EPA “Clean Power Plan” and 2015 Virginia Session May 2015

Dominion Virginia Power: Residential Rates Remain Very Competitive Residential Rate Comparison, Typical Monthly Bills, 1,000 kWh As of April 2015, Dominion’s typical residential bill is 6.5% below the Virginia average, 16.7% below the D.C. regional average, 20.1% below the national average, and 30.3% below the East Coast average. * * * ^ † *DVP bill: Rates effective Jan.1, 2015. **DVP bill: Rates effective April 1, 2015. Includes interim fuel factor reduction and four generation rider adjustments. †D.C. Regional Average: DVP (April 2015), Baltimore Gas & Electric, Potomac Electric (D.C.), Potomac Electric (Montgomery Co.), and Potomac Electric (Prince George’s Co.). ^ VA average includes all munis, cooperatives and investor-owned utilities as of July 2014 (surveyed by Virginia Office of the Attorney General). Source: Edison Electric Institute, Typical Bills and Average Rates Report: Winter 2015. Rates effective Jan. 1, 2015. Annualized, monthly residential bills, 1,000 kWh usage.

Dominion Virginia Power: Industrial Rates Remain Extremely Competitive Industrial Rate Comparison, average rate per kilowatt-hour, 1,000 kW demand and 650,000 kWh usage As of April 2015, Dominion’s typical industrial rate is 23.6% below the Southeast Peer Group average, 39.6% below the national average, and 54.5% below the East Coast average. (¢/kWh) † * * DVP bill: Rates effective Jan. 1, 2015. ** DVP bill: Rates effective April 1, 2015. Includes interim fuel factor reduction and four generation rider adjustments. †Southeast Peer Group: AL Power, Duke (NC), Duke (SC), Entergy MS, FPL, GA Power, Gulf Power, MS Power, Duke Energy Progress (NC), Duke Energy Progress (SC), Duke Energy Florida, SCE&G, TECO, Kentucky Utilities, and Louisville Gas & Electric Source: Edison Electric Institute, Typical Bills and Average Rates Report : Winter 2015. Rates effective Jan. 1, 2015. Annualized, monthly industrial bills, 1,000 kW demand & 650,000 kWh usage.

100 Largest U.S. Power Producers (Pounds CO2 per MWh Output) Dominion: Low Carbon Intensity Due to Nuclear Fleet and Coal Plant Closures 6/17/2018 100 Largest U.S. Power Producers (Pounds CO2 per MWh Output) Dominion’s carbon intensity has decreased by almost 20 percent since 2000. Dominion Because of our substantial nuclear generation, we have for many years been ranked in the lowest third of U.S. power producers in terms of carbon intensity (this is true whether you look at Dominion as a whole or just Virginia Power assets). I would note that this analysis was done for the Natural Resources Defense Council, it is not Dominion’s analysis though we certainly concur with it. Dominion is among the lowest for CO2 emissions for the largest U.S. power producers. 4 Source: Benchmarking Air Emissions Report: May 2014 (2012 data). Study supported by NRDC and others. Note: Source data gives full credit for existing zero-emission facilities. Subsequent slides illustrating 111(d) which gives partial credit for existing nuclear.

Virginia: A Stricter 111 (d) Goal than Key Competitors Average tons of CO2 released per MWH of generation : 2012 level versus 2030 goal 6/17/2018 Current numbers: VA – 1297 GA – 1500 DE – 1234 NC – 1646 PA – 1540 TN – 1903 MD – 1870 OH – 1850 WV – 2019 KY - 2158 Source: U.S. EPA Clean Power Plan, Technical Supporting Document State Goal Computation

