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August 1998 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. 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. 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. 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. 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. 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.
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