Dominion Energy Inc. executives have negotiated a multi-party agreement that proposes to drop a performance requirement for its planned offshore wind farm in exchange for tighter parameters governing any future cost overruns.
The Virginia State Corporation Commission this summer approved Dominion’s plans to build Coastal Virginia Offshore Wind, a project that comprises nearly 180 turbines more than 20 miles from Virginia’s coast and in which Dominion plans to spend a total of $9.8 billion. But the regulators also included a performance guarantee clause with their approval, something Dominion Chairman, President and CEO Bob Blue called “an unprecedented layer of financial one-way risk.”
But Blue also said in early August that there was room for an alternative compromise. On Oct. 28, Dominion detailed that alternative, saying it has filed with the state a proposed settlement it has hammered out with the office of Virginia Attorney General Jason Miyares as well as Walmart, Sierra Club and Appalachian Voices. The proposal drops any energy production requirement but it will require Dominion to detail the factors in any shortfall. The company also has agreed to pick up half of cost overruns between $10.3 billion and $11.3 billion as well as all spending from $11.3 billion to $13.7 billion.
The settlement, which the State Corporation Commission needs to approve, also calls on Dominion to do what it can to pass on benefits of the Inflation Reduction Act. You can read the proposal here.
“I appreciate the thoughtful effort of all parties in reaching a constructive agreement to allow the project to continue moving forward,” Blue said in a statement. “Development of the project has continued uninterrupted to maintain the project's schedule. We expect over 90% of the project costs, excluding contingency, to be fixed by the end of the first quarter in 2023 as compared to about 75% today, further de-risking the project and its budget.”
Shares of Dominion (Ticker: D) were up 1% to about $70 in early trading Oct. 31. Over the past six months, they have fallen nearly 15%, trimming the company’s market capitalization to about $58 billion. Blue and his team will report the company’s third-quarter results Nov. 4.