interest of expeditiously obtaining a final order from the Commission, the Company respectfully requests that the Commission issue a final order as soon as possible declaring that the Project does not need a certificate by reason of its being in the ordinary course of business under W. VA. CODE I 1 a(a) (provided, of course the Commission agrees on that exemption), without ruling on the right-of-way exemption under subsection (f). DISCUSSION W.Va. Code $ requires that entities constructing utility facilities obtain a certificate of public convenience and necessity. The Code exempts from this requirement ordinary extensions of existing systems in the usual course of business. In General Order 246, In the Mutter of Establishing Comprehensive Criteria or Rules for the Application of Section , West Virginia Code, for Utility Construction Projects, (Commission Order, February 24, 1993) the Commission, in deciding not to develop specific guidelines on when a certificate application should be filed, urged public utilities, on a case-by-case basis, to consult with Staff on whether a construction project that will provide service to the public requires a certificate. In Town of West Hamlin, Case No, W-PW (Commission Orders April 25,2005, and June 7, 2005), the Commission cited South Putnam Public Service District, Case No Public Sennce Commssion of West Vu-gmia Charleston 2

3 PWD-PC (Recommended Decision, March 17,2004; Final Order April 6,2004) and its criteria for determining whether a project is an ordinary extension: The Code provision does not define or elaborate as to what constitutes an ordinary extension of an existing system, although it has been construed to mean that construction activities which deal with the in-lund replacement of existing facilities are not subject to the certification process. Historically, Commission Staff has looked at various factors, any of which are subjective, in order to make a determination regarding the need for a certificate. These factors include, but are not limited to, the following: (a) the estimated cost of the project as compared with the annual revenues of the applicant; (b) the level of complexity (engineering or otherwise) of the proposed project; (c) the type of funding proposed for the project; (d) the factors driving the project; (e) the urgency of the project; (f) the experience and competency of the applicant s staff andor professional consultants; (g) the regulatory history of the applicant; and (h) the potential benefits and risks of the project. South Putnam, p. 4. These factors are not all inclusive and projects will be reviewed on a case-by-case basis. In some cases the Commission has determined projects to be an ordinary extension when the cost of a project is low compared to annual utilityrevenues, grant funds result in no rate impact, and engineering design was not required. See, e,g., Southwestern Water District, Case No PWD-PW (Commission Order, September 2 1,2004). The Commission has also denied a request that an extension be deemed an ordinary extension, however, when engineering concerns were present and funding was uncertain. Raleigh County Public Service District, Case No PWD-P (Commission Order, April 25,2003). According to VEPCO and Staff The estimated cost of the project is $350 million, but total company revenue for 2009 was $6.6 billion and total net plant was $15.8 billion. Thus, the $350 million cost of the project represents 5.3 percent of annual revenues and an expansion of net plant of 2.2 percent. This project constitutes an in-kind replacement of existing facilities. Further, the new towers will be slightly larger than the old structures, but the line will use the same right-of-way and access roads and no new property will need to be condemned, resulting in a manageable level of complexity. VEPCO will finance the project itself using internally generated funds. The project is designed to reinforce the existing transmission system, address the risk of a catastrophic tower collapse, and increase the capacity on the line. Charleston 3

4 (v) (vi) Degradation of the line over forty-four years of operation combined with the severe weather conditions in the area create an urgent need for the project to proceed. Additionally, capacity created by completion of the TrAIL project in the Spring of will create a window of opportunity to take the Mt. Storm- Doubs lines temporarily out of service with minimal impact on customers. The work will be performed by Dominion Technical Resources, Inc., an affiliate with extensive experience and technical expertise. Further, VEPCO recently used construction techniques proposed for this project to build portions of the TrAIL line in Virginia. For the reasons cited by VEPCO and Staff, the Commission concludes that this project constitutes an in-kind replacement of facilities and qualifies as an ordinary extensions of an existing system in the usual course of business. Thus, the project does not require a certificate of convenience and necessity. Because the Commission concludes that a certificate is not necessary based on the ordinary extension criteria, it is unnecessary to address whether this project also qualifies for an exemption under W.Va. Code la(f). FINDINGS OF FACT 1. VEPCO seeks a ruling that its proposed project does not require a certificate of convenience and necessity. 2. Staff agreed that a certificate is not necessary because the project qualifies as an ordinary extension of an existing system in the usual course of business. Staff recommended that the Commission deny the VEPCO request for a determination that W.Va. Code $ la(f) applies to this project. CONCLUSIONS OF LAW 1. The Commission concludes that the in-kind replacement of facilities proposed by VEPCO does not require a certificate of convenience and necessity because it is an ordinary extension of an existing system in the usual course of business. 2. It is not necessary to address whether this project also meets the criteria of W.Va. Code a(f). ORDER IT IS THEREFORE ORDERED that the project described in the October 12, 2010 VEPCO filing does not require a certificate of convenience and necessity. IT IS FURTHER ORDERED that on entry of this Order this case shall be removed from the Commission docket of open cases. Charleston 4

5 IT IS FURTHER ORDERED that the Executive Secretary of the Commission serve a copy of this Order by electronic service on all parties of record who have filed an e-service agreement, by United States First Class Mail on all parties of record who have not filed an e- service agreement, and on Staff by hand delivery. JJWIslc c.wpd Charleston 5