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BEFORE

THE PUBLIC SERVICE COMMISSION

OF

SOUTH CAROLINA

DOCKET NO. 2022-___-E

In the matter of : )
)
Application of Dominion Energy South ) APPLICATION FOR A MID-PERIOD
Carolina, Inc. for Mid-Period Adjustment to ) ADJUSTMENT TO INCREASE BASE
Increase Base Rates for the Recovery of ) RATES FOR THE RECOVERY OF
Electric Fuel Costs ) ELECTRIC FUEL COSTS
)
)

Pursuant to S.C. Code Ann. § 58-27-865(D) and S.C. Code Ann. Regs. 103-823, Dominion

Energy South Carolina, Inc. (“DESC” or the “Company”) hereby applies to the Public Service

Commission of South Carolina (the “Commission”) for an order permitting a mid-period

adjustment to increase the base rates charged by DESC for the recovery of fuel costs associated

with its service to retail electric customers.

INTRODUCTION

In support of this Application, DESC respectfully shows the Commission the following:

1) DESC is a corporation duly organized and existing under the laws of the State of

South Carolina, with its principal offices in Cayce, South Carolina. DESC’s mailing address is

220 Operation Way, Cayce, South Carolina 29033. The Company is engaged in, among other

things, the business of generating, transmitting, delivering, and providing electricity to public and

private energy users for compensation.

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2) The names, titles, addresses, and telephone numbers of the persons to whom

correspondence or communications relating to this filing should be addressed are as follows:

K. Chad Burgess
Matthew W. Gissendanner
Dominion Energy Services, Inc.
Mail Code C222
220 Operation Way
Cayce, South Carolina 29033
(803) 217-8141 (KCB)
(803) 217-5359 (MWG)
chad.burgess@dominionenergy.com
matthew.gissendanner@dominionenergy.com

Michael J. Anzelmo
Sarah B. Nielsen
Jason A. Richardson
McGuireWoods LLP
1301 Gervais Street, Suite 1050
Columbia, South Carolina 29201
(803) 251-2313 (MJA)
(803) 251-2306 (SBN)
(803) 251-2309 (JAR)
manzelmo@mcguirewoods.com
snielsen@mcguirewoods.com
jrichardson@mcguirewoods.com

3) Pursuant to S.C. Code Ann. § 58-27-865(B), the Commission conducts an annual

review of an electrical utility’s estimated fuel costs for the succeeding 12-month period, establishes

fuel cost recovery factors for each customer class, and adjusts for any over-recovery or

under-recovery by the utility. The statute is intended to “allow the recovery by electrical utilities

of all their prudently incurred fuel costs as precisely and promptly as possible[.]” S.C. Code Ann.

§ 58-27-865(G).

4) S.C. Code Ann. § 58-27-865(D) allows an electrical utility to request a hearing at

“at any time between the twelve-month reviews to determine whether an increase or decrease in

the base rate amount designed to recover fuel costs should be granted.” In accordance with

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subsection (D), DESC is requesting a hearing on this application for a mid-period adjustment to

increase its current base rates for fuel costs.

PROCEDURAL HISTORY

5) The Commission established DESC’s current fuel cost recovery factors and base

rates in Docket No. 2022-2-E, Order No. 2022-290, dated April 28, 2022, following a public

hearing held on April 7 and 8, 2022.

6) As set forth in Order No. 2022-290, the current fuel cost recovery factors1 for the

period of May 2022 to April 2023 are as follows:

Variable
Environmental DER
Base Fuel & Avoided Avoided
Cost Capacity Cost Cost Total Fuel
Component Component Component Costs Factor
Class (cents/kWh) (cents/kWh) (cents/kWh) (cents/kWh)
Residential 3.032 0.101 0.040 3.173
Small General Svc. 3.032 0.084 0.032 3.148
Medium General Svc. 3.032 0.074 0.030 3.136
Large General Svc. 3.032 0.044 0.017 3.093
Lighting 3.032 -- -- 3.032

7) The Commission directed DESC to send notice and corresponding explanation to

its customers regarding the increase in fuel costs established by Order No. 2022-290. DESC

timely complied.

1
This application seeks an adjustment solely to the Base Fuel Cost Component (Fc). This
application does not seek adjustments to the Variable Environmental & Avoided Capacity Cost
(FEC), DER Avoided Cost (FAC), or DER Incremental (FIC) components.
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REQUEST FOR MID-PERIOD ADJUSTMENT TO INCREASE
BASE RATES FOR FUEL COSTS

8) DESC uses a variety of fuel sources to generate electricity, including natural gas,

coal, and No. 2 fuel oil. The costs of these fuel sources are included in the Base Fuel Cost

Component. The Base Fuel Cost Component approved in Order No. 2022-290 was derived from

the forecasted price of delivered coal and natural gas as of January 11 and 12, 2022, respectively.

