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Dominion: Carbon rule will not be disruptive, but legal challenge could be

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Essential Energy Insights - February 2021

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Six trends shaping the industries and sectors we cover in 2021

Six trends shaping the industries and sectors we cover in 2021


Dominion: Carbon rule will not be disruptive, but legal challenge could be

Notingthat it is one of the largest energy producers in the nation, said that ifit can comply with the Clean Power Plan, other power plant owners can too, solong as flexibility and regulatory efficiency are maintained.

Thecompany offered itstwo cents in support of the U.S. EPA's Clean Power Plan in a "friend ofthe court" brief filed April 1, as the company said its opinions differ substantiallyfrom those of the parties challenging the rule.

"Dominiondoes not agree that the rule will necessarily result in such disruptive effectsto the power sector and its consumers," the brief said. "Dominionbelieves that compliance with the rule is challenging but feasible and can bemanaged through a diverse generation fleet."

Ifkey flexibilities are maintained in the rule, states develop theirimplementation plans and government permitting and regulatory agenciesefficiently move to complete applications and perform regulatory oversight forgas and transmission infrastructure, "then compliance is feasible forpower plants subject to the rule," Dominion said.

Somestates challenging the rule have contendedthat the Clean Power Plan will be overly burdensome on their energy regulators,and significant resources will need to be expended to assist the complianceefforts.

ButDominion said the rule is compatible with current trends in the energy industrytoward renewable and natural gas generation based on market conditions andcustomer demand. Some states, too, are moving on ambitious climate goals thatare further pushing the wave towards cleaner resources. Federal regulationsunrelated to the Clean Power Plan also are having a similar effect.

Dominionis currently in the midst of a 10-year growth plan, investing $3.2 billion peryear in expanding transmission, generation and natural gas infrastructure. Thecompany is doing so to meet the projected increase in electricity demand in itsservice area with lower-carbon electricity while maintaining reliable service.That includes the expansion of the company's natural gas pipelineinfrastructure to deliver reserves of natural gas from the Marcellus and Uticashales. The Atlantic Coast Pipeline will be key to that strategy as well.

Dominionalso differs from the rule's opponents in the legal case in its interpretationof "standard of performance." Citing the challengers' belief that thestatute implies that market-based measures such as emissions trading oraveraging cannot be used, Dominion said that interpretation is overly narrow.

Withsuch an interpretation of the Clean Air Act, Dominion said, the petitionerscould unintentionally foreclose market-based measures and other standards ofperformance. Moreover, they could unintentionally force the closure of morecoal-fired generation, resulting in a less diverse generation fleet and highercompliance costs.

"Ifthe court were to adopt petitioners' interpretation of these terms, theinterpretation would not only constrain EPA's authority when establishing 'emissionguidelines,' as is intended by petitioners, but would also effectively prohibitregulated entities from complying with this and all other Section 111 standardsthrough flexible compliance approaches such as market-based trading mechanisms,"Dominion wrote. "Real-world experience, academic theory, and industryconsensus all indicate that market-based measures are an optimal approach forstates to adopt in air quality regulatory plans."

Dominionhas significant experience with market-based emissions reduction measures inseveral different states, having participated in trading programs for ozone,fine particulate matter and nitrogen oxide. The company also has owned powerplants participating in the Regional Greenhouse Gas Initiative trading program.