1. business and industrial
2. business operations
3. management
4. project management

Virginia State Corporation Commission
eFiling CASE Document Cover Sheet
Case Number (if already assigned)
PUE-2013-00036
Case Name (if known)
Application of AEP Appalachian Transmission
Company, Inc. and Appalachian Power Company for
Approval and Certification of Transmission Facilities in
Botetourt County : Cloverdale Substation Expansion
Project
Document Type
EXBR
Document Description Summary
Brief of AEP Appalachian Transmission Company, Inc.
and Appalachian Power Company
Total Number of Pages
43
Submission ID
7707
eFiling Date Stamp
12/3/2013
3 :49:03PM
WOODS ROGERS C
P
1-6
W
L
ATTORNEYS
H . ALLEN GLOVER, Jrt
(540) 983-7636
glovet@woodsrogers .com
AT
V11
December 3, 2013
VIA ELECTRONIC FILING
Joel 1-1. Peck, Clerk
Document Control Center
State Corporation Commission
Tyler Building, I" Floor
1300 E. Main Street
Richmond, VA 23219
Re:
Application of AEP Appalachian Transmission Company, Inc. and Appalachian
Power Company for Approval and Certification of Transmission Facilities in
Botetourt County: Cloverdale Substation Expansion Project
(SCC Case No. PUE-2013-00036)
Dear Mr. Peck :
Enclosed for filing is the Brief of AIEP Appalachian Transmission Company, Inc. and
Appalachian Power Company.
Thank you for your assistance .
Sincerely,
H. Allen Glover, Jr.
Encl .
c:
LAW
Glenn P. Richardson, Esq. (w/encl.)
D. Mathias Roussy, Jr., Esq. (w/encl.)
Edward L. Petrini, Esq. (w/encl.)
James G. Ritter, Esq. (w/encl.)
(11636J64-1. 011380-00930-01)
P.O. Box 14125 / Roanoke, Virginia 24038-4125
10 South Jefferson Street, Suite 1400
540 983-7600 / Fax 540 983-7711
nfrices al-,zo in Blacksburg.nville Lnchbur and Richmond Virinia
COMMONWEALTH OF VIRGINIA
STATE CORPORATION COMMISSION
APPLICATION OF
AEP APPALACHIAN TRANSMISSION
COMPANY, INC .
and
APPALACHIAN POWER COMPANY
Case No. PUE-2013-00036
For approval and certification
of transmission facilities in Botetourt County:
Cloverdale Substation Expansion Project
BRIEF OF AEP APPALACHIAN TRANSMISSION COMPANY, INC.
AND APPALACHIAN POWER COMPANY
H. Allen Glover, Jr. (VSB # 14800)
George J. A. Clemo (VSB # 25219)
Woods Rogers PLC
P.O. Box 14125
Roanoke, VA 24038-4125
Phone: (540) 983-7600
[email protected]
glover@woodsrogers .com
James R. Bacha (VSB#74536)
Hector Garcia (VSB # 48304)
American Electric Power Service Corporation
I Riverside Plaza - 29h Floor
Columbus, OH 43215
Phone : (614) 716-1000
[email protected]
[email protected]
Counsel for AEP Appalachian Transmission Company, Inc . and Appalachian Power
Company
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TABLE OF CONTENTS
vi
Page
1.
INTRODUCTION . .... ...... . ...... . . ........ . . . ..... . ..... . . ..... ........ . ..... . . ..... ....... . ... . . . . . ...... . ...... . .. ..... . . . I
11.
CASE HISTORY . . . .... ...... . ...... . . . . ..... ... .... .. . ..... . . ..... ....... . . ... .. . . ..... ...... . . .... . . . . ...... . . ...... ....... . .. 4
Ill.
QUESTIONS PRESENTED . .. . . .. ........ ... . .. . ..... .. ..... ....... . . ..... . . ..... ...... . . .... . . . ....... . . ..... . ....... . .. 6
IV.
A.
IS THE PROJECT NEEDED IN ORDER TO MAINTAIN ADEQUATE AND
RELIABLE ELECTRIC SERVICE TO APCO'S CUSTOMERS? .... ........ . ...... . . .. 6
B.
WILL THE PROJECT HAVE A POSITIVE EFFECT ON ECONOMIC
DEVELOPMENTWITHIN THE COMMONWEALTH? ... . .... . . .. . ...... . . . . ... . . .. ..... . 6
C.
WILL THE CONSTRUCTION AND OPERATION OF THE PROJECT'
PRESENT ANY HEALTH OR SAFETY RISKS RELATING TO ELECTRIC
AND MAGNETIC FIELDS? . .... .. .... . . . .... .... ..... .. .... . . ..... ....... . ..... . .. ...... . . ...... . ....... . .. 6
D.
WILL TILE LOCATION FOR THE PROJECT REASONABLY MINIMIZE
ADVERSE IMPACT ON THE SCENIC ASSETS, HISTORIC DISTRICTS AND
ENVIRONMENT? .. . . ......... . . .... . . . .... . . ..... . ....... ....... . ...... ...... . . .... ... ...... . . ...... . . ......... .. 6
E.
DOES VIRGINIA LAW PERMIT APCO TO DEVELOP THE PROJECT
JOINTLY WITH ITS AFFILIATE, VIRGINIA TRANSCO? ... . . . ...... . . .. .... . ........ .. 6
F.
DOES THE EVIDENCE OF RECORD SUPPORT GRANTING THE CPCN TO
APCO AND VIRGINIA TRANSCO? . .... ........ . ....... . ...... .... .. . ..... . . . . ....... . ...... . . .. .... . . 6
G.
WILL THE COMMISSION'S REGULATORY OVERSIGHT OF VIRGINIA
TRANSCO'S FACILITIES AND OPERATIONS BE ADEQUATE AND IN THE
PUBLIC INTEREST? . ........ .. ..... . . ..... . . . .... ........ . .... . . .. .... ...... . . .... . .......... ........ . ....... . .. 6
ARGUMENT . . . ..... ...... ..... . ..... . . . ........ .. .... .. ...... . ............. ....... . ...... ...... . ..... . . . . ....... . . ..... . . .. . . ... . 7
A.
THE PROJECT IS NEEDED IN ORDER TO MAINTAIN ADEQUATE AND
RELIABLE ELECTRIC SERVICE TO APCO'S CUSTOMERS . ..... . ....... . ..... .. . .. 7
B.
THE PROJECT WILL HAVE A POSITIVE EFFECT ON ECONOMIC
DEVELOPMENT WITHIN THE COMMONWEALTH . .. . .... . . . .. ...... .. ...... . ....... . .. 9
C.
THE CONSTRUCTION AND OPERATION OF THE PROJECT WILL NOT
PRESENT ANY KNOWN HEALTH OR SAFETY RISKS ARISING FROM
ELECTRIC AND MAGNETIC FIELDS . ..... . . . ..... . . . .... .. ... .. . . . .... . . . ...... .. ...... . . ...... . .. 9
D.
THE LOCATION FOR THE PROJECT WILL REASONABLY MINIMIZE .
ADVERSE IMPACT ON THE SCENIC ASSETS, HISTORIC DISTRICTS AND
ENVIRONMENT OF THE AREA CONCERNED . .... ...... . . .... . .. ........ ........ . ..... . . . 10
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E.
1.
THE ENVIRONMENTAL IMPACT OF THE PROJECT WAS
APPROPRIATELY EVALUATED AND MINIMIZED. .. ...... .. ....... . ...... 10
2.
NO REASONABLE ALTERNATIVE LOCATIONS FOR THE PROJECT
WERE AVAILABLE . . .. ..... . ...... ....... ....... ..... .. ...... . . .... . ..... . ...... . ....... . . ....... 11
3.
THE COMPANIES WILL COMPLY WITH SECTION 10 OF HOUSE
BILL 1319, CHAPTER 799 OF THE 2008 ACTS OF ASSEMBLY BY
SEEKING TO IMPLEMENT LOW COST AND EFFECTIVE MEANS
TO IMPROVE THE AESTHETICS OF THE PROJECT............. . .......... 11
4.
PLACING ALL OR A PORTION OF THE PROJECT UNDERGROUND
IS NOT A REASONABLE OPTION, AND THE PROJECT IS NOT
SUITABLE AS A PILOT PROJECT UNDER HOUSE BILL 1319 . .... .. 12
5.
THE PROJECT WILL USE OR PARALLEL EXISTING
RIGHTS-OF-WAY TO THE EXTENT FEASIBLE . ..... ........ ..... . . . . ...... .. 12
6.
ALTHOUGH THE COMPANIES CONCUR WITH MOST OF THE
AGENCY RECOMMENDATIONS PRESENTED IN THE DEQ
REPORT, THE COMPANIES OPPOSE CERTAIN OF THOSE
RECOMMENDATIONS BECAUSE THEY ARE UNDULY
BURDENSOME, IMPRACTICAL AND/OR UNNECESSARY . . . ...... . . 13
VIRGINIA LAW PERMITS APCO TO DEVELOP THE PROJECT JOINTLY
WITH ITS AFFILIATE, VIRGINIA TRANSCO . . ...... . ..... . . ............ . . ... .. . ........ .... 14
I.
SECTIONS 56-265 .3 AND 56-265 .4 OF THE CODE APPLY TO THE
ALLOTMENT AND PROTECTION OF DISTRIBUTION SERVICE
TERRITORIES OF VIRGINIA UTILITIES . . . ..... . . . .... ....... . . ...... ........ .. .... 14
2.
COMMISSION PRECEDENT SUPPORTS AN INTERPRETATION OF
SECTIONS 56-265 .3 AND 56-265 .4 THAT WOULD NOT RESTRICT
VIRGINIA TRANSCO FROM DEVELOPING ITS PORTION OF THE
CLOVERDALE PROJECT . .. ...... . . .... . . . .... . . ...... . ..... . . ..... ........ . ... . . . .. ...... . ... 17
3.
