Remarks - T. F. Farrell II
Chairman, President & CEO - Dominion
Virginia International Investors Forum
May 6, 2010
Thank you, Mister Secretary … and good afternoon. It is a pleasure to join you.
I want to thank Secretary Cheng and the Virginia Economic Development Partnership for hosting this event, which Dominion is delighted to help sponsor. It is a great way to share ideas and hear different perspectives about the economy and Virginia's development plans.
It is also an excellent opportunity for us to thank you for the important contribution your business is making to the Virginia economy — the jobs you create and the dollars you invest — adding value to the Commonwealth and our reputation as the most business-friendly state in the nation.
Virginia benefits from having a strong partnership between the public and private sectors - a partnership that works hard to grow the state's economy and build its competitive strength.
On reflection, "RE-build" is probably the better word to use. As you heard this morning, the economy is showing signs of recovery from the trauma of the past two years. Even so, there are those who continue to take a downcast view of things. And that is understandable. These are very uncertain times, and as we all know, uncertainty is no friend to the business community.
On balance, however, I am very bullish about Virginia and its long-term prospects. I believe in the dynamic strength and resilience of the Commonwealth. And I believe Governor McDonnell when he says that job creation and economic vitality are the top priorities of his administration.
A string of recent announcements — including a partnership between Dominion Virginia Power and Faneuil, Incorporated, to open a new customer service center in Martinsville, which will create 250 jobs, and the relocation of Northrop Grumman's corporate headquarters to Northern Virginia, bringing another 300 jobs to the state — lends strong support to that view.
In addition, the wave of government activism that we are seeing in Washington is bound to create other new opportunities for the private sector:
In sum, all signs indicate that the pieces are in place for the next round of innovation, entrepreneurship and business growth.
At Dominion, we are starting to see higher levels of electricity demand among our industrial customers. I have been in the business long enough to know that when industrial energy demand picks up, the economy is gaining momentum as well. And nothing is more critical to the long-term success and stability of the economy than the availability of reliable and affordable supplies of energy.
On that score, the rate settlement approved by the State Corporation Commission in March bodes well for Virginia.
For example, we estimate that our small commercial customers — those businesses using about 15,000 kilowatt-hours per month — will see their electric bills drop by approximately 10 percent from levels of a year ago. On top of this monthly bill reduction, these customers should receive almost $350 in credits over the next few months to offset the fuel expenses that are part of their bill.
The news is also good for our larger, industrial customers — those whose monthly power consumption is typically around 500,000 kilowatt-hours. We estimate that the rate settlement will lower the typical industrial customer's bill by about 14 percent a month from last year's levels. These customers should receive around $12,000 in credits to help offset their fuel charges.
According to figures obtained from the Edison Electric Institute, the trade group that represents investor-owned electric utilities, Dominion's commercial rates — including the reductions I just mentioned — will be about 18 percent below the national average in 2010. Electric rates for our industrial customers look even more favorable - about 28 percent below the national average.
At Dominion, we know that energy costs are an important concern for every household and business. So we will continue to work hard to keep our rates down to help Virginia grow and remain economically competitive.
All indications are that growth will be central to the Commonwealth's future. Long-range demand forecasts prepared by PJM, the regional manager of the transmission grid, indicate that over the coming decade Dominion will need to add about 5,600 megawatts of new generating capacity to our system. That is the equivalent of adding about 1.4 million typical new homes to our customer base.
Stated differently, we expect the peak demand for power to grow by about 28 percent by 2020 — the highest growth rate in a 13-state region that stretches from Chicago, Illinois, to Washington, D.C.
Part of the reason for Virginia's expected high rate of growth is the state's robust high-tech industry. As you may know, about half of all global Internet traffic flows through energy-intensive data centers located in Northern Virginia and other areas of the state.
In Northern Virginia alone, there are 35 of these data centers in operation and 15 more are planned. Each one of them consumes the same amount of power that serves about 9,000 typical residential households.
A healthy demand for electricity is good news for Virginia and its prospects for sustained growth. But growth also presents Dominion with an enormous challenge.
Developing and delivering new energy supplies is a highly complex undertaking. Large-scale energy projects have high fixed costs, long lead times and lengthy capital recovery periods. For Dominion, the future really is now. Our job is to stay focused on the fundamentals — and well ahead of the economic growth curve.
With that in mind, we have launched a three-year, $4 billion investment program to expand and modernize Virginia's energy infrastructure. That includes the construction of new power stations, high-voltage transmission lines and upgrades to our distribution circuits to enhance service reliability.
Chmura Economics & Analytics, a Richmond-based consulting firm, estimates that our $4 billion capital spending program will create an estimated 20,000 construction jobs, 600 permanent jobs and have an annual economic impact in Virginia of $200 million.
The new generating capacity that we are currently building — or plan to invest in — comes from diverse fuel sources and includes the following:
In addition to those resources, we are evaluating the commercial feasibility of building wind farms offshore along the coast of Virginia to further diversify our potential range of generating options.
We were very pleased that Governor McDonnell signed legislation last month creating the Virginia Offshore Wind Development Authority. This legislation represents an important first step in the potential creation of additional renewable energy sources for Virginia.
Supportive legislation is critical to ensuring that sufficient energy is available to meet Virginia's future needs. So is effective regulation. We are fortunate to have both in the Commonwealth.
Forward-looking regulatory policies enacted by the General Assembly are making it possible for Dominion to invest in the capital projects I mentioned a minute ago. All of them call for good, high-paying jobs and are the direct result of Virginia's progressive model for regulating its electric utilities.
A favorable regulatory environment provides Dominion with the incentives we need to help realize Governor McDonnell's goal: making the Commonwealth the energy capital of the East Coast — and creating prosperity for Virginia along the way.
Developing a diverse basket of energy supplies — both renewable and conventional — is essential if we are to meet the state's future energy needs and environmental goals. But increased energy supply is only part of the solution. We must also become smarter in the way we use energy.
To that end, Dominion is offering five new energy efficiency and conservation programs to help our customers manage their energy usage and costs — and at the same time, reduce environmental impacts and lower the economy's energy intensity — the amount of energy needed to produce a unit of Gross Domestic Product.
We are also evaluating a range of emerging energy technologies and the latest research on conservation and demand management. Our goal is to keep encouraging and promoting more energy efficiency to benefit our customers, the economy and the environment.
A cornerstone of the future gains we hope to realize in energy efficiency is the so-called smart grid, a modernized and digitized power grid that will enhance the way we deliver electricity to our customers.
"Smart meters" are a key building block of the larger smart grid.
In 2009, we launched two pilot projects here in the Richmond suburbs and in the city of Charlottesville to test smart meters and associated equipment. By the end of the year, we had more than 53,000 smart meters operating successfully.
In February of this year, we announced plans to install and test an additional 30,000 smart meters in Northern Virginia. This project expansion will reinforce and further validate the cost savings we achieved in our initial demonstrations.
Innovative smart metering technology will ultimately lead to more efficient use of the power grid, which will help reduce the amount of energy our customers need and also lower environmental emissions.
Those are some of the things we are doing at Dominion to lay the groundwork for Virginia's future growth and prosperity. We hope you and your business will choose to be part of that future — a future that holds great promise for even stronger economic health and a quality of life that is second to none in these United States.