Table 1: Dominion Net Generation iii

This case study on Dominion accompanies "White Paper: Financial Risks of Investments in Coal."

Dominion faces significant risks due to its reliance on coal.

Dominion Ranks 10th among U.S. electric utilities for power generated from coal.i The company owns and/or operates 11 utility generating coal plants and five merchant generating coal plants with a combined total generating capacity of 7,900 MW [Table 1].ii It operates in Virginia, North Carolina, Ohio, and West Virginia.

Most of Dominion's coal plants are over 40 years old [Table 2].

Table 2: Dominion Unit Age and Size iv

 

 

Dominion and its subsidiary, Virginia Power, estimate that they will make capital expenditures of approximately $2.4 billion and $2 billion respectively during the period 2011 through 2015 in order to bring facilities into compliance with Clean Air Act emissions limits.v Dominion has determined that the new 1–hour SO2 NAAQS will likely require significant future capital expenditures at its State Line, plant and, accordingly, recorded an impairment charge of $163 million on this facility in the second quarter of 2010.vi

Almost all of Dominion's SO2, Nox, and CO2 and all of its mercury emissions come from coal combustion [Table 3].

Table 3: Dominion Emissions from Coal

Under Virginia regulations, companies emitting more than 900 pounds of mercury in 1999, such as Dominion, will not be allowed to buy allowances in order to comply with the new mercury standards. This means that compliance for these generators can only be met by reductions in emissions and not by purchasing allowances.vii

Dominion has received requests for information and/or Notices or Findings of Violations (NOV/FOV) from the EPA regarding compliance with NSR and Title V permit program at its Salem Harbor, State Line, Kincaid, and Brayton Point plants.viii

Dominion owns five ash disposal sites, three of which are ponds.ix The EPA reported an unusual discharge from Dominion's Chesterfield Pond in 2005. Almost 1.5 million tons of coal ash produced by the company was beneficially reused in 2009.x Dominion is currently being sued by two different groups regarding coal ash reuse in a golf course in the Chesapeake Bay area. The total amount being asked is over $2.25 billion.xi Dominion was forced to connect local residents' houses to grid water so that they would not be reliant upon potentially contaminated well water.xii

In 2003 the EPA and the Massachusetts Department of Environmental Protection each issued water withdrawal permits for Dominion's Brayton Point plant that included mandates for the installation of cooling towers—at a total cost now estimated to be approximately $600 million, including $354 million yet to be spent for completion of the project by 2012.xiii

Table 4: Dominion Coal Source xiv

The new plant at Virginia City is mandated to burn coal mined in Virginia, part of the Central Appalachian (CAPP) region [Table 4].xv

In Central Appalachia, declining coal reserves and increased regulations are producing price increases.

Dominion has not disclosed actual costs for construction of the 585 MW Virginia City Hybrid Energy Center. Dominion can raise rates to finance the plant's $1.8 billion construction for a return on equity of 12.12%. Cost overruns beyond that cannot automatically be charged back to ratepayers.xvi Costs for plant construction in the Southeast are rising exponentially. A single Cliffside unit cost Duke Energy almost as much the company estimated for a two-unit plant only two years earlier.xvii Dominion customers have faced several rate hikes in order to cover the cost of constructing the plant.xviii

Footnotes
i. Natural Resources Defense Council (NRDC), "Benchmarking Air Emissions of the 100 Largest Electric Power Producers in the United States, All 2008 Data," accessed 20 April 2011, available here.
ii. Dominion Resources, Inc, "2010 Form 10-K," U.S. Securities and Exchange Commission, 28 February 2011, p. 27-28; Dominion, "Electric Generating Stations," accessed 19 April 2011, available at: http://www.dom.com/about/stations/index.jsp.
iii. Dominion Resources, Inc, "2010 Form 10-K," p. 5, http://www.dom.com/about/stations/index.jsp.
iv. Sierra Club, available at: http://carbon.sierraclub.org.
v. Dominion Resources, Inc, "2010 Form 10-K," U.S. Securities and Exchange Commission, 28 February 2011, p. 112.
vi. Dominion Resources, Inc, "2010 Form 10-K," p. 81.
vii. Dominion Resources, Inc, "Emerging Regulations," accessed 20 April 2011, available at: http://www.dom.com/about/environment/report/emerging-regulations.jsp.
viii. Dominion Resources, Inc, "2010 Form 10-K," U.S. Securities and Exchange Commission, 28 February 2011, p. 112.
ix. U.S. EPA, Wastes- Non-Hazardous Waste- Industrial Waste, "Information Request Responses from Electric Utilities," last updated 23 November 2010, available here.
x. Dominion Resources, Inc, "Coal Combustion Products," accessed 20 April 2011, available here.
xi. L. Hansen, "Lawsuit claims Dominion saw golf course as 'coal ash dump,'" The Virginian-Pilot, 27 August 2009, available at: http://hamptonroads.com/2009/08/lawsuit-claims-dominion-saw-golf-course-coal-ash-dump.
xii. M. Rostami, "Chesapeake connects residences near golf course to water services," The Virginian-Pilot, 16 March 2011, available at: http://hamptonroads.com/2011/03/chesapeake-connects-residences-near-golf-course-water-service.
xiii. Dominion Resources, Inc, "2010 Form 10-K," U.S. Securities and Exchange Commission, 28 February 2011, p. 113.
xiv. EIA 923 Database.
xv. G. Kranz and P. C. Squires, "Keeping the lights on in a low-carbon world," Virginia Business, 1 July 2008, available at: http://www.virginiabusiness.com/index.php/news/article/keeping-the-lights-on-in-a-low-carbon-world/1090/.
xvi. G. Kranz and P. C. Squires, "Keeping the lights on in a low-carbon world," Virginia Business, 1 July 2008, available at: http://www.virginiabusiness.com/index.php/news/article/keeping-the-lights-on-in-a-low-carbon-world/1090/
xvii. D. Schlissel, A. Smith, and R. Wilson, "Coal-Fired Power Plant Construction Costs," Synapse Energy Economics, July 2008, accessed 26 April 2011, p. 1, available at: http://www.synapse-energy.com/Downloads/SynapsePaper.2008-07.0.Coal-Plant-Construction-Costs.A0021.pdf.
xviii. G. Kranz and P. C. Squires, "Keeping the lights on in a low-carbon world," Virginia Business, 1 July 2008, available at: http://www.sourcewatch.org/index.php?title=Wise_County_Plant and http://www.sierraclub.org/environmentallaw/coal/getBlurb.aspx?case=va-dominion.aspx.