Piedmont Environmental v. Virginia Elec.

Present: Keenan, Koontz, Kinser, Lemons, and Millette, JJ.,
and Carrico and Lacy, S.JJ.

THE PIEDMONT ENVIRONMENTAL COUNCIL, ET AL.

OPINION BY
v. Record Nos. 090249, 090253, JUSTICE LAWRENCE L. KOONTZ, JR.
090258, 090278, November 5, 2009
& 090284

VIRGINIA ELECTRIC AND POWER COMPANY,
D/B/A DOMINION VIRGINIA POWER, ET AL.

FROM THE STATE CORPORATION COMMISSION

These five consolidated appeals of right arise from an

order of the State Corporation Commission dated October 7,

2008 granting certificates of public convenience and necessity

to two electric utilities, Virginia Electric and Power Company

(“VEPCO”) and Trans-Allegheny Interstate Line Company

(“TrAILCo”), for the construction and operation of two

Virginia segments of a proposed 500 kilovolt (500kv)

interstate electric transmission line. 1 The interstate

transmission line is to be operated by a regional transmission

1
The appellants in the respective appeals are Fauquier
County Board of Supervisors (Record No. 090249), Piedmont
Environmental Council (Record No. 090253), Prince William
County Board of Supervisors (Record No. 090258), Power-Line
Landowners Alliance (Record No. 090278), and Culpeper County
Board of Supervisors (Record No. 090284). An appeal brought
by Virginia’s Commitment, Inc. (Record No. 090272), also
originally consolidated with these five appeals, was dismissed
upon motion of the appellant. Following consolidation of the
appeals, the Piedmont Environmental Council assumed the role
of lead appellant, and for convenience we will refer to the
appellants collectively as “Piedmont.”
entity which is subject to federal regulation. VEPCO and

TrAILCo are members of that regional transmission entity. As

will be addressed subsequently in some detail in this opinion,

the focus of the issues raised by the appellants in their

challenge to the decision of the Commission involves the

interplay of the requirements placed on the Commission by Code

§§ 56-46.1 and 56-265.2 and certain federal regulations

pertaining to the reliability of a regional electric

transmission grid such as the one involved in the present

case.

BACKGROUND

On April 19, 2007, VEPCO and TrAILCo, pursuant to the

requirement of Code § 56-265.2, filed applications with the

Commission for approval of two Virginia segments of a 500kv

interstate electric transmission line project. 2 The project

was intended to address an anticipated need for increased

2
In pertinent part, Code § 56-265.2 provides:

A. It shall be unlawful for any public utility to
construct, enlarge or acquire, by lease or
otherwise, any facilities for use in public utility
service, except ordinary extensions or improvements
in the usual course of business, without first
having obtained a certificate from the Commission
that the public convenience and necessity require
the exercise of such right or privilege . . . . The
certificate for overhead electrical transmission
lines of 150 kilovolts or more shall be issued by
the Commission only after compliance with the
provisions of § 56-46.1.

2
reliability in the transmission of electricity for

distribution to the Virginia suburban communities of the

Washington, D.C. metropolitan area along a transmission line

originating at generation sources in central Pennsylvania and

extending through West Virginia and the Shenandoah Valley to

northern Virginia. 3 VEPCO’s application, filed jointly with

TrAILCo which would hold a 50% stake in ownership of VEPCO’s

segment of the line, sought authority to build a transmission

line from a point in Warren County on the west side of the

Appalachian Trail near the boundary of Warren and Fauquier

Counties to VEPCO’s existing Loudoun Substation in Loudoun

County. TrAILCo’s separate application was for its wholly-

owned segment of the transmission line that would enter the

Commonwealth at the Virginia/West Virginia state line, run

through the existing Meadow Brook Substation in Warren County,

and continue from there a short distance to connect with

3
The terms generation, transmission, and distribution
have specific meanings within the electric utility industry,
and the definitions of these terms have been adopted within
the statutes and regulations that govern that industry. See,
e.g., Code § 56-576. Generation is the production of electric
power, usually on a large scale for wholesale delivery;
transmission is the transfer of electric energy from its
sources of generation across high voltage lines to either a
local distributor or a large-scale industrial consumer;
distribution is the transfer of electric energy through a
retail delivery system to industrial, commercial, and
residential consumers.

3
VEPCO’s line. Each application proposed preferred and

alternate routes for each line.

Prior to the filing of the applications for approval of

the proposed segments of the transmission line by the

Commission, the determination of the need for the construction

of the entire 500kv interstate electric transmission line was

subject to a federal regulatory process. That process

involved the interaction of three administrative entities:

the Federal Energy Regulatory Commission (“FERC”), a federal

agency whose jurisdiction includes regulation of interstate

electricity sales and wholesale electric rates as well as the

authority to impose mandatory reliability standards on bulk

electric transmission systems, commonly referred to as

“grids;” the North American Electric Reliability Corporation

(“NERC”), a non-profit corporation overseen by FERC and its

Canadian regulatory counterpart that is responsible for

developing standards for transmission grid operation,

monitoring and enforcing compliance with those standards, and

assessing the reliability of interconnected regional grids;

and PJM Interconnection, LLC (“PJM”), a regional transmission

entity 4 (“RTE”) regulated by FERC and monitored by NERC that

4
Also referred to in the record as a “regional
transmission organization,” or RTO, the term used in federal
legislation and regulations; “regional transmission entity” is
the term used in the applicable Virginia statutes, see, e.g.,

4
coordinates wholesale electricity transmission in 13 states

and the District of Columbia, including most of Virginia.

The federal determination of need for the new interstate

transmission line was the result of a mandatory regional

transmission expansion planning (“RTEP”) process in which PJM

attempts to identify future transmission system additions and

improvements needed within PJM’s operating area necessary to

maintain transmission reliability standards established by

NERC. During its 2006 RTEP process, PJM determined that

additional transmission capacity would be