Since January 2022, there have been significant and unforeseen market changes and commodity

price increases impacting natural gas, coal, and No. 2 fuel oil prices. As outlined herein, the actual

increase in price above the original forecast and an increase in the forecasted price are the direct

cause for DESC filing this request for a mid-period adjustment—specifically, its request for a

change to the previously approved Base Fuel Cost Component.

I. Commission’s Prior Approval of the Base Fuel Cost Component: Order No. 2022-290

9) During the review period established in Docket No. 2022-2-E,2 natural gas costs

fluctuated between $2.45 per dekatherm and $6.31 per dekatherm, with DESC paying

approximately $355 million for natural gas commodity at an approximate average price of $3.77

per dekatherm. When the company pre-filed its direct testimony on February 7, 2022 in Docket

No. 2022-2-E, it used natural gas price forecasts available on January 12, 2022 in determining the

Base Fuel Cost Component. At that time, the forecasted price of natural gas was approximately

$3.30 per dekatherm for the remainder of 2022, $3.10 per dekatherm for 2023, and $2.95 per

dekatherm for 2024. At the time of the hearing on April 7, 2022, however, the natural gas price

forecast for the remainder of 2022 had already dramatically risen to suggest that natural gas prices

would likely average above $6.00 per dekatherm, thus signaling that DESC would likely

2
The review period in Order No. 2022-290 was January 1, 2021, to December 31, 2021.
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experience an under-collection of fuel costs in 2022. As of July 26, 2022, natural gas prices are

forecasted at $8.88 per dekatherm for August to December 2022, $5.93 per dekatherm for 2023,

and $4.79 per dekatherm for 2024.

10) As for coal, the 2022 projected burn rate was 1,827,856 tons, and the forecast for

prices was trending upward. DESC noted it has long-term contracts that are projected to meet

90% of coal supplies and short-term contracts to meet the remaining 10% in 2022. Like with

natural gas price forecasts, DESC’s 2022 filing included coal price forecasts from January. As of

January 11, 2022, the projected cost of coal was $87.55 per delivered ton in 2022, $87.58 per

delivered ton in 2023, and $97.69 per delivered ton in 2024. Unforeseen market changes and

commodity price increases exceeded those estimates, as set forth in Paragraphs 18-19, infra. For

2022, DESC did not intend to return to the market to negotiate additional short-term coal supply

commitments.

11) DESC also reported that delivered No. 2 fuel oil prices are adjusted daily and are

competitively solicited every two years. For the review period, delivered average monthly prices

ranged from the low of $12.01 per Million British Thermal Units (“MMBTU”) in January to a

high of $18.52 per MMBTU in October. DESC expected the cost of fuel oil to remain stable but

susceptible to international price pressures.

12) Given the then-existing market conditions and the January 2022 projections, the

Commission approved a Base Fuel Cost Component of 3.032 cents per kilowatt-hour (“kWh”) for

all rate classes.

II. Forecasting and Market Changes: Continuing Increases in Prices

13) As noted above, the cost of natural gas, coal, and No. 2 fuel oil are subject to

changing market conditions outside of DESC’s control or influence. Natural gas short-term prices

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can fluctuate based on weather conditions, increased customer demand, changes in supply and

demand, fluctuations in storage inventory levels, geopolitical matters, and other economic factors.

The market for coal and No. 2 fuel oil can be less volatile than the market for natural gas, but both

fuel sources are subject to cost fluctuations due to production shortages, overall demand, and

increased exports into the international market.

14) Since the Commission’s approval of DESC’s base fuel cost of 3.032 cents/kWh for

all DESC retail electric customer classes, there have been significant and unanticipated market

shifts, namely higher commodity prices and increased demand for those commodities.

15) As set forth in the direct testimony of Witness Rose M. Jackson, filed

contemporaneously herewith, DESC relies on industry-standard tools to inform its natural gas

purchasing decisions and forecast price changes. Specifically, DESC relies upon natural gas

pricing data provided by the New York Mercantile Exchange (“NYMEX”), which is a financial

market that captures real-time trading data about the projected price of natural gas and other

commodities.

16) As fully set forth in Witness Jackson’s testimony and outlined in the chart below,

the natural gas prices and forecast prices continue to rise, exceeding those provided in Docket No.