STAFF'S INTERPRETATION OF SECTIONS 56-265 .3 AND 56-265 .4
WOULD EFFECTIVELY BAR ALL NON-INCUMBENT UTILITIES
FROM UNDERTAKING TRANSMISSION PROJECTS IN VIRGINIA
AND THUS TRIGGER FERC BACKSTOP SITING AUTHORITY IN
CERTAIN INSTANCES . .. . . .... . . . ..... . ...... . ..... . . . ..... . ...... .... .. . .. ... . .......... . ..... 22
4.
FERC ORDER 1000 DOES NOT APPLY TO THIS PROCEEDING . ... 23
F.
THE EVIDENCE OF RECORD SUPPORTS GRANTING THE CPCN TO APCO
AND VIRGINIA TRANSCO. ..... . . . . .... . ....... ....... ...... . . . ... . . ....... ...... . ..... . ........ . . ...... 24
G.
THE COMMISSION'S REGULATORY OVERSIGHT OF VIRGINIA
TRANSCO'S FACILITIES AND OPERATIONS WILL BE ADEQUATE AND
IN THE PUBLIC INTEREST . ...... . . .... . . . ..... . ...... . ..... . . . ..... . . ..... ...... . . . .. .. . . ........ . . .... 32
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1.
2.
VIRGINIA TRANSCO'S CAPITAL STRUCTURE. .. ..... .. . .... . . ...... . . ...... 33
3.
LOWER VOLTAGE PROJECTS . ... ........ .... .. ...... ....... . .... . . . . .... ........ . ... . . . . 34
4.
EMINENT DOMAIN . ....... . .... . . . . ...... ........ . ..... . ..... . ...... . ... . . . . . .... ........ . ..... .. . 34
5.
V.
APPLICABILITY OF THE AFFILIATES ACT TO VIRGINIA
TRANSCO . ..... . ...... ...... ..... . . ..... . . ....... ........ . ..... .. .... .. ...... ..... .. . .... . . . . ..... . ...... 32
APPLICABILITY OF THE UTILITY SECURITIES ACT TO VIRGIN IA
TRANSCO . ... . . .... . . ...... ...... . . ... .... ....... .... .. . . . ... . .. .... ........ .... . . . . . .... ........ . ..... . . 35
CONCLUSION . . . .... .. .... .. ...... . . .... . ....... ...... . . ..... . .. ...... ...... .. . .... . . .... . ....... . .... . . . . .... . ....... . ...... . 35
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TABLE OF AUTHORITIES
Paize(s)
Statutes
16 U.S .C. § 824 p(b)(1)(B) ... .. .... . ... . . . ........... . . . . ... .. . ...... .. .... .. . .. ... . .. ...... . ..... . . . ........ .. .. .... . ....... . ........22
Chapter 3 of Title 56 of the Code of Virginia . . . ...... .. .... .. ...... . . . .... . . . ...... . .... . . .......... .. . .... . ........ . . ...... 35
Chapter 4 of Title 56 of the Code of Virginia . . ... . . . . .... .. ...... . . . ..... . ........ ...... . ..... . .... . . ...... . ....... . .. 32,33
Section 56-46.1 of the Code of Virginia ....... . . . .... . . . ...... .. .... .. . ..... . ........ ...... . ..... . .... . . ...... . ....... . . . ...4,12
Section 56-259 of the Code of Virginia .. ...... . . . . ... .. . ...... ........ . ..... . ........ ...... . ..... . .... . . ...... . ....... . . ....... 12
.
Section 56-265 .1 of the Code of Virginia ..... . . . . ..... . ...... ...... . . . ..... . ........ ...... . .... . . .... .. ..... . . ....... . . ... 4114
Section 56-265 .2 of the Code of Virginia .. . . . .. ..... . . ..... ........ . .. ... ......... . ... 4, 14, 17, 18, 19, 21, 3 4, 3 6
Section 56-265 .3 of the Code of Virginia ... . . . . ..... . . ..... ........ . .. ... .. .....4, 14, 15 ; 16, 17, 18,-19, 21, 22
Section 56-265 .4 of the Code of Virginia .... . . . ..... . . ............. . . . ... ....... 4, 14, 15, 16, 17, 18, 19, 21, 22
Section 56-579 of the Code of Virginia . ...... . . . ..... ....... .. ...... . . . ........ ..... .. .... ....... ..... . . ...... . ....... . ... ..... 16
Section 56-580 of the Code of Virginia . .... . . . ..... . . . ... . . . ...... . . . ..... . ........ ..... . . ..... . ...... . . . . .. . . . ... .. . . . ...... . . 17
Section 56-585 of the Code of Virginia . .... . . ... ... . . . .... .. ...... . . . ..... . ...... .. ... ... . ..... . .... . . .. .. .. . . .... .... . ...... . . 16
Section 67-101 of the Code of Virginia . .... ..... ... . . . .... .. ...... . . . ..... . ... .
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Cases
Application ofAppalachian Power Company, S. CC Case No. PUE-2009-0013 7 ... .. ...... .. . .. .... . . 13
Application ofAppalachian Power Company, & C. C. Case No. PUE-2012-0000 7 ... .. ........ . . ...... . 13
Application ofAppalachian Power Company, & C. C. Case No. PUE-2012-00089 . . ... . . . .. .. ... . . . 2,33
Application ofAppalachian Power Company, S. C. C. Case No. PUE-2012-00132 ... . ....... .. . ...... . . 13
Application ofPATHAllegheny Virginia Transmission Corporation,
S. CC. Case No. 2010-00115 . . ... . . ... . . . ..... . . ... . . . . . .. .. . . . ... .. . .. . . . . . . . . ... . ...... . . . ..... . ..... . .... . . . . .... . . . .. 18,19,20
Application of Trans-Allegheny Interstate Line Company,
S CC. Case No. PUE-2007-00033 .. . . . .... . . .... . . . . .... . . ...... . . . ... . . . . . ... . . . . ... . . . . . ... . ...... . . .. . . . . . .. 17,18,19,20
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Application of Virginia Natural Gas, S. CC Case No. PUE860065.... . . ... . . . . . . . . . . . ..... . .... . ..... . . . 18,20
Joint Application of Virginia Electric and Power Company and Trans-Allegheny Interstate Line
Company, S. CC Case No. PUE-2007-00031 . . . . ... .. . . . .... . . . . .... . . . .. .. . . ..... . . . .. . . . . . . . .. . . ..... . . 17,18,19,20
Other Authorities
House Bill 1319, Virginia Acts of Assembly, 2008 .... . .. ...... ........ .... . . . .............. . ..... . .... .... . 11,12,35
Transmission Planning and Cost Allocation by Transmission Owning and Operating Public
Utilities, Order No. 1000, 136 FERC T 61,051 (201 1) ("Order No. 1 000"), order on reh'g and
clarif, Order No. I 000-A, 139 FERC 161,132 (2012) ("Order No. I 000-A"), order on rehg and
clarif, Order No. 1 000-B, 141 FERC 1 61,044 (2012) ("Order No. I 000-B") . .... .. . .... .... . . . . ...23,24
Guidelines of Minimum Requirements for Transmission Line Applications Filed Under Virginia
Code Section 56-46.1 and the Utility Facilities Act .. . ........ ...... . . ...... . ...... ........ .... . . . ........ . . . ..... . ......21
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INTRODUCTION.
AEP Appalachian Transmission Company, Inc. ("Virginia Transco") and Appalachian
Power Company ("APCo") (collectively, the "applicants" or the "Companies") are seeking a
certificate of public convenience and necessity for the Cloverdale Extra High Voltage
Transmission Improvements Project in Botetourt County (the "Project"), which will require
approximately a $237 million investment and three years to complete and place in service. The
applicants wish to build the Project together, with the majority of the Project to be financed by
Virginia Transco, resulting in lower costs for customers, and improved cash flow credit metrics for
APCo leading to additional benefit to customers in the long run.
There is no dispute about the need for the Project and the fitness of the proposed
engineering solution to address this need .'
The Commission's Staff wholly supports the issuance
of a certificate authorizing construction of the Project. The only point of contention between the
applicants and Staff is whether the certificate should be issued to APCo alone, as opposed to both
2
companies as requested in the application.
The evidence of record demonstrates that customers will benefit if APCo and Virginia
Transco are permitted to build, own and operate different components of the Project, and that
Staff s concerns are misplaced and not well taken. Based upon current relative financing costs, it
is clear that customers will experience a greater rate increase if Staffs recommendation is adopted .
It is also clear that undertaking the Project alone will weaken APCo's cash flow credit metrics for
1 The need for the Project as well as engineering and environmental concerns are addressed in Sections ITI A-D of this
brief.
2 Whether Virginia law pen-nits APCo to develop the Projectjointly with Virginia Transco is discussed in Section IV
E below, while the question of whether the Commission should jointly authorize the Companies to undertake the
Project is addressed in greater detail in Section IV F.
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the next three years, the result of making the significant investment required to build the Project,
with no concurrent recovery of cash revenues which is delayed until the facilities are placed in
service. Thus, Staff s opposition boils down to a single argument : that APCo's credit ratings may
suffer over the long term if this Commission permits $222 million of this investment to be made by
Virginia Transco. This argument is not supported by the evidence on the record, which clearly
shows substantial contemporaneous transmission investment by APCo, and which clearly shows
that APCo's credit rating is not at risk of deterioration as a result ofjointly developing the Project
with Virginia Transco, as proposed by the applicants .
Staff also expresses concern that the Commission's regulatory oversight of the facilities
and operations of Virginia Transco will be diminished in several areas if the Commission approves
the Companies'joint application for this Project. To address this concern, Virginia Transco will
agree to the following conditions that will allow the Project to proceed to the benefit of APCo's
customers and without -the alleged loss of oversight identified by Staff:
Virginia Transco will agree that the terms of its service agreement with American
Electric Power Service Corporation ("AEPSC") will conform in all material respects to
the terms of the agreement between APCo and AEPSC (as it now exists or may
hereafter be amended), which was most recently approved by the Commission by order
entered on October 22, 2012, in Case No. PUE-2012-00089 . Further, Virginia
Transco will submit to Staff a copy of its current service agreement with AEPSC and
any subsequent modification thereof.