Clean Power Plan Building Blocks Challenging for Virginia 6/17/2018 4 building blocks: Coal plant heat rate improvements - 6% -hard to achieve with five modern or fully modernized coal plants remaining in-service Increased Natural Gas NGCC dispatch -70% capacity - Virginia’s stringent target makes this building block less helpful than for neighboring states Expanded use and new renewable energy and nuclear generation 6% credit for existing nuclear (41 percent of 2013 Virginia Power generation was nuclear) Renewable energy based on existing generation and potential growth—SCC traditionally skeptical of renewable energy 4. Demand-side energy efficiency – 1.5% annual savings rate Virginia annual savings 1.2% in 2020 to 9.3% in 2029—Virginia’s SCC relies on a toughest in the nation test for approving energy efficiency programs (RIM Test) This slide shows the four building blocks EPA used to calculate the specific state goal. As I have mentioned, a state is not required to achieve the individual targets of these building blocks, but the cumulative state goal, that will be included in EPA’s final rule next June, is binding. The first building block assumed six percent heat rate improvements at coal plants. We view this as unrealistic for state generally and particularly for our generation fleet where our remaining coal units are almost all either modern or fully modernized (the exceptions being two small units at Chesterfield). The second building block assumed a 70 percent combined cycle dispatch rate. This is certainly achievable with our modern units coming onto the system, but the wisdom of this would depend on the commodity price of natural gas and on adequate pipeline infrastructure. I would note that for purposes of this rule, both the Warren and Brunswick units are treated as existing units, meaning they are subject to the stricter standard that the new rule sets for Virginia 810 pounds per MW hour in 2030 versus the national standard for new units of 1000 pounds per MW hour. The third building block assigned the very modest credit I’ve already mentioned for existing nuclear and made robust assumptions about renewable energy in our “East Central Region” of 16 percent by 2030. I’ve lived in Virginia all my life and this is the first time I’ve ever heard us referred to as part of the East Central. The fourth building block deals with energy efficiency and assumes that this will account for 9.3 percent savings by 2029. This would be an exponential growth and would be extremely challenging in our current regulatory environment for energy efficiency, where a utility program must pass the “Ratepayer Impact Methodology” or RIM test and demonstrate that the program benefits all customers, not just program participants.

SCC Staff Expressed Concern about 111 (d) 6/17/2018 Substantial costs for customers, estimated at $5.5 billion to $6.0 billion; concern estimate might be low Significant reliability concerns caused by potential forced retirement of round-the-clock generation and unrealistic assumptions about replacements State’s goal fails to recognize substantial clean energy investments already made in Virginia Beyond the building blocks, there are also some limits on state compliance options. I would emphasize here that under 111 (d) the compliance obligation is on the Commonwealth, not individual utilities. The state in turn is expected to develop an enforceable state implementation plan. As you can see the limits on what counts are not especially helpful for Virginia. Beyond the credit for existing nuclear I’ve already mentioned existing nuclear does not count, even though it is emissions-free and carbon free. Combined cycle units under construction do not count, unfortunate for a state with 2,700 MW of combined cycle gas under construction. Pumped storage does not count, a particular challenge for the utility that happens to operate the largest pump storage facility in the United States at Bath County. Commonwealth’s goal, in large part, is based on assumption Virginia will adopt policies from higher rate states to our North regarding renewable energy and energy efficiency

2015 State Legislative Initiatives SB 1349 (Wagner)—comprehensive energy policy legislation in response the proposed EPA Clean Power Plan; signed by the Governor on February 24, 2015 (Chapter 6, 2015 Acts of Assembly) Five-year transition rate period Utility funded energy assistance and energy efficiency pilot Up to 500 MW of solar declared in the public interest Reinforces SCC audit authority, utilities bear weather and plant impairment risk during the transition rate period SCC gains authority to approve power plant retirements during the transition rate period (reverse CPCN) HB 2237 (Yancey)—declares up to 500 MW of utility scale solar in the public interest—signed by the Governor on March 26, 2015 (Chapter 599, 2015 Acts of Assembly)

6/17/2018 SB 1349 Supporters Major Business Groups: Virginia Chamber, Virginia Hispanic Chamber, Virginia Manufacturers Association, Metropolitan Business League Major Users of Electricity: Gerdau Steel, MeadWestvaco, ODEC, QTS, Smithfield Foods, Stihl Community Organizations: American Red Cross, Korean Society of Greater Richmond, NAACP, Partnership for Housing Affordability, Rebuilding Together Richmond, Senior Connections

Solar Energy/Net Metering Both SB 1349 and HB 2237 declare up to 500 MW of utility scale solar in the public interest and allow recovery through a rate adjustment clause; allows the filing to be based on a market index versus cost of service to allow access to federal investment tax credits Legislation passed increasing the net metering limit from 500 kw to 1 MW, with much tighter language linking the size of a net metering installation to the customer’s usage (SB 1395/HB 1950) Legislation also passed creating the Virginia Solar Development Authority—modeled on the existing offshore wind development authority (SB 1099/HB 2267) HB 2267 includes language allowing the authority to work with investor-owned utilities in siting at least 400 MW of solar in the Commonwealth by 2020

Working on Tax Policy Issues Long-standing partnership at Dominion between the tax group, government affairs, regulatory, and public policy 2004 legislation creating an alternative minimum tax, SB 681, Senator Watkins (Chapter 716, 2004 Acts of Assembly) 2012 legislation clarifying attempt by localities at “double taxation” of natural gas generation facilities Regular contact on pending policy issues (legislative or administrative) Tax expertise is critical in evaluating economic impact studies of proposed new infrastructure (recent example is the rollout of the proposed Atlantic Coast Pipeline)