2022-2-E and noted in Paragraph 9, herein.

DESC
Natural Gas Commodity Prices per DT
Spring Fuel DESC Gas Latest Mid-
Hearing Commodity Period Increased Percentage
Month Forecast 1 Cost 2,3 Forecast 1 Cost Increase
Jan, 2022 3.820 6.050 2.230 58%
Feb, 2022 3.920 5.500 1.580 40%
Mar, 2022 3.730 4.920 1.190 32%
Apr, 2022 3.670 5.790 2.120 58%
May, 2022 3.690 7.800 4.110 111%
Jun, 2022 3.740 8.300 4.560 122%

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Jul, 2022 3.790 9.300 5.510 145%
Aug, 2022 3.810 8.993 5.183 136%
Sep, 2022 3.790 8.825 5.035 133%
Oct, 2022 3.820 8.794 4.974 130%
Nov, 2022 3.910 8.866 4.956 127%
Dec, 2022 4.090 8.944 4.854 119%
Jan, 2023 4.200 8.999 4.799 114%
Feb, 2023 4.090 8.516 4.426 108%
Mar, 2023 3.800 7.031 3.231 85%
Apr, 2023 3.240 5.210 1.970 61%
1 Excludes Gas Transportation and Basis Differentials
2 Excludes Gas Transportation
3 July 2022 Costs per DT are preliminary

As of July 26, 2022, natural gas price forecasts are $8.88 per dekatherm for August to December

2022, $5.93 per dekatherm for 2023, and $4.79 per dekatherm for 2024.

17) As fully set forth in the direct testimony of Witness Michael D. Shinn, filed

contemporaneously herewith, and outlined in the charts below, the coal market prices have also

risen dramatically over the last several months.

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200
Central Appalachian Coal Market Prices 80
195 78
190 76
185 74
180 72
175 70
170 68
165 66
160 64
155 62
150 60
145 58
140 56
135 54
13D 52 a
125 50 E
E
0 120 48
C 115 46
110 44 '0
o 105 42 co
10D 40 O
CL 95 38
90 36
0 85 34
80 32
75 30
70 28
65 26
60 24
55 22
50 20
45 18
40 16
35 14
30 12

S DI

Europe Coal Market Prices ($ /ton)

400
15

16

14

\2
0 250 E
E
Vl
10
~c 200
CL

50

I R n n n n n n
I CO CD I CO Cl 4 O 0 m m
I
I CO O 0
I I I OI I 0 CO /I 0 I

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18) As of July 5, 2022, coal prices had risen to approximately $98.82 per delivered ton

for 2022, $102.84 per delivered ton in 2023, and $149.01 per delivered ton for 2024. Forecasts

for market coal prices continue to increase, with market prices at $190.00 per ton for August 2022

and upward pressure on market prices to remain at that level for the remainder of 2022.

19) Given the increased demand for these commodities and dramatic spike in prices,

DESC is experiencing a significant under collection of fuel costs with the currently established

Base Fuel Cost Component. Based on current forecast pricing, the under-collected balance is

projected to continue to increase substantially.

III. Under Collection of Fuel Costs and Proposed Change to Base Fuel Cost Component

20) At the end of the review period, December 31, 2021, DESC’s actual base

under-collected balance totaled $115,854,473, and DESC’s projected under-collected balance in

Docket No. 2022-2-E as of April 30, 2022 was estimated to be approximately $142 million.3 At

that time, the base fuel cost of 3.032 cents per kWh was projected to allow DESC to recover the

under-collected balance by the end of April 2023.

21) Given the unforeseen unpredictable market changes causing a substantial rise in

fuel costs, DESC’s under-collected base fuel cost balance as of June 30, 2022 has increased to

$201,822,137. See A. Rooks Direct, filed contemporaneously herewith. If the current price

forecasts remain through the end of the forecasted period and the current base rate remains

unchanged, the under-collected balance will continue to rise to a total of approximately $404

3
The Company was able to reduce the under-collected balance to approximately $74.3 million
through two adjustments related to proceeds received from the monetization of a settlement
agreement with Toshiba Corporation in the amount of $61.3 million and proceeds received from
the Westinghouse Electric Company LLC’s bankruptcy proceeding in the amount of $4.6 million,
as well as $1.8 million related to a VIC true-up.
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million by October 31, 2022, and to approximately $592 million by April 30, 2023. Exhibit No.

___ (AWR-1).

22) To address the growing under-collected balance and the corresponding costs to

customers in a timely manner, DESC asks that the Commission schedule a hearing, following

notice to customers and the public, and enter an order adjusting DESC’s Base Fuel Cost

Component to an amount that is projected to suspend further increases in the under-collected

balance such that DESC can limit additional under-collections that would occur between October

2022 and April 2023.