Virginia Transco will agree that its capital structure will match that of APCo . In
addition, Virginia Transco will agree not to initiate a proceeding before the Federal
Energy Regulatory Commission ("FERC") to modify or remove the current 50% cap
on Virginia Transco's equity capitalization .
Virginia Transco will not pursue the option for local county or municipal review and
approval of 138 kV transmission lines for any 138 kV transmission line, but will
instead seek the Commission's approval for such projects .
Virginia Transco will not undertake any transmission projects below 138 kV without
first bringing any such project to Staff for discussion and evaluation . If Staff
2
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recommends it for specific projects, Virginia Transco will apply to the Commission for
a certificate of public convenience and necessity .
Virginia Transco will agree to a condition that it not exercise eminent domain rights
except with respect to projects that have either been certificated by the Commission or
vetted by Staff as described above .
Virginia Transco will submit a report to Staff with respect to the details of any
financing transactions engaged in by Virginia Transco or its parent.
Virginia Transco proposes that the foregoing conditions remain in effect until the Commission no
longer deems them necessary. Virginia Transco's agreement to these conditions will ensure that
the Commission's regulatory oversight of Virginia Transco's facilities and operations will be
adequate and in the public interest. 3
3
This issue is discussed in more detail in Section IV G below .
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CASE HISTORY.
On May 2, 2013, Virginia Transco and APCo filed their joint application, direct testimony
and exhibits in this case, requesting approval of the Cloverdale Extra High Voltage Transmission
Improvements Project (the "Project"), pursuant to § 5646.1 of the Code of Virginia ("Code") and
the Utility Facilities Act, §§ 56-265 .1 et ~M. of the Code . The Project consists of (i) installation
of a new 765/500 kV transformer bank and two new 500/345 kV transformer banks, (ii)
construction of a new 500 kV yard, (iii) construction of four short new extra high voltage
transmission lines between the several yards of the Cloverdale Substation, (iv) partial relocation of
four existing transmission lines, and (v) associated new substation improvements (including
buswork, switches and related equipment) .
Pursuant to the Commission's Order for Notice and Hearing, entered on June 19, 2013 (the
"Order"), a public hearing was scheduled before the Commission in Richmond on October 22,
2013 . A Notice of Participation was filed by the Old Dominion Committee for Fair Utility Rates
("ODCFUR") . ODCFUR did not file any testimony or exhibits and did not take an active role in
the proceedings.
The Virginia Department of Environmental Quality ("DEQ") filed a report summarizing
the comments and recommendations of various state and local agencies on the Project (the "DEQ
Report"), as well as a supplemental letter and attachments, dated October 15, 2013, updating the
DEQ Report as to wetlands and stream impacts of the Project. The SCC Staff filed the testimony
of W. Timothy Lough, sponsoring the Staff Report on the application (the "Staff Report"), as well
as the testimonies of Patrick W. Carr and Farris M. Maddox . The Companies filed rebuttal
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testimony of Company witnesses Timothy B . Earhart, Richard A. Peszlen, George T. Reese,
Charles A. Patton, Rajagopalan Sundararajan, Jerald R. Boteler, Jr. and William A. Bosta.
The public hearing on the application was held before the Commission on October 22,
2013 . No public witnesses testified in connection with the Project.
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111.
QUESTIONS PRESENTED .
A.
IS THE PROJECT NEEDED IN ORDER TO MAINTAIN ADEQUATE AND
RELIABLE ELECTRIC SERVICE TO APCO'S CUSTOMERS?
B.
WILL THE PROJECT HAVE A POSITIVE EFFECT ON ECONOMIC
DEVELOPMENT WITHIN THE COMMONWEALTH?
C.
WILL THE CONSTRUCTION AND OPERATION OF THE PROJECT
PRESENT ANY HEALTH OR SAFETY RISKS RELATING TO ELECTRIC
AND MAGNETIC FIELDS?
D
WILL THE LOCATION FOR THE PROJECT REASONABLY MINIMIZE
ADVERSE IMPACT ON THE SCENIC ASSETS, HISTORIC DISTRICTS
AND ENVIRONMENT?
E.
DOES VIRGINIA LAW PERMIT APCO TO DEVELOP THE PROJECT
JOINTLY WITH ITS AFFILIATE, VIRGINIA TRANSCO?
F.
DOES THE EVIDENCE OF RECORD SUPPORT GRANTING THE CPCN TO
APCO AND VIRGINIA TRANSCO?
G.
WILL THE COMMISSION'S REGULATORY OVERSIGHT OF VIRGINIA
TRANSCO'S FACILITIES AND OPERATIONS BE ADEQUATE AND IN
THE PUBLIC INTEREST?
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ARGUMENT.
A.
THE PROJECT IS NEEDED IN ORDER TO MAINTAIN ADEQUATE AND
RELIABLE ELECTRIC SERVICE TO APCO'S CUSTOMERS.
The Project is necessary to ensure that the transmission system serving the Roanoke,
Salem, Lynchburg and New River Valley area and adjoining counties continues to meet
mandatory reliability standards established -by the North American Electric Reliability
Corporation ("NERC") . NERC is designated under federal law by FERC as the electric reliability
organization responsible for establishing and enforcing reliability standards for bulk transmission
systems in the U.S .
APCo's transmission system is continuously studied and evaluated by PJM
Interconnection, L.L.C. ("PJM"), which is the regional transmission organization ("RTO") with
oversight responsibility for APCo's transmission system. ~JM's Regional Transmission
Expansion Plan ("RTEP") is an exhaustive and ongoing study process undertaken by PJM and its
members to ensure that the transmission system is adequate to meet projected demand and
applicable NERC reliability criteria . (Exhibit 1A, Application, Volume 2, Response to
Guidelines, pp. 1-2; Exhibit 2, Direct Testimony of Evan R. Wilcox, p. 2.)
Because there is no significant generation capacity located in the Prcjcct area, customers in
Roanoke, Salem, Lynchburg, the New River Valley and adjoining counties must depend upon the
transmission system serving the area for a continuous and reliable source of electricity. The
Cloverdale Substation is the principal transmission hub for the extra high voltage ("EHV")
transmission lines serving this area. Those EHV lines include the Jacksons Ferry-Cloverdale 765
kV line, the Cloverdale-Joshua Falls 765 kV line, the Matt Funk-Cloverdale 345 kV line and the
Cloverdale-Lexington (AEP-Dominion interconnection) 500 kV line . These four EHV
191649541-1, 011380-00930-011
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transmission sources supply power to numerous distribution substations in the
Roanoke-Salem-Lynchburg-New River Valley area that in turn support the area's distribution
system . Additionally, the Cloverdale Substation provides a strong 500 kV interface with Virginia
Electric and Power Company ("Dominion") . (Exhibit IA, Application, Volume 2, Response to
Guidelines, pp. 2-3 .)
The Project is needed for three main reasons. First, it has been mandated by PJM as
necessary to address certain NERC reliability criteria violations identified in PJM's 201 1 RTEP .
Second, PJM conducted a market efficiency study that determined that the Project will
cost-effectively address the significant economic congestion that exists on the bulk transmission
system in the area, particularly on the 500 kV line between AEP's Cloverdale Substation and
Dominion's Lexington Substation . Third, two 500/345 kV transformer banks at the Cloverdale
Substation are approaching the end of their uscful life and need to be replaced to maintain
reliability. (Exhibit 2, Direct Testimony of Evan R. Wilcox, p. 4; Exhibit IA, Application,
Volume 2, Response to Guidelines, pp. 2-12 .)
To address the identified NERC reliability criteria violations, economic congestion and
equipment reliability issues, AEP and PJM considered credible alternatives and developed this
project. The Project has been vetted and approved by PJM's Board of Managers. Once the Project
was approved by PJM, AEP as a member of PJM is required to seek the necessary regulatory
approvals and build the Project. (Exhibit IA, Application, Volume 2, Response to Guidelines, p.
11 .)
Staff witness W. Timothy Lough reviewed the Companies' assertion that the Project is
needed and reviewed documentation supplied by the Companies with the application to verify the
Companies'peak load projections, load flow modeling and contingency analyses . As noted in the
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Staff Report, Dr. Lough concluded that the Companies' projections of annual load growth, load
flow studies and contingency analyses appear to be reasonable and that the Companies have
demonstrated a public need for the Project. (Exhibit 20, Direct Testimony of W. Timothy Lough,
Staff Report, pp. 8-12, 19.) No evidence was offered to challenge the peak load projections, load
flow modeling and contingency analyses or any other aspect of the need for the Project .
B.
THE PROJECT WILL HAVE A POSITIVE EFFECT ON ECONOMIC
DEVELOPMENT WITHIN THE COMMONWEALTH .
The Project is essential to accommodate fidure growth and maintain a reliable and stable
supply of electricity to customers in the Roanoke region and beyond. A reliable and stable power
supply is necessary in order to attract new industries and expansions of existing industries to the
area . High tech industries in particular demand a very stable power supply . Additionally, the
Project, together with planned and ongoing improvements to the Cloverdale-Lexington 500 kV
transmission line, will relieve congestion on the interface with the Dominion transmission system
to the north, thereby improving reliability and market efficiency. All of the foregoing benefits
will have a positive effect on economic development within the Commonwealth . TheProjectwill
also further many of the energy objectives listed in § 67-101 of the Code, such as ensuring an
adequate energy supply, using energy resources more efficiently and optimizing intrastate and
interstate use of energy supply and delivery to maximize energy availability, reliability and price
opportunities to the benefit of all user classes . (Exhibit 2, Direct Testimony of Evan R. Wilcox,
pp. 4-5 ; Exhibit 20, Direct Testimony of W. Timothy Lough, Staff Report, pp. 16-17 .)
