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Political Winds Drastically Shifting Into Favor Of Dominion

May 07, 2020 10:13 PM ETDominion Energy, Inc. (D)31 Comments
Power Player profile picture
Power Player


  • New legislation in Virginia dramatically shifts the regulatory environment in favor of Dominion.
  • Mandated renewable investment will allow Dominion to add projects to its rate base, without fear of repercussion.
  • While risks remain, the market downturn is a great opportunity to add this safe name to portfolios.

Dominion (NYSE: D) is likely to be a beneficiary of the new Democratic legislature in Virginia. Already, Virginia has passed a new bill which promises 100% clean energy by 2050. Dominion will be able to use this opportunity to make massive investments, while also placing these projects in its rate base. This growth seems almost risk-free with the full support of both regulators and its usual adversaries in the political sphere.

The Virginia Clean Economy Act

The Virginia Clean Economy Act (VCEA) seeks to eliminate CO2 emissions by investing in clean energy technology and energy efficiency programs. The Democratic legislature passed this bill under the climate change umbrella, earning praise from the Virginia League of Conservation Voters (LVC), who called the legislation a “turning point.”

Under the terms of the bill, Dominion Energy must retire all-electric units that release carbon emissions, and at the same time buying or building new renewable generation.

Dominion must complete its 100% renewable energy transition by 2045. By 2035, Dominion will have 2,700MW of energy storage capacity. In addition, Dominion is also required to develop offshore wind projects with a total capacity of at least 5,200MW by January 1, 2034. The biggest argument against offshore wind has always been the steep costs, especially now with the pending expiration of PTCs. But with a mandated build, Dominion will have no trouble spending this capex and placing the projects in its rate base.

Note, Dominion's original low-cost, long-term, growth plan:

Source: Dominion Energy

This plan includes no offshore wind and no energy storage due to the prohibitive costs. However, with the new law, Dominion has been able to propose 3 additional plans which meet the new law's requirements, which place cost considerations seemingly on the back burner. The 3 plans are outlined below. Each plan accounts for about 3 GW of fossil fuel

This article was written by

Power Player profile picture
I am a former Equity Analyst at top sell side bank. Currently, I am an independent investor and I provide insights in the power sector.

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Comments (31)

hivoltage profile picture
The hysterical alarmists want to shutdown nukes too.
You can't fix stupid.
So Virginia has decided to go completely 'renewable' by 2050 eh? A disaster in the making, but at least I have plenty of time to unload my substantial holdings in this company.

So does any policy maker in Virginia who is advocating this nonsense have any actual idea on how to accomplish this? Windmills? Solar? Great idea, until one looks at the actual data arising from past projects. I'm sure the Virginia will be thrilled with the results though, once the hydrocarbon-based powergen is completely shut down, leaving them at the mercy of the vagaries of weather. Good Luck! Most engineering types have already correctly concluded that wind and solar are parasitical designs in principal, relying on hydrocarbon powergen to bail them out when they go idle, as they tend to do when the wind stops or the sun sets.

Looking forward to hearing about the nuclear power program in Virginia, soon.
Short Circuit profile picture
Once the nation has committed to abandoning oil, nuclear, coal and gas...you can count on the "environmentalists" to go after solar and then wind. They are essentially just a competing business that brings in funds for driving an alternate path and once that path/cause is depleted the business will create another path/cause.

Therefore I would not count my chickens (future rate increases) until they are hatched (in the rate base) as rate-making is a very political process in most states.
@Short Circuit

Well said. I don't fully understand ratemaking. Whatever direction the political wind blows, people will need electricity. The NEBAAE (never, ever build anything, anywhere, ever) groups will ultimately fail (but it can take a while). I am interested to see Michael Moore's new movie.

Some of the environmental groups are interesting. Its screaming, unscientific lunacy fought through the media or bust. If you want to be part of a solution (and cooperate with others) you are a sell out.

Disclosure: Long D (employed by D) and I stole the NEBAAE acronym from someone else on SA.
charlie430 profile picture
I wonder what will happen in 20-25 years when they need to invest it all over again? and if they have no gas as a backup I wonder how they will deal with the brown/blackouts

IRP has gas backup built in
I would like to have seen some discussion of their current debt. Otherwise interesting, but without debt covered it is hard to know if D is a good investment.
I don't understand why the author does not own the shares of the stock that he/she is recommending that others buy. Otherwise the thesis seems logical.
hivoltage profile picture
Thank God I don't live in Virginia and am not a D ratepayer.
These "renewables" will be a big shit sandwich for all those naive enough to believe weak, intermittent and expensive electricity can replace powerful, compact, reliable and affordable electricity.
Agree totally. Example: D’s newest combined cycle natural gas powered electric generation station sits on 515 acres of land and generates a steady 1500 MWs. An equivalent (1500 MW) solar “farm” (more like city) requires 6000 acres of land to be cleared. And only provides electricity when the sun shines. And the solar panels only last 10 years. Solar seems like an expensive waste to me.
Yup. My former state is now a political disaster area.

dont forget all the nasty stuff that runs off of disposed solar panels.
Good article. Thanks.
Algorithmic profile picture
I feel like i just read a communist government announcement.
Climate change is bull excrement junk science. But as long as Dominion is in bed with the communist politicians who will send out the Bolsheviks to enforce their religion on the masses, they should be ok. Meanwhile Virginia is quickly becoming the southern version of New York.
That's why I moved to Georgia. Virginia is done.
Nope, there's no climate change...nada, zilch. And I think it will be great when Greenland is green again. (duhhh)
cummiden1 profile picture
Would like to see what these plans would do to retail price of electricity. My guess is rate payers will not be happy.
Rate payers vote for it. Rate payers get it. If they’re unhappy they should look in the mirror.
Long time long. Getting in bed with progressive politicians is a long term Faustian Bargain. Look no further than EIX and PCG. Years from now the quacks in Richmond will bring the pain.
My thoughts exactly. They need to be be very careful how they advance. As long as they make sure they get the money from the rate increases coming in and offload the eventual risk of failure of the program. House the wind farms in a subsidiary and drag their feet on decommission if reliable generators.
Can't wait for the open on Monday to pick up 1K shares... I bet D will support the antitrump squadrons with contributions. Can't get rid of trump fast enough. And you climate deniers will be dead in 30 years anyway. Good riddance.
Wow! Even natural gas being retired! All these new solar and wind installation costs will cause extremely high electricity rates. At times like this, people may not like those costs skyrocketing.
kmeixner, it's got some fantasy in that plan.
Ron Burgundy’s Hair profile picture
Long D but really disliked all of the pandering to the purveyors of climate change mythology crowd in their most recent press conference.
Good for stockholders. Long on D. Glad that I moved out of Virginia in 2015......electric rates will skyrocket!! Take a look at “Planet of the Humans” on “You Tube” to see the future of wind and solar. Interesting.
Been very happy owning this for a long time.
I don’t understand the Duke reference given they do not maintain a LSE in Virginia. Did you mean AEP?
I believe it should have been Dominion but the writer inadvertently wrote Duke.
wiredlitigator profile picture
Power player, thank you for the time in the article. Environmental concerns are not going away. I am long dominion, but I’m curious what you think of the COVID-19 implications. I would think utilities would be of primary concern and be somewhat defensive here. I was even thinking of adding. Thoughts and thanks.
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