Electric News Releases

November 15, 2000

Dominion Virginia Power Reaches Major Agreement With EPA, Announces Comprehensive Effort To Improve Air Quality

RICHMOND, Va. – Dominion (NYSE: D) announced Thursday that its subsidiary Dominion Virginia Power has reached an agreement with the U.S. Environmental Protection Agency that will result in one of the most comprehensive efforts ever undertaken by an energy company to improve air quality.

The agreement in principle represents a collaborative effort between the regulatory agency and Dominion Virginia Power, an electric utility serving more than 2 million customers in Virginia and North Carolina. Last spring, Dominion Virginia Power contacted EPA about working together to establish a comprehensive, affordable and structured program for achieving major environmental improvements at the company’s coal-fired generating stations in Virginia and West Virginia.

As part of the resolution, Dominion Virginia Power has agreed to install state-of-the-art emissions-control equipment on its largest coal-fired generating units in both states. The agreement will also allow the company to continue to maintain and make selective improvements to its generating units to better serve its customers.

“This is a positive development for our customers, our shareholders, the general public and, most importantly, the environment,” said Thos. E. Capps, chairman, president and chief executive officer of Dominion. “In reaching this agreement, we have reaffirmed our corporate commitment to protect the environment while meeting the energy needs of our customers with reliable, affordable power.”

The 12-year, $1.2 billion capital investment program is consistent with assumptions already in Dominion’s current financial models. The company remains on track to meet or exceed its operating earnings targets of $3.30 per share in 2000, $3.80 per share in 2001, and an 8 to 10 percent annual growth in subsequent years, Capps said.

Capps stressed that the capital investments will not lead to any rate increases for Dominion Virginia Power customers. "Under the historic agreement to bring competition to the electric utility industry in Virginia, we have agreed to a rate freeze through 2007. We will honor that agreement.”

The highlights of the agreement, which includes several major environmental improvement efforts already under way at Dominion Virginia Power, are:

• Installation of two scrubbers that will remove up to 95 percent of all sulfur dioxide emissions at Mt. Storm Power Station in West Virginia. The scrubbers will be operational by 2002. 
• Installation of equipment to reduce nitrogen oxide emissions on all three units at Mt. Storm. 
• Installation of two scrubbers at Chesterfield Power Station, near Richmond. 
• Installation of NOx control equipment on three units at Chesterfield Power Station. 
• Installation of NOx control equipment on two units at Chesapeake Energy Center in Chesapeake, Va. 
• Conversion of two units at Possum Point Power Station near Washington, D.C., from coal-fired generation to natural gas-fired generation. The company filed with the Virginia State Corporation Commission this past spring for permission to begin that conversion, which should be completed by 2003. 
• Payment of a $5.3 million civil penalty to resolve issues at Mt. Storm. 
• Commitment of $14 million for major environmental programs or projects in cooperation with the states of Virginia, West Virginia and New York.

“Far and away, this is the most ambitious and far-reaching environmental commitment ever made by a Virginia-based corporation,” Capps said. “We are proud to have taken this step.”

Under the agreement, Dominion Virginia Power will begin making major reductions in its nitrogen oxide emissions in 2004.

Dominion has been in the forefront among U.S. energy companies in leading the way for legislation to improve the environment. In 1990, it was among the first U.S. energy companies to support the Clean Air Act Amendments. It followed that support by volunteering to install a scrubber on Mt. Storm Unit 3. Clover Power Station, completed in 1995 in Halifax County, Va., uses modern emission controls and is one of the cleanest coal-fired stations in the United States.

The agreement resolves a Notice of Violation that EPA sent Dominion Virginia Power last June for alleged Clean Air Act violations at its Mt. Storm Power Station.

In 1999, EPA and the U.S. Department of Justice sued seven other energy companies over similar issues. No federal suit has been filed against Dominion Virginia Power or any of its affiliates, and the company voluntarily agreed to work with EPA to develop a compliance plan.

“Even though our view remains that we operated Mt. Storm in full compliance with the Clean Air Act and in full accord with accepted industry standards and practices, we believed that the best approach was to be proactive and reach an agreement that was in the best interest of all involved,” Capps said.

The addition of control equipment at Mt. Storm, Chesapeake and Chesterfield power stations will help the Commonwealth of Virginia improve air quality in Northern Virginia, Hampton Roads and the greater Richmond area. All of the regions have had problems with ground-level ozone, which is produced when nitrogen oxides react with sunlight during warm summer months. Nitrogen oxides are a byproduct of fossil fuel combustion and emissions from automobiles and industrial plants.