C.
THE CONSTRUCTION AND OPERATION OF THE PROJECT WILL NOT
PRESENT ANY KNOWN HEALTH OR SAFETY RISKS ARISING FROM
ELECTRIC AND MAGNETIC FIELDS.
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Company witness Richard Gutman presented the calculated maximum electric and
magnetic fields ("EMF") expected to occur at the edge of the right-of-way ("ROW") for several of
the transmission lines involved in the Project, noted that these fields are well below the limits set
by the Institute of Electrical and Electronics Engineers ("IEEE") in Standard C95.6 Tm - 2002
(which sets the safety levels with respect to human exposure to EMF), and concluded that no
significant adverse health effects will result from the operation of the Project. The Companies'
position is consistent with the conclusions expressed in the final report to the Virginia General
Assembly, dated October 31, 2000, prepared by the Virginia Department of Health in association
with this Commission, entitled "Monitoring of Ongoing Research on the Health Effects of High
Voltage Transmission Lines (Final Report .)" (Exhibit 5, Direct Testimony of Richard Gutman,
pp.5-6 .) No expert testimony, other than Mr. Gutman's, has been presented in this case on this
issue.
D.
THE LOCATION FOR THE PROJECT WILL REASONABLY MINIMIZE
ADVERSE IMPACT ON THE SCENIC ASSETS, HISTORIC DISTRICTS.
AND ENVIRONMENT OF THE AREA CONCERNED .
1.
THE ENVIRONMENTAL IMPACT OF THE PROJECT WAS
APPROPRIATELY EVALUATED AND MINIMIZED.
The Companies engaged GAI Consultants, Inc. and Hurt & Proffitt, Inc. to evaluate and
reasonably minimize any adverse environmental impact of the Project. As part of that process,
the Companies conducted a public infon-nation workshop in Botetourt County in order to notify
the public about the Project and solicit public comment. The Companies' environmental
consultants also consulted with and solicited input from various federal and state agencies and
Botetourt County. The Companies and their environmental consultant took the public comments
received during and after the workshop and the agency input into account in deciding upon the
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final locations and design for the various improvements encompassed by the Project . (Exhibit
IA, Application, Volume 2, Response to Guidelines, pp. 35-41 ; Exhibit 4, Direct Testimony of
Richard A. Peszlen, pp. 5-7; Exhibit 6, Direct Testimony of George T. Reese, pp. 2-8; Exhibit 8,
Rebuttal Testimony of George T. Reese, pp. 2-4; Exhibit 9, Rebuttal Testimony of Richard A.
Peszlen, pp. 1-3 .)
2.
NO REASONABLE ALTERNATIVE LOCATIONS FOR THE PROJECT
WERE AVAILABLE.
Several alternative locations for the proposed new East Yard were considered and rejected
as impractical due to site constraints, displacement of established businesses, topography, high
potential environmental impacts, incompatibility with existing land use and opposition from
Botetourt County. With regard to the locations for the proposed new transmission lines, due to
the proximity of the existing and proposed substation yards and the correspondingly short lengths
of the proposed lines connecting them, there is no meaningful opportunity to develop alternative
line routes . (Exhibit 7, Direct Testimony of Timothy B. Earhart, pp. 7-8 ; Exhibit 20, Direct
Testimony of W. Timothy Lough, Staff Report, p.14.)
3.
THE COMPANIES WILL COMPLY WITH SECTION 10 OF HOUSE
BILL 1319, CHAPTER 799 OF THE 2008 ACTS OF ASSEMBLY BY
SEEKING TO IMPLEMENT LOW COST AND EFFECTIVE MEANS
TO IMPROVE THE AESTHETICS OF THE PROJECT.
Section 10 of House Bill 1319 of the 2008 Virginia Acts of Assembly, as amended ("HB
1319") provides that any public utility granted a certificate of public convenience and necessity for
an overhead transmission line "shall seek to implement low cost and effective means to improve
the aesthetics of' the new line and towers .
As noted in the direct testimony of Company
witnesses Earhart and Peszlen, the Companies plan to use a number of low-cost and effective
means to improve the aesthetics of the Project, including using tubular steel poles and vegetative
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buffers and berms where practical, which will minimize the visual presence of those elements.
Additionally, Companies selected the location for the proposed new East Yard to minimize
visibility and line lengths. Overall, these measures are an effective and low-cost means of
improving the aesthetics of the Project and thus will comply with § 10 of HB 13 19. (Exhibit 3,
Direct Testimony of Timothy B. Earhart, pp. 10- 11 ; Exhibit 4, Direct Testimony of Richard A.
Peszlen, pp. 8-9.)
4.
PLACING ALL OR A PORTION OF THE PROJECT UNDERGROUND
IS NOT A REASONABLE OPTION, AND THE PROJECT IS NOT
SUITABLE AS A PILOT PROJECT UNDER HOUSE BILL 1319.
The Companies determined that an undergrounding option was not practical given the
additional costs, reliability -problems and environmental impact . Also, due to the fact the site
already includes seven existing overhead transmission lines, including three EHV lines, there
would be little or no resulting aesthetic mitigation . (Exhibit 3, Direct Testimony of Timothy B.
Earhart,p.10'.) Because the new lines exceed 230 kV, the Project does not meet the criteria to
qualify for the underground pilot program as set forth in HB 1319 . The Commission's Staff
concurs with the Companies that the Project is unsuitable as an underground pflot project, and does
not meet the criteria under HB 1319 . (Exhibit 3, Direct Testimony of Timothy B. Earhart, p. 10;
Exhibit 20, Direct Testimony of W. Timothy Lough, Staff Report, p. 15 .)
THE PROJECT WILL USE OR PARALLEL EXISTING
RIGHTS-OF-WAY TO THE EXTENT FEASIBLE .
As required under §§ 56-46.1 C and 56-259 C of the Code, the Companies did consider
using or paralleling existing ROW easements for the transmission lines included in the Project.
All of the new and relocated lines use or parallel existing APCo and railroad ROWs, except for the
2,000 foot Cloverdale West-Cloverdale East 500 kV tie line. Given the necessary terminal points
(91649541-1, 011380-00930-01)
12
for the 500 kV tie line, there was no practical way to use or parallel any existing ROW for that line.
(Exhibit 3, Direct Testimony of Timothy B. Earhart, p. 8 .)
6.
ALTHOUGH THE COMPANIES CONCUR WITH MOST OF THE
AGENCY RECOMMENDATIONS PRESENTED IN THE DEQ
REPORT, THE COMPANIES OPPOSE CERTAIN OF THOSE
RECOMMENDATIONS BECAUSE THEY ARE UNDULY
BURDENSOME, IMPRACTICAL AND/OR UNNECESSARY.
The Companies recognize the importance of conserving and protecting Virginia's natural,
cultural and visual resources, and accordingly concur with most of the recommendations included
in the DEQ Report (Exhibit 18). However, the Companies consider five of those
recommendations to be unduly burdensome, impractical and/or unnecessary. The Companies
also believe that certain of those recommendations may raise worker safety concerns . The
recommendations objected to by the Companies include (a) the recommendations of the Virginia
Department of Game and Iffland Fisheries as to a time-of-year restriction on in-stream work in
Tinker Creek and its tributaries, as to a time of year restriction on tree removal and ground clearing
during songbird nesting season, as to the maintenance of 100 foot wide natural buffers around
streams and wetlands, and as to the implementation of low impact development ("LID") measures;
and (b) the recommendation of the Virginia Department of Forestry as to mitigation of forest loss.
The rebuttal testimony of Company witness Earhart sets forth in detail the Companies' objections
to the foregoing recommendations . (Exhibit 7, Rebuttal Testimony of Timothy B. Earhart, pp.
2-9.) Three of the recommendations objected to by the Companies have been included in the
DEQ Reports filed in connection with prior transmission line cases filed by APCo (e.g., Case Nos.
PLTE-2009-00137 (Saltville-Kingsport Rebuild), PUE-2012-00007 (Falling Branch-Merrimac)
and PUE-2012-00132 (Wythe Area Improvements).) Upon objection of APCo in those cases on
grounds similar to those set forth in Mr. Earhart's rebuttal testimony in this case, the Commission
(#1649541-1, 011380-00930-01)
13
declined to adopt those recommendations in those cases. The Companies ask the Commission to
decline to adopt the similar recommendations in this case.
VIRGINIA LAW PERMITS APCO TO DEVELOP THE PROJECT JOINTLY
WITH ITS AFFILIATE, VIRGINIA TRANSCO.
E.
In its Legal Memorandum dated September 24, 2013, the Commission's Staff takes the
position that Virginia law prohibits Virginia Transco from undertaking any portion of the
Cloverdale Project. Staff argues that, under §§ 56-265 .3 and 56-265 .4 of the Code, Virginia
Transco is required to prove the inadequacy of the current electric service of APCo, the incumbent
retail supplier, before it can provide transmission services in Virginia . Given that Virginia
Transco does not seek to serve customers at retail in APCo's certificated territory and that its
participation in the Project is limited to its role as a wholesale provider of transmission services,
Staff s position is plainly without merit.
I
SECTIONS 56-265 .3 AND 56-265 .4 OF THE CODE APPLY TO THE
ALLOTMENT AND PROTECTION OF DISTRIBUTION SERVICE
TERRITORIES OF VIRGINIA UTILITIES.