23) DESC requests an increase from 3.032 cents per kWh to 4.877 cents per kWh,

effective for bills rendered on and after the first billing cycle of November 2022. Exhibit No. ___

(AWR-2). As outlined above, the adjustment is necessary to reduce the rising under collection

projected through April 2023. Specifically, as set forth in Exhibit No. ___ (AWR-2), the proposed

adjustment is projected to level out the growing under-collected balance. With the proposed

adjustment, the projected under-collected balance as of April 2023 will be $403,953,705, which is

$188,151,255 less than the projected under-collected balance without a mid-period adjustment.

Compare Exhibit No. ___ (AWR-1), with Exhibit No. ___ (AWR-2).

24) Notably, without the requested mid-period adjustment, the 2023-2024 fuel cost

recovery factors would need to include the recovery of the entire forecasted under-collection of

$592,104,960. If the under-collection balance is not addressed now, DESC estimates that its

residential customers would likely experience a significant bill increase in May 2023 of

approximately 27%.

25) Further, by not seeking full recovery of projected under-collected base fuel costs,

the requested mid-period adjustment will reduce the change in charges to customers’ immediate

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bills as the market continues to fluctuate. If DESC were to seek full recovery of the under-collected

balance projected as of October 31, 2022, as well as all projected base fuel costs through April 30,

2023, the total projected Base Fuel Cost Component would total 8.838 cents/kWh in November

2022, which would be composed of 4.877 cents/kWh in forecasted costs, and an under-recovery

rate of 3.961 cents/kWh. Exhibit No. ___ (AWR-3). By requesting a mid-period adjustment at

the amount to maintain the October 31, 2022 projected under-collected balance, the total Base Fuel

Cost Component for bills starting in November 2022 will be significantly lower at 4.877

cents/kWh.

26) Prompt action through this requested mid-year adjustment seeks to balance rate

increases with the higher fuel costs being incurred by the Company, while reducing the long-term

under-collected balance carried by DESC. The public, the Commission, and DESC will benefit

from a hearing as soon as possible. DESC respectfully requests the Commission notice the filing

of this application and the hearing simultaneously.

27) DESC is not requesting any carrying costs be applied to the base fuel

under-collected balance in this proceeding.

28) DESC projects that for a DESC residential customer using 1,000 kWh per month,

the average monthly bill would rise from $132.79 to $151.34, or approximately 13.97%, inclusive

of revenue taxes. For a DESC commercial customer with a 500 kVA demand, using 150,000 kWh

per month, the average monthly bill would rise from $16,485 to $19,267, or 16.88%, inclusive of

revenue taxes. For a DESC industrial customer with a 10,000 kW demand, using 6,570,000 kWh

per month (90% load factor), the average monthly bill would rise from $456,541 to $578,415, or

26.70%, inclusive of revenue taxes.

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29) With the filing of this application and associated forecasted fuel costs, the Company

respectfully requests that the requirement found in Ordering Paragraph 14 of Commission Order

No. 2022-290 to submit a forecast “of the expected fuel factor to be set at its next annual fuel

proceeding” be removed for the June 30 quarter, and resume for the September 30 quarter.

CONCLUSION

WHEREFORE, DESC respectfully requests that the Commission schedule a hearing at the

earliest possible time and upon due notice to customers and the public, and that the Commission

order a change to DESC’s Base Fuel Cost Component to reflect increased prices of natural gas,

coal, and No. 2 fuel oil in the rates it currently charges its customers according to the terms set

forth above, and authorize DESC to put into effect the base rates for fuel costs contained in this

Application for bills rendered on and after the first billing cycle of November 2022, and order such

other and further relief as may be appropriate.

SIGNATURE PAGE ATTACHED

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DOMINION ENERGY SOUTH CAROLINA, INC.

/s/Michael J. Anzelmo_______________________
Michael J. Anzelmo
Sarah B. Nielsen
Jason A. Richardson
McGuireWoods LLP
1301 Gervais Street, Suite 1050
Columbia, South Carolina 29201
(803) 251-2313 (MJA)
(803) 251-2306 (SBN)
(803) 251-2309 (JAR)
manzelmo@mcguirewoods.com
snielsen@mcguirewoods.com
jrichardson@mcguirewoods.com

K. Chad Burgess, Esquire

Counsel for Dominion Energy South Carolina, Inc.

August 8, 2022
Columbia, South Carolina

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