The president and CEO of Dominion Virginia Power says the utility needs to seek new generation, including wind farm and solar energy, as well as build transmission and other facilities to meet growing demand and reliability.
"We have been very busy over the past year," said Paul D. Koonce, president and chief executive officer of Dominion Virginia Power. "We’ve focused on achieving excellence in customer service, strengthening our current power line infrastructure where needed, and planning for the future."
Going beyond the three-year horizon he discussed in a similar letter last January, Koonce told customers the company plans to invest $7.6 billion over the next five years for new power stations and other electric infrastructure to meet growing demand.
The investments also cover reliability enhancements and new technology that will allow customers to save money on their energy bills. In addition to these investments, the company will continue its plan to spend more than $2 billion to improve the environmental performance of its fossil-fueled power stations and anticipates that additional investment may be necessary to meet pending federal regulations.
"The trends remain clear that Virginia’s economy continues a slow-but-steady recovery, the state’s population is growing, and the demand for energy is moving right along with it," Koonce said. "We are committed to support that growth in the most cost-effective, reliable and responsible way."
In January Koonce told customers in his annual letter that investments for 2010 through 2012 would total $4 billion. The current, longer-range capital spending forecast covers the five-year period through the end of 2015. As growth continues past that period, Koonce noted, the company will need enough additional energy to power the equivalent of 1.4 million new homes by 2020.
The company’s strategy for meeting growing electricity demand, called Powering Virginia, emphasizes using a balanced mix of highly reliable and economic generation sources including upgrades to existing units, clean-burning natural gas, a state-of-the-art hybrid energy power station, renewable resources, and conservation.
"We look for the most efficient, technologically proven and environmentally responsible approach," Koonce told customers. Powering Virginia also will create thousands of new construction jobs and other forms of economic development in the process.
Focusing first on making significant efficiency improvements, the company by 2014 will have added enough new output from existing fossil and nuclear units to power the equivalent of more than 170,000 homes — without adding any significant new emissions.
Highly efficient, gas-fired units are under construction in Buckingham County and a hybrid coal-and-biomass station is about 75 percent complete in Southwest Virginia. Additionally, the company is looking for wind power sites in Virginia, and plans for a solar project in Halifax County are under development.
New conservation programs have been added for homeowners and businesses, and the company is currently testing sophisticated digital metering systems that could provide significant cost and environmental savings in the future.
Of the $7.6 billion in projected capital spending, approximately $4 billion will be for adding or upgrading new transmission and distribution lines, substations and other related facilities that bring power to customers. A circuit reconditioning program will continue to target lines that experience higher levels of outages.
"Economic and population growth are not the only reasons we need to invest," Koonce said. "The typical customer today also uses much more electricity. In 1980 the average U.S. household had just three electronic products. Today, that number is 25."
More than a decade ago the company began a major effort to reduce emissions from its fossil power stations. Environmental controls were added at six power stations as part of a spending commitment of more than $2 billion that extends through 2015.
Koonce said those efforts are paying off. Virginia’s air is much cleaner today than it was in 1970, and the company is on track to reduce emissions of major air pollutants by 80 percent or more by the middle of this decade.
The company’s investments will require some increases in rates. On Jan. 1 the company’s rates will effectively go up by 4.6 percent as $268 million in customer credits are completed Dec. 31. Customers have been receiving these credits on their bills since April.
"Even with these changes, the company’s rates will remain well below the national average electric rate and 28 percent below the average of East Coast utilities," Koonce said, noting that all rate changes must be approved by the Virginia State Corporation Commission.
Dominion (NYSE: D) is one of the nation’s largest producers and transporters of energy, with a portfolio of approximately 27,600 megawatts of generation. Dominion operates the nation’s largest natural gas storage system and serves retail energy customers in 13 states.