In 1950, the Virginia General Assembly enacted the Utility Facilities Act, §§ 56-265 .1 et
seq . of the Code . A goal of the legislation was to divide the Commonwealth into distinct service
territories so that only one utility providing a particular type of utility service was authorized and
required to provide that service to customers located in a certain territory. Accordingly, §
56-265 .3 provides in pertinent part:
A. No public utility shall begin to fimiish public utility service
within the Commonwealth without first having obtained from the
Commission a certificate of public convenience and necessity
authorizing it to furnish such service. Any company engaged in
furnishing a public utility service in this Commonwealth as of July
1, 1950, shall, upon filing maps with the Commission within ninety
days from such date, showing the territory now being serviced by it,
be entitled to receive a certificate of convenience and necessity
1#1649541-1, 011380-00930-01)
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authorizing it to begin to fumish such public utility service in such
territory.
B. On initial application by any company, the Commission, after
formal or informal hearing upon such notice to the public as the
Commission may prescribe, may, by issuance of a certificate of
convenience and necessity, allot territory for development of public
utility service by the applicant if the Commission finds such action
in the public interest.
To provide protection to utilities that were allotted certificated service territories under § 56-265 .3,
as well as to the retail customers of those utilities, the General Assembly also enacted § 56-265 .4,
which states:
Except as provided as in § 56 .265 .4:4, no certificate shall be granted
to an applicant proposing to operate in the territory of any holder of
a certificate unless and until it shall be proved to the satisfaction of
the Conunission that the service rendered by such certificate holder
in such territory is inadequate to the requirements of the public
necessity and convenience; and if the Commission shall be of
opinion that the service rendered by such certificate holder in such
territory is in any respect inadequate to the requirements of the
public necessity and convenience, such certificate holder shall be
given reasonable time and opportunity to remedy such inadequacy
before any certificate shall be granted to an applicant proposing
'
to
operate in such territory.
A common sense reading of these statutes, particularly in light of recent developments in
the electric utility industry, leads to the conclusion that they should be interpreted only as
establishing separate retail distribution service territories throughout Virginia, insuring that there
will be no competition for customers or duplication of distribution facilities in each distinct
territory. When the Utility Facilities Act was initially enacted, the norm in Virginia and
elsewhere was vertically integrated electric utilities. Each utility had its own generation,
(#1649541-1 . 011380-00930-01)
15
transmission and distribution facilities that it used to provide service to its customers. In recent
04
years, however, significant statutory and regulatory developments have occurred in the industry
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that have changed the manner in which the generation and transmission functions are carried out.
For instance, incumbent utilities and independent power producers now have the opportunity to
construct and operate generating facilities in the service territories of Virginia utilities and to sell
the output from such facilities on the open market . 4 With respect to transmission, much of that
function is now under the auspices of RTOs .
In 1999, the Virginia General Assembly enacted §
56-579 of the Code, which required each Virginia electric utility operating or controlling
transmission capacity to join a regional transmission entity and to transfer the management and
control of its transmission assets to that entity . In response, this Commission approved the
requests of APCo and Dominion to join PJM, which now coordinates the planning of transmission
facilities and the movement of wholesale electricity across all or parts of 13 states and the District
of Columbia . In addition, the General Assembly enacted § 56-585 .1 A 4 of the Code, which
significantly altered the manner by which the transmission expenses of Virginia's electric utilities
are recovered. That statute requires the Commission to allow recovery in retail rates of all costs
for transmission services provided to APCo or Dominion by PJM as determined under rates
approved by FERC. It is appropriate for the Commission to consider these fundamental changes
when interpreting §§ 56-265 .3 and 56-265 .4.
As shown by the Commission precedent discussed below, the requirement in § 56-265 .4
that a utility desiring to provide service in a territory allotted to another utility must demonstrate
that the current service is inadequate thus logically applies only if the non-incumbent seeks to
provide retail service to customers in the incumbent's certificated territory or otherwise to
See Code § 56-580D.
1#1649541-1,011380-00930-01)
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duplicate or interfere with its service or facilities. In contrast, the mandate of § 56-265 .4 does not
appl'y to a transmission-only provider such as Virginia Transco, which seeks only to provide
wholesale transmission services in connection with ajoint project undertaken with its affiliate,
APCo, and not to supplant APCo in the delivery of retail electric service to customers. 5
2.
COMMISSION PRECEDENT SUPPORTS AN INTERPRETATION OF
SECTIONS 56-265 .3 AND 56-265 .4 THAT WOULD NOT RESTRICT
VIRGR41A TRANSCO FROM DEVELOPING ITS PORTION OF THE
CLOVERDALE PROJECT.
The Commission has clearly established that a Virginia public utility may construct and
operate utility facilities providing wholesale transrriission utility service within the. certificated
retail service territory of another Virginia public utility without obtaining a service territory
certificate pursuant to § 56-265 .3, or proving the inadequacy of the incumbent utility's service
under § 56-265 .4, where the proposed wholesale facilities do not compete with, duplicate or
interfere with the service or activities of the incumbent utility. In Application of Trans-Allegheny
Interstate Line Company, S .C.C . Case No. PUE-2007-00033, and in the related Joint Application
of Virginia Electric and Power Company d1bla Virginia Power and Trans-A llegheny Interstate
Line Company, S.C.C . Case No. PUE-2007-0003 1, the Commission granted certificates of public
convenience and necessity to Trans-Allegheny Interstate Line Company ("Trailco") to construct
and operate a 500 kV transmission line through the certificated service territory of an affiliate of
Trailco, The Potomac Edison Company ("Potomac Edison") . The Commission did not require
,5 Staff argues that § 56-265 .2B of the Code, which allows the Conunission to permit the construction of electrical
generating facilities under certain circumstances "notwithstanding the provisions of § 56-265 .4," supports its position .
However, the General Assembly subsequently enacted § 56-580D of the Code, which includes a similar provision
authorizing the Commission to permit the construction of a generating facility upon finding, among other things, that
such facility will have no material adverse impact upon the reliability of electric service provided by any regulated
utility. Significantly, the more recent enactment does not contain an exception fi7om § 56-265 .4, suggesting that none
wasnecessary. Moreover, § 56-580 goes onto confirm in subsection E that the purpose of §§ 56-265 .3 and 56-265 .4
was to create exclusive retail distribution service territories by providing that "[n]othing in this section shall impair the
distribution service territorial rights of incumbent electric utilities . . . within their exclusive service territories as
established by the Commission" (emphasis added).
17
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TrailcQIto obtain a service territory certificate under § 56-265 .3 as a necessary prerequisite thereto,
or to prove the inadequacy of Potomac Edison's service under § 56-265 .4, before constructing and
operating the proposed transmission line. Indeed, there was no need to do so, inasmuch as Trailco
6
did not seek to supplant the incumbent utility within its own retail service territory.
Similarly, in Application of Virginia Natural Gas, S.C .C. Case No. PUE860065, the
Commission granted a certificate to Virginia Natural Gas ("VNG") under Code § 56-265 .2,
permitting the construction of a gas pipeline across the certificated retail service territories of a
number of incumbent gas utilities. In that case, in rejecting the objections of one incumbent gas
utility, the Commission pointed out that VNG did not seek, and the facilities certificate granted to
VNG did not grant, any territorial service (distribution) rights outside of VNG's certificated
service territory.
More recently, in Application of PA THAllegheny Virginia Transmission Corporation,
S .C.C. Case No. PUE-2010-00115, the Commission flatly rejected Staffs assertion that PATH
Virginia Allegheny Transmission Corporation (a transmission-only affiliate of AEP and
Allegheny Energy, Inc . 7) ("PATH") was required by § 56-265 .4 to prove the inadequacy of the
current electric service of the incumbent utilities through whose territories PATH's proposed
transmission line ran (S .C.C. Case No. PUE-2010-00115, Order dated October 20, 2010, pp. 34) .
The Conunission stated :
The Application is not required to include evidence that current
electric service of Virginia Power, NOVEC or Shenandoah "is
6
In addition, as a part of this overall 500 kV transmission line project, Trailco and Dominion were jointly authorized
by the Commission to construct a section of the 500 kV line through the current certificated territory of Rappahannock
Electric Cooperative and Dominion was authorized to construct a section of the line across the territory of Northern
Virginia Electric Cooperative . In neither case did the Commission interpret § 56-264 .4 to require the applicant to
demoristrate that the service of the incumbent utility was inadequate .
7
Allegheny Energy, Inc . subsequently was merged into FirstEnergy Corp .
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inadequate to the requirements of the public convenience andnecessity" (SCC Case No. PUE-2010-00115, Order dated October
20, 20 10, p. 4).
The Commission added in a footnote:
We find that § 56-265.4 of the Code does not apply to the
Application herein in the manner requested by Staff Thus, we also
deny Staff s request "that the Commission direct [Virginia Power],
NOVEC and Shenandoah to provide statements indicating whether
any service deficiency currently exists within their respective
territories . . . . .. (Order, p. 4.)
Staff unsuccessfully attempts in its Legal Memorandum to distinguish each of the cases
cited above. Staff argues that the Trailco decision does not set a precedent on this issue since the
case was decided near the end of the capped retail rate period, which followed a period where the
Virginia Code had established specific windows of time for divestiture of generation and
transmission assets by vertically integrated utilities. Staff further notes that the incumbent utility,
Potomac Edison, had divested itself of its generation . None of these factors is relevant. First, as
Staff itself recognizes, the windows of time provided for divestiture had closed by the end of 2005,
two years before the Trailco application was filed. Second, in any event APCo is not seeking to
divest itself of transmission . All of APCo's current transmission assets will remain owned by
APCo and, as Company witnesses Patton and Sundararajan testified, APCo will continue to invest
in new transmission projects at levels comparable to or higher than historic levels . (See, e.g., Tr .
at37 :18-38 :12 (Patton) ; 60:10-15 (Sundararajan) .) Third, neither the fact that the capped retail
rate period was in effect when Trailco was decided nor the fact that Potomac Edison had divested
itself of generation is material . As shown above, §§ 56-265 .3 and 56-265 .4 of the Code establish
and protect retail service territories, and do not apply to transmission-only providers such as
Trailco. Accordingly, if Trailco had sought to provide distribution service in Potomac Edisods
t#1649541-1, 011380-00930-01)
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territory, it would have had to prove the inadequacy of the incumbent's current service,
This was
not the case, and the Commission appropriately awarded Trailco a certificate.
Staff also seeks to distinguish Application of Virginia Natural Gas on the basis that §§
56-265 .3 and 56-265 .4 do not apply since VNG was an incumbent Virginia utility. To the
contrary, the inadequacy of service requirement of § 56-265 .4 applies whether or not the utility
seeking to supplant the retail distribution utility is already operating in the Commonwealth or is a
non-incumbent seeking to provide service in Virginia . In other words, VNG would have had to
prove the service inadequacy of the incumbent gas utilities if it were seeking to provide
distribution service in their territories. Since VNG did not seek, and the facility certificate
granted to VNG did not grant, any retail service rights outside of VN,G's service territory, it was
not in violation of the statute.
Finally, Staff argues that, in rejecting its position in PATH, the Commission meant only
that the utility's application need not include information on inadequacy of service, but such
evidence must eventually be pre'sented in the case. A reading of the order in its entirety
demonstrates that this was not the Commission's intention. The Commission's subsequent
statement in the order that further evidence may be necessary and should be received by the
Hearing Examiner instead referred specifically to additional information regarding original routes
for the proposed line, projections from PJM's 201 0 RTEP, and information on Dominion's
reconductoring or rebuilding project relating to its Mt. Storm-Doubs transmission line (Order, pp.
4-5). The subsequent statement did not refer to any need for evidence as to inadequacy of service .
The Commission's approach in the PATH, Trailco and VNG cases permitted the public
interest to be served in a manner consistent with the overall intent of Title 56 of the Code. In
those cases, the applicants sought a facilities certificate under § 56-265 .2 to construct a major new
01649541-1, 011380-00930-011
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utility facility in the certificated retail service territory of one or more incumbent utilities. Ineach
case, the applicant did not seek to displace the incumbent utility as a retail supplier of utility
services or to duplicate the incumbent's facilities in order to provide such retail services .
Accordingly, there was no need for any proceeding under §§ 56-265 .3 or 56-265 .4, and any
legitimate concerns about the presence of one utility's facilities in the service territory of another
utility could be fully addressed in the facilities certificate proceeding under § 56-265 .2. The
PATH, Trailco and VNG cases establish that the proof of inadequacy of service requirement does
not apply to a wholesale transmission-only public utility like Virginia Transco, and that the only
certificate it must obtain is a facilities certificate under § 56-265 .2, which is precisely what the
Companies seek in this proceeding . 8
It is important to recognize that, in continuing to interpret these statutes in this practical and
common sense manner, the Commission would -not be setting a precedent allowing any
non-incumbent utility to undertake transmission projects in Virginia without its approval . Any
such utility would be required to apply to the Commission for a certificate .of public convenience
and necessity under the Utility Facilities Act. In such a proceeding, the Commission could
consider not only the need and environmental impact associated with the project, but also the
qualifications of the applicant to undertake the project and other relevant factors. Thus, the
decision to allow a non-incumbent to provide service in the Commonwealth would be made on a
case-by-case basis.
8 This interpretation is entirely consistent with Staffs own Guidelines ofMinimum Requirementsfor Transmission
Line Applications Filed Under Virginia Code Section 56461 and The Utility Facilities Act (1991) . SectionllA9b
of these guidelines clearly contemplates that one utility can construct a transmission line requiring a certificate under §
56-265 .2 in the service territory of another utility without the need for a proceeding under §§ 56-265 .3 or 56-265 .4
absent an objection from the affected utility.
21
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STAFF'S INTERPRETATION OF SECTIONS 56-265 .3 AND 56-265 .4
WOULD EFFECTIVELY BAR ALL NON-rNCUMBENT UTILITIES
FROM UNDERTAKING TRANSMISSION PROJECTS IN VIRGINIA
AND THUS TRIGGER FERC BACKSTOP SITING AUTHORITY IN
CERTAIN INSTANCES.
After devoting much of its Legal Memorandum to its argument that §§ 56-265 .3 and
56-265 .4 of the Code flatly prohibit a non-incumbent provider of electric service from entering the
Commonwealth absent a showing that the incumbent's electric service is inadequate, Staff abruptly
reverses itself and states that "Virginia law does not establish a blanket prohibition on
non-incumbent entry and Staff does not recommend, such a ruling by the Commission ." (Staffs
Legal Memorandum, p. 26.) Staff does not, however, because it cannot, mention any scenario
whereby a non-incumbent transmission developer could enter and provide wholesale transmission
service in Virginia under Staffs interpretation of these statutes . Staff cannot have it both ways .
If Staff s position is correct, then no non-incumbent can ever undertake transmission projects in the
certificated service territory of any Virginia utility absent a showing of inadequate service.
As a result, adopting Staffs interpretation would in effect establish a blanket prohibition on
non-incumbent entry into the Commonwealth . The Companies agree with Staff that such a ruling
would appear to trigger federal "backstop" siting authority in any area of the Commonwealth
designated as a National Interest Electricity Transmission Corridor ("NIETC").' Inthatevent,the
non-incumbent utility could seek FERC approval to construct and operate transmission facilities in
Virginia without any Commission review whatsoever. To avoid this undesirable result, the
Commission should reject Staffs interpretation of § § 56-265 .3 and 56-265 .4 and continue to
interpret these statutes to allow wholesale providers of transmission services to operate in the
9 16 U.S.C. § 824 p (b)(1)(13) (allowing FERC to permit transmission construction in NIETCs if "the applicant for a
permit is a transmitting utility under [the Federal Power Act] but does not qualify to apply for a permit or siting
approval for the proposed
0 project in a State because the applicant does not serve in-use customers in the State . . .
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Commonwealth, subject to the Commission's jurisdiction to approve or deny applications for
specific projects on a case-by-case basis pursuant to the requirements for a certificate of public
convenience and necessity.
4.
FERC ORDER 1000 DOES NOT APPLY TO THIS PROCEEDING .
In 201 1, FERC promulgated Order No. 1000 ("Order 1000")10 . Order 1000 mandates
changes to electric transmission planning processes and associated cost allocation methods used
by transmission providers such as PJM.
Among other things, the order includes a requirement
that transmission providers expand their planning processes to consider proposals submitted by
non-incumbent transmission developers. To accomplish this, FERC directed transmission
providers to remove from their Open Access Transmission Tariffs ("OATTs") any provisions
under which incumbent transmission owners would have a right of first refusal for certain new
transmission facilities selected in a regional transmission plan for cost allocation. The rule is
designed to promote competition in regional transmission planning processes to support efficient
and cost-effective transmission development, which should ultimately reduce transmission costs
for retail customers. Order 1000 requires that, before approving a non-incumbent to build another
transmission project, PJIM must have determined that the non-incumbent's project satisfies the
regional needs in the most cost-effective manner. (Exhibit 24, Rebuttal Testimony of
Rajagopalan Sundararajan, p. 7.)
VAiile Order 1000 may have future implications in Virginia, it does not apply in this
proceeding . Company witness Sundararajan testified that the Cloverdale Project was approved as
10 Transmission Planning and Cost Allocation by Transmission Owning and Operating Public Utilities, Order No .
1000, 136 FERC 161,051 (201 1) ("Order No. 1 000"), order on reh'g and clarif, Order No . I 000-A, 139 FERC 1
61,132 (2012) ("Order No . I 000-A"), order on rehg and clarif, Order No . I 000-B, 141 FERC 1 61,044 (2012)
("Order No . I 000-B").
(91649541-1, 011380-00930-01)
23
part of PJM's RTEP before Order 1000 became effective. (Tr .atl97 :23-198 :25 .) AEPwas
designated to construct the Project as part of the 201 1 RTEP, while FERC did not issue its order on
PJM's FERC Order 1000 compliance filing until March, 2013. (Exhibit 24, Rebuttal Testimony
ofRajagopalanSundararajan,pp7-8 .) Moreover, even if Order 1000 had been in effect at the
time PJM evaluated and approved the Project, it would not have been a candidate for competition
under Order 1000 because it did not meet each of the eligibility requirements set forth in the order.
(Tr. 198:7-25.)
In addition, Mr. Sundararajan noted that Order 1000 will also be inapplicable to any future
projects undertaken by Virginia Transco, which will not be competing with non-incumbents to
.construct any projects that are subject to Order 1000. Another AEP entity, Transource Energy,
LLC ("Transource"), will participate in competitive transmission projects . To the extent that
Transource is designated to construct projects in Virginia, it will seek all necessary regulatory
approvals from this Commission . (Exhibit 24, Rebuttal Testimony of Rajagopalan Sundararajan,
p. 8 ; Tr. 192:4-12 .)
F.
THE EVIDENCE OF RECORD SUPPORTS GRANTING THE CPCN TO
APCO AND VIRGINIA TRANSCO.
The evidence before the Commission shows unequivocally that it is in the best interest of
Virginia customers that Virginia Transco be permitted to join APCo in building, owning and
operating the Cloverdale Project, as requested by the Companies.
The most immediate benefit of the Companies' proposal is that Virginia customers are
projected to experience a smaller rate increase in connection with the construction of these
transmission facilities if they are built by Virginia Transco and APCo together. As explained by
Company witness Boteler, the debt financing costs that Virginia Transco would incur to build its
(91649541-1, 011380-00930-01)
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portion of the Project are already lower than APCo's. (Tr. at 75-5-24 (explaining that Virginia
Z
Transco has a five to ten basis point relative cost advantage over APCo in the ten-year-debt
benchmark, which is commonly used in the utilities sector).)" If APCo built the Project alone,
the cost of debt would be greater, an increased cost that would be borne by customers not only in
APCo's service territory, but also elsewhere in Virginia and other PJM regions.
Notably, in addition to Virginia Transco,s lower financing costs, it has committed to
estabfish the equity component of its capital structure at a level no greater than APCo's. Jr. at
179:7-181 :2 (Sundararajan).) This is significant, because the equity component of the capital
structure has a direct impact on the rates customers will pay in connection with the Project. Jr.at
179:20-22 (Sundararajan); see also Tr. at 148 :15-149:21 (Maddox, acknowledging that Virginia
Transco will not have an actual capital structure until the Commission authorizes* it to construct
and own the Project) .) It is undisputed that the cost of equity is the same for APCo and Virginia
Transco, since their authorized rates of return for the Project are identical. Therefore, Virginia
Transco's decision to match its capital structure with that of APCo (to the extent APCo's has a
greater debt component) ensures that customers will not pay more for the Project if Virginia
Transco and APCo build it together.
Additionally, APCo has also offered additional rate mitigation, if necessary, through its
transmission rate adjustment clause ("T-RAC"), to further protect its Virginia customers.
(Exhibit 25, Rebuttal Testimony of William A. Bosta, pp. 2-3.) These customer protections,
coupled with Virginia Transco's lower financing costs, make clear that it is in the best interest of
customers that APCo and Virginia Transco be authorized to develop the Project as requested in the
11 Virginia Transco's cost of debt is expected to continue to decrease in the future, creating the potential for increased
benefit to customers in future projects . (Tr. at 84:24-86:17 (Boteler).)
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application, and that customers, not only APCo's but also others in Virginia and throughout PJM,
will experience a smaller rate increase if APCo and Virginia Transco develop the Project together.
Staff's opposition to Virginia Transco seeks to minimize this advantage, arguing in the
abstract that investments by Virginia Transco could erode APCo's transmission investment
opportunities generally and could negatively affect APCo's credit rating . These arguments,
however, are contrary to the clear weight of the evidence before the Commission. 12
First, it is undisputed that making the $222 million additional investment to develop the
Project over the next three years would have an immediate detrimental effect on APCo's credit
metrics if it were required to build the Project alone . This is so because, as explained by
Company witness Boteler, under APCo's FERC formula rate there are no cash flows associated
with APCo's transmission investment until the facilities go in service. (Tr. at 107:6-108 :5;
Exhibit 26, Rebuttal Testimony of Jerald R_ Boteler, Jr., p. 2.).
Staff attempts to argue that APCo's T-RAC somehow alleviates this negative effect. It
does not. The record is clear that the T-RAC does not at all accelerate the recovery of
transmission investments and return thereon. The T-RAC simply collects in retail rates the costs
billed by PJM to APCo for transmission services . (Exhibit 25, Rebuttal Testimony of William A.
12 It is worth mentioning that Staff originally opposed Virginia Transco on the basis that a) its participation in the
Project had a de minimis negative impact on rates, and b) its participation had an immediate negative impact on
APCo's credit metrics . Staff appears to have abandoned those arguments at the hearing, in favor of its position now
alleging the risk of possible long-term weakening of APCo's transmission investment and a risk of higher financing
costs resulting from the potential credit-quality deterioration at APCo. Like Staff's prior objections, the facts do not
support Staff's current position.
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Bosta,pp .5-6.) And in any event, A.PCo's T-RAC will only collect approximately 5% of the total
costs associated with the Project. (Exhibit 17, Direct Testimony of William A. Bosta, pp. 5-8.)
13
Second, contrary to Staffs assertions, APCo's credit rating will not deteriorate as a result
of Virginia Transco's investment in the Project . The main reason for this, as explained by
Company witness Boteler, is that from a credit rating agency perspective the relief from the debt
associated with this project helps APCo avoid deterioration of its credit profile. In other words,
having Virginia Transco make the majority of the investment in the Project instead of APCo helps
APCo avoid the pressure that investing $222 million with no associated revenues for three years
would have on APCo's cash flow metrics.
If the Commission approves Virginia Transco's request to build, own and operate the
Project, APCo will augment its financial flexibility, enhancing its capacity to respond to other
capital demands in an ever-changing environment for public utilities. This in turn will permit
necessary, and often times mandated, investments to be made to its transmission system without
the potential of limiting the amount of APCo's capital to be invested in its distribution and
generation systems. Authorizing Virginia Transco to build, own and operate transmission .assets
in Virginia will provide this flexibility with no adverse impact on APCo's rates or service.
(Exhibit 10, Direct Testimony of Charles R. Patton, p. 3.)
Staff bases its position on the premise that, once the Project goes in service, APCo will
miss the earnings from investing in the Project. The main flaw in Staffs argument is that there is
" Much confusion has arisen from the fact that the T-RAC enables APCo to recover in retail rates the transmission
costs it incurs (i .e ., what APCo pays PJM as a transmission customer). These transmission costs reflect investments
made by APCo and other transmission owners in PJM, but the T-RAC is not a mechanism to recover those
investments . Transmission investment by APCo and other transmission owners in PJM are recovered in
wholesale rates charged to transmission customers through PJM's OATT. (Tr. at 166:3-15 (Carr).) The
difference between these two spheres is illustrated by the fact that APCo would have transmission costs flowing
through its T-RAC even if it had never made any transmission investments .
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no detriment to customers if APCo forgoes this particular $222 million investment.
Staff's
position would require that there be a negative effect on APCo's credit ratings as a result of not
making this investment, but the evidence is clear that no such detriment would result from Virginia
Transco's investment in the Project either in the short or the long term. On the contrary, as
explained by Company witness Boteler, even though APCo is capable of making this investment,
it could not do so without adversely affecting its credit metrics . (Tr. at 108:20-25 (APCo's metrics
would suffer if APCo had to borrow hundreds of millions of dollars more than its cash flows in
order to finance the Project) ; 107:12-16 (explaining that APCo would not receive any cash
revenues until the transmission assets go in service) .)
14 Significantly, this deterioration of
APCo's credit metrics could affect not only the cost of debt for the Project, but also for other
projects that APCo is financing for generation and distribution investments .
Moreover, because transmission investments produce lower annual cash flows than
comparable generation or distribution investments, the credit rating agencies assign lower credit
metric criteria to wires-only utilities as compared to vertically integrated electric utilities. As a
result, vertically integrated utilities such as APCo do not realize all of the benefit associated with
transmission investment since they are held to a higher credit metric standard than wires-only
companies such as Virginia Transco. (Exhibit 26, Rebuttal Testimony of Jerald R. Boteler, Jr., p .
6.)
The infirmity of Staff s position is best illustrated by the lack of basis for witness
Maddox's criticism of Company witness Boteler's testimony that additional transmission
14 Staff witness Maddox acknowledged during the hearing that if APCo were to lever up to make the investment in the
0
Project alone this investment could have negative implications . Remarkably, he suggested that it would be a benefit
(or a possibility) for APCo "even to invest, as AEP is having, investment in the transmission at fifty/fifty
equity-to-debt, that would help to improve the financial situation of APCo." jr. at 129:16-130:2 .) Mr. Maddox's
statement ignores the reality of APCo's current capital structure, and completely overlooks the significant increase in
costs for APCo's customers across the board if APCo were able and allowed to take such approach .
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investment by APCo in place of generation or distribution investment does not enhance credit
metrics but rather lowers them. First, in making this statement Mr. Maddox ignores the clear
evidence that APCo will continue to make substantial investments in transmission assets, and
therefore that its long-term credit profile will not lack the long-term benefits of transmission
investment. Additionally, Mr. Maddox bases his conclusion on a misplaced assumption that
APCo is able to timely recover its transmission investments through its T-RAC. (See, e.g., Tr. at
134 :20-135 :8; 141 :15-17 .) The error in this assumption is clear, in light of the very small
percentage of the costs of the Project that eventually will be reflected in the PJM transmission
costs paid by APCo and then reflected in retail rates. . And further, Mr. Maddox's testimony
simply disregards the undisputed evidence that the absence of cash flows during the Project's
construction period will cause APCo's cash flow metrics to deteriorate if APCO' has to finance the
entirety of the Project.
When questioned during cross-examination, Mr. Maddox admitted not to be familiar with
the fact that a transmission asset needs to be in service in order to be placed in APCo's formula rate
(Tr. at 134:13-18), and readily acknowledged that the T-RAC does not account for the recovery of
the return on and of every dollar APCo invests in transmission in Virginia (Tr. at 134:20-136:21),
even though such dollar-for-dollar recovery is one of the spear tips of Staffs position. Mr.
Maddox further disclaimed an understanding of how APCo's T-RAC and FERC formula rate
work, or their interplay, and was unable to provide any meaningful responses regarding the timing
or origin of cash flows related to APCo's transmission investment. (See Tr . at
131 :9-135 :8;140 :9-145 :1 .) Without such basis, Mr. Maddox's conclusions about the quality and
effect of transmission investment on the credit rating agencies must be disregarded.
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VI
Pun
Remarkably, Staff appears to advance the position that it would be desirable for APCo to
favor transmission investments because of the "aspects of FERC rate-making for transmission that
credit-rating agencies and investors believe are generous compared to APCo's rate-making for
other investments." (Tr. at 164:2-6 (Carr) .) Such position ignores not only the absence of cash
flows during construction discussed above, but the material risk that over the long life of these
transmission assets the authorized rates of return may be lower than what they currently are (and,
in fact, lower than those authorized by this Commission). In light of the testimony of Company
witness Sundararajan about actual cases in which FERC rates of return have been reduced,
sometimes dramatical.ly, after assets have gone in service (Tr. at 178 :3-179 :6), a position that
would consider transmission assets to be risk-free and that assumes that FERC recovery
mechanisms are in any way superior or preferable than state mechanisms across the board is
unwarranted. In that regard, transmission investment, while necessary, should not be considered
more desirable than generation or distribution investment as a matter of course.
In the end, Staff position fails because there is no harm to APCo's cre dit ratings as a result
of Virginia Transco,s investment in the Project. This is so, first of all, because allowing Virginia
Transco to make this investment does not deprive APCo of an opportunity to build and own
transmission assets . APCo will continue to make substantial transmission investments in
Virginia. (See, e.g., Tr. at 47:17-18 (Patton) (explaining that 40% of the $500 million
transmission investment anticipated in the short term in APCo's Virginia territory will be done by
APCo); 60:10-15 (Sundararajan).) This undisputed testimony is illustrated by the fact that the
Commission recently issued a CPCN for APCo to undertake a $ 100 million transmission project in
the Wythe area (Case No. PUE-2012-00132), with a projected in service date of 2015. Similarly,
APCo recently filed a CPCN application with the Commission for a $28 million project for
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transmission reliability improvements in the south Lynchburg area (with a projected in service
date of 2017), and will shortly file a CPCN application for a $40 million project for the
reconductoring of the Cloverdale-Lexington 500 kV transmission line (with a projected in service
date of 2016). With such substantial transmission investment by APCo, there should be no
concern that the transmission component of APCo's utility asset mix could weaken as a result of
Virginia Transco's investment in the Project.
But even if there was such concern, there is no dispute that the Commission has complete
regulatory control over what transmission investments Virginia Transco is authorized to make .
Virginia Transco is required to obtain certificates for its transmission investments on a project by
project basis. Thus, if one were to entertain a concern about a reduction in APCo's transmission
investment, the question should not be whether the mere existence of Virginia Transco, in general,
could cause APCo's transmission investment to decline below historic levels, but rather whether
Virginia Transco's investment in this particular project could materially change APCo's
transmission asset mix . There is no evidence in the case suggesting that APCo's historic
transmission asset mix would appreciably change if APCo does not make the entire $222 million
investment in the Project. On the contrary, it is quite plain that authorizing Virginia Transco to
undertake its portion of the required investment to develop the Project does not have any
discemible impact on APCo's $2.0 billion transmission asset plant given the large transmission
investment on the horizon.
This fact, coupled with the Conunission's jurisdiction and latitude to monitor quite closely
the proportion of APCo's transmission investment as compared to its distribution and generation
investment clearly shows that there will be no opportunity for APCo's transmission investment to
weaken due to Virginia Transco's transmission investment, either as a result of the Cloverdale
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Project or in the future. APCo and Virginia Transco would be willing and ready to provide the
Commission and its Staff with periodic informational reports to facilitate the Commission's
oversight of APCo's and Virginia Transco's upcoming transmission investment.
Authorizina,42 the construction, ownership and operation of the Project by APCo and
Virginia Transco, as requested in the application, is a win-win situation for both customers and the
Companies. Customers will immediately benefit ftom Virginia Transco's investment in the
Project, because of the lower costs and smaller rate increase . APCo will also immediately
benefit, as it will avoid the cash flow credit metric weakening that would result from making the
entire $237 million investment but not receiving any cash flows until the Project goes in service.
The public interest is best served by granting the CPCN for the Project to both APCo and Virginia
Transco as requested in the application.
G.
THE COMMISSION'S REGULATORY OVERSIGHT OF VIRGINIA
TRANSCO'S FACILITIES AND OPERATIONS WILL BE ADEQUATE AND
IN THE PUBLIC INTEREST .
In its Legal Memorandum, the Staff argues that, if the Commission approves the
Companies'joint application for the Cloverdale Project, its regulatory oversight of the facilities
and operations of Virginia!s electric utilities in general, and those of Virginia Transco in particular,
will be diminished in several areas. This will not be the case . As discussed below, Virginia
Transco will agree to a number of conditions that will address these concerns and allow the joint
Project to proceed to the benefit of APCo's Virginia customers and without the alleged loss of
regulatory oversight identified by Staff. Virginia Transco proposes that these conditions remain
in effect until the Commission no longer deems them necessary.
APPLICABILITY OF THE AFFILIATES ACT TO VIRGINIA
TRANSCO .
(#1649541-1 . 011380-00930-011
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Staff correctly points out that Virginia Transco does not meet the definition of a "public
service company" under the Affiliates Act, Chapter 4 of Title 56 of the Code. (StaffsLegal
Memorandum, p. 15.) Accordingly, while transactions between Virginia Transco and APCo are
subject to the Commission's review and approval under Chapter 4, transactions between Virginia
Transco and AEPSC, which will provide services to Virginia Transco, are not.
To address this issue, Virginia Transco will agree that the terms of its service agreement
with AEPSC will conform in all material respects to the terms of the agreement between APCo and
AEPSC (as it now exists or may hereafter be amended), which was most recently approved by the
Commission by order entered on 0ctober 22, 2012, in Case No. PUE-2012-00089, Further,
Virginia Transco will submit to the Staff a copy of its current service agreement with AEPSC and
any subsequent modification thereof.
2.
VIRGINIA TRANSCO'S CAPITAL STRUCTURE .
The Staff also expresses its concern that, under Virginia law, the Commission will have no
ratemaking jurisdiction over Virginia Transco, and thus no regulatory oversight with respect to the
debt/equity ratio in Virginia Transco's capital structure. Staff also notes that, even though
Virginia Transco's FERC formula rate includes a 50% cap on equity, Virginia Transco can petition
FERC to remove this cap. (Staff s Legal Memorandum, pp. 18-19.)
As discussed earlier, Virginia Transco addressed Staffs capital structure concerns at the
hearing by agreeing that Virginia Transco's capital structure -will match that of APCo . (Tr. at
179:7-181 :2 (Sundararajan)), subject to Virginia Transco's 50% capon equity . Thiscommitment
will not only alleviate Staffs concerns about lack of regulatory oversight, but will also ensure that
customers in APCo's Virginia service territory and elsewhere will not pay more for the Project if it
is built jointly by the Companies. As additional protection in this area, Virginia Transco will also
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agree not to initiate a proceeding at FERC to modify or remove the current 50% cap on equity
capital. Virginia Transco does, however, reserve the right to respond to a Section 206 filing made
at FERC by other parties with respect to its formula rate.
3.
LOWER VOLTAGE PROJECTS .
The Staff is also concerned that, if the Commission authorizes Virginia Transco to
participate in the Project, it will empower Virginia Transco to make certain 138 kV and lower
voltage extensions of transmission facilities without Commission approval . Specifically, Staff
refers to § 56-265 .2A2 of the Code, which provides an option for local county or municipal review
and approval of 138 kV lines, and § 56-265 .2AI of the Code, which permits a utility to undertake
ordinary extensions or improvements in the usual course of business without Commission
approval . (Staff s Legal Memorandum, p. 22 .)
To alleviate these concerns, Virginia Transco will make two commitments. First,
Virginia Transco will not pursue the local option under § 56-265 .2A2 for any 138 kV transmission
line, but will instead seek the Commission's approval for such projects. Second, Virginia Transco
will not undertake any transmission projects below 138 kV without first bringing any such project
to the Staff for discussion and evaluation . If the Staff recommends it for specific projects,
Virginia Transco will apply to the Commission for a certificate of public convenience and
necessity.
4.
EMINENT DOMAIN .
As a corollary to its concern about Virginia Transco undertaking lower voltage projects
without Commission oversight or approval, Staff also speculates that Virginia Transco may
exercise the power of eminent domain to carry out those projects . (Staffs Legal Memorandum,
pp 22-23 .) To address this concern, Virginia Transco will agree to a condition that it not exercise
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eminent domain rights except with respect to projects that have either been certificated by the
Commission or vetted by Staff as described in Section G3 above.
5.
APPLICABILITY OF THE UTILITY SECURITIES ACT TO VIRGINIA
TRANSCO .
Chapter 3 of Title 56 of the Code (the Utility Securities Act) requires public service
companies to seek Commission approval to issue securities or to create liens on their property .
Staff notes that, like Chapter 4, Chapter 3 does not apply to Virginia Transco since it does not meet
the definition of "public service company" contained in the Act. (Staff s Legal Memorandum, p.
19.) In response, Virginia Transco will agree to submit a report to Staff with respect to the details
of any financing transactions engaged in by Virginia Transco or its parent .
V.
CONCLUSION .
Based upon the evidence and for the reasons set forth above, the Commission should :
A.
Find (1) that the Project is needed and will have a positive effect on economic
development in the Commonwealth; (2) that the Companies have considered the feasibility of
using or paralleling existing rights-of-way and have provided adequate evidence that the Project
does use or parallel existing rights-of-way to the extent feasible ; (3) that the location of the Project
will reasonably minimize adverse impact on the scenic assets, historic districts and environment of
the areas concerned; (4) that the Companies will employ appropriate low-cost and effective
measures to improve the aesthetics of the new lines and towers in accordance with HB 1319, and
(5) that the Project does not meet the criteria set forth in HB 1319 for inclusion as an underground
pilot program;
B.
Find that Virginia Transco is permitted under applicable law to undertake a portion
of the Project as proposed in the Companies' application; and
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C.
Approve, pursuant to §§ 56-46.1 and 56-265 .2 of the Code, the construction of the
Project by Virginia Transco and APCo, as proposed in the Companies' application.
AEP APPALACHIAN TRANSMISSION
COMPANY, INC. AND APPALACHIAN POWER
COMPANY
By:
Of Counsel
H. Allen Glover, Jr. (VSB # 14800)
George J. A. Clemo (VSB # 25219)
Woods Rogers PLC
P.O. Box 14125
Roanoke, VA 24038-4125
Phone: (540) 983-7600
Fax: (540) 983-7711
glover@woodsrogers .com
[email protected]
James R. Bacha (VSB#74536)
Hector Garcia (VSB # 48304)
American Electric Power Service Corporation
I Riverside Plaza - 29h Floor
Columbus, OH 43215
Phone: (614) 716-3410
Fax: (614) 716-1613
[email protected]
hgarcial@aep .com
Counsel for AEP Appalachian Transmission Company, Inc. and Appalachian Power
Company
CERTIFICATE OF MAILING
I certify that a copy of this Brief was dclivered or mailed to all parties of record this 3rd day
of December, 2013.
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