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<title>Virginia: Hearings Examiner Recommends Issuance of Certificate of Public Need to
Proposed IPP Facility</title>
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<p align="left"><strong><small><font face="Arial">About The Author:</font></small></strong></p>
<p align="left"><font face="Arial" style="font-size: 9pt">Robert A. Olson is a partner in the law firm of
Brown, Olson & Gould, P.C. which maintains a nationwide practice in energy law,
public utility law and related commercial transactions.</font></p>
<p><small><font face="Arial"><font style="font-size: 9pt">He can be reached at:</font><br>
<br>
<b><font color="#0000FF">Brown, Olson & Gould, PC</font></b><br>
2 Delta Drive<br>
Suite 301<br>
Concord, NH 03301<br>
<a href="mailto:[email protected]">[email protected]</a><br>
(603) 225-9716<br>
<a href="mailto:[email protected]"></a></font></small></p>
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<p><b><u>August 1998</u><br>
</b><font size="6"><b>Virginia Examiner Recommends Issuance Of Certificate
Of Public Need To Proposed IPP Facility<br>
</b></font><strong>by Robert Olson -- Brown, Olson and Wilson, P.C.<br>
</strong><font face="Arial" size="2">(<em>originally published by PMA OnLine Magazine:
08/98</em>)</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">On July 10, 1998, a hearings examiner
recommended to the Virginia Corporations Commission (the "Commission") that it
issue a certificate of public convenience and necessity (the "Certificate") to
Commonwealth Chesapeake Corporation ("Chesapeake") for the construction of a 300
MW single cycle peaking facility. The examiner also recommended that the Certificate be
conditioned on either Chesapeake signing interconnection agreements with Delmarva Power
& Light ("Delmarva") and the Pennsylvania/New Jersey/Maryland
Interconnection ("PJM") to permit the facility to be dispatched by PJM or
signing a purchase power agreement with Old Dominion Electric Company.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">In September 1996, Chesapeake requested that the
Commission issue a Certificate for its proposed 300 MW facility and requested that the
Commission exempt the facility from the Commission’s jurisdiction. The proposed
facility will be an oil-fired peaking unit, located on Virginia’s eastern shore and
will consist of three simple cycle combustion turbines. The facility will operate as an
independent power producer ("IPP") and sell energy on a wholesale basis to the
markets that comprise the PJM. Initially, Chesapeake requested that the Commission issue a
conditional Certificate requiring Chesapeake obtain commitments to purchase the
facility’s output. Initially, the staff of the Commission recommended that the
Commission grant Chesapeake’s conditional Certificate and stated that the Certificate
should be conditioned upon the Chesapeake obtaining a purchase power agreement for at
least 100 MWs. Subsequently, Chesapeake and the staff asked the Commission to issue a
non-conditional Certificate.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">Under prior Virginia law, a Certificate could not be
issued unless the developer of the proposed facility made an explicit showing of a need
for the energy. This need requirement applied to both facilities that were developed by
regulated electric utilities and those developed by IPPs. For example, the Commission
previously refused to issue a Certificate to an IPP developer because Virginia Power did
not have a present need for the capacity and no other utility agreed to purchase the
output. Subsequently, the Virginia statute was amended to include consideration of the
effect the proposed facility would have on economic development within Virginia and the
Commission was required to consider improvements in service reliability. On March 13,
1998, the Virginia legislature enacted a second statutory basis for issuing a Certificate
which applies to generating facilities which would not be included in the rate base of any
Virginia regulated utility. Under this secondary approach, the Commission must determine
whether the proposed facility would have: an adverse affect on electric utility rates;
have a material adverse affect on reliability of electric service; and was not otherwise
contrary to public interest. </font></p>
<p ALIGN="JUSTIFY"><font face="Arial">On July 10, 1998, the hearings examiner recommended
that the Commission issue a Certificate to Chesapeake on the condition that Chesapeake
enter into an interconnection agreement with Delmarva in order to sell energy to markets
that comprise the PJM or in the alternative to enter into a purchase power agreement with
Old Dominion. The hearing examiner initially determined that the recently enacted statute
applied because Chesapeake was not subject to the Commission’s jurisdiction and no
Virginia utility had a financial interest in the company. In determining that Chesapeake
did not have any impact on Virginia retail rates, the examiner noted that the facility
would be selling capacity and energy to PJM and that PJM will dispatch Chesapeake only
when its the lowest cost provider. In addition, the examiner noted that while it is
uncertain whether Chesapeake would be responsible for the costs associated with
transmission upgrades associated with the facility, this issue would probably be covered
by the interconnection agreement with Delmarva and even if Delmarva was responsible for
upgrade costs, these costs would not solely be borne by Virginia customers. </font></p>
<p ALIGN="JUSTIFY"><font face="Arial">The hearing examiner also noted that the proposed
facility was not contrary to the public interest. In determining the public interest, the
hearing examiner considered a multiple of issues, including the environmental impact of
the proposed facility and the need for power from the facility. Regarding the need for
power, the hearing examiner did not just focus solely on Virginia, but also considered the
energy needs of the entire PJM market. The examiner reasoned that the development of
competitive wholesale market changed the assessment of needs analysis and that there would
be a need for power in the PJM system in the near future. </font></p>
<p ALIGN="JUSTIFY"><font face="Arial">On July 25, 1998, comments were due on the hearing
examiner’s decision. It is anticipated that the Commission will shortly review the
hearing examiner’s recommendation.</font></p>
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<blockquote>
<p align="left"><font face="Arial">
<small>Robert A. Olson is a partner in the law firm of Brown, Olson &
Gould P.C.
which maintains a nationwide practice in energy law, public utility law and related
commercial transactions. He can be reached at:</small></font><p align="center">
<font face="Arial"><small><font color="#0000FF"><b>Brown, Olson & Gould, PC</b></font><br>
2 Delta Drive, Suite 301<br>
Concord, NH 03301 <br>
<br>
<a href="mailto:[email protected]">[email protected]</a> | (603) 225-9716<a href="mailto:[email protected]"></a></small></font>
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