Starting this year, Dominion Virginia Power is voluntarily assisting those areas by reducing nitrogen oxide emissions during the summer months. The installation of selective catalytic reduction systems will greatly improve air quality in Richmond and Hampton Roads. Northern Virginia will benefit from the fuel switching from coal to natural gas at Possum Point Power Station.

“This is a banner day for Virginia’s citizens and its beautiful mountains and scenic valleys,” said Secretary of Natural Resources John Paul Woodley Jr. “We can all breathe a little easier because of Dominion Virginia Power’s leadership in taking this significant step to improve the environment.”

The agreement provides Dominion Virginia Power with flexibility to complete the construction of the projects over a 12-year period. It also gives the company the ability to maintain and make selective improvements in the efficiency and capacity of its existing coal-fired units in Virginia and West Virginia.

“What that means is that our stations, many of which are located in rural areas, will continue to be a viable and important part of those communities, generating not only electricity but also tax dollars and jobs,” Capps said.

Dominion Virginia Power has been working for nearly two years to design and install two new scrubbers and three selective catalytic reduction systems. Mt. Storm’s three units generate about 1,650 megawatts of electricity, or about enough electricity to power half a million homes.

“When we have completed the installation of all these controls, Mt. Storm will be one of the cleanest coal-fired plants in the world,” Capps said.

The selective catalytic reduction systems to be installed at Mt. Storm will decrease nitrogen oxide emissions by about 16,500 tons each year. Alstrom Power of France, which has its U.S. office in Knoxville, Tenn., is building the system.

Selective catalytic reduction works much like a catalytic converter on a car. Flue gas containing the nitrogen oxide emissions from the combustion process is mixed with ammonia. The mixed gases travel through a series of catalytic layers, which cause the nitrogen oxide to react with the ammonia. The reaction converts the nitrogen oxide to pure nitrogen, a benign chemical that makes up 80 percent of the air we breathe, and water vapor. Both elements are returned to the environment through the station’s stacks.

The two new scrubbers at Mt. Storm will remove 95 percent of the SO2 emissions from Units 1 and 2. Unit 3 already is equipped with a scrubber. Each scrubber will remove up to 50,000 tons of SO2 per year. The scrubbers will be completed by February 2002. They will be part of Dominion Virginia Power’s overall strategy to reduce SO2 emissions as part of Phase II of the Clean Air Act Amendments of 1990. Scrubbers operate by spraying a mixture of pulverized limestone and water into the exhaust gas of the generating units. Inside the scrubber vessels, calcium in the limestone reacts with the gaseous SO2 to form calcium sulfate, commonly know as gypsum. Similar systems will be installed at Chesterfield Power Station. The agreement calls for scrubbers to be operating on Unit 6 by 2010 and on Unit 5 by 2012. Selective catalytic reduction systems also will be added much sooner. Chesapeake Energy Center also will receive nitrogen oxide controls.

Dominion is one of the nation’s largest producers of energy, with a production capability of 2.7 trillion British Thermal Units (BTUs) of energy per day. Dominion has the largest BTU production capability among integrated utilities in the northeast quadrant of the United States. The company has a power generation portfolio of more than 19,000 megawatts, which is expected to grow to more than 28,000 megawatts by 2005. 

Dominion is also one of the largest independent oil and natural gas exploration and production companies in North America, with 2.8 trillion cubic feet of equivalent reserves. The company has 7,600 miles of interstate natural gas pipeline with more than 650 billion cubic feet of annual natural gas throughput and a delivery capability of 6.3 billion cubic feet per day. 

In addition, the company operates the nation’s largest underground natural gas storage system, with more than 950 billion cubic feet of storage capacity. Dominion also serves 3.8 million retail natural gas and electric customers, and owns a telecommunications business which is expanding its fiber-optic network from its current 35,000 miles to more than 700,000 miles. For more information about Dominion, visit the company's website at www.dom.com.

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This release contains forward-looking statements that are subject to various risks and uncertainties. A discussion of factors that may cause actual results to differ from management’s projections, forecasts, estimates and expectations is available in our filings with the SEC, including Dominion’s Form 10-K for the year ended December 31, 1999, and our most recent Quarterly Report on Form 10-Q. They include fluctuations in energy-related commodities prices, weather conditions, capital market conditions, the risks of operating businesses in regulated industries that are in the process of becoming deregulated, completing the integration of Consolidated Natural Gas Company (CNG) with the remainder of our business and completing the divestitures of Dominion Capital Inc. and Virginia Natural Gas required of us in connection with the CNG transaction as well as those we are making to focus our attention on the northeast quadrant of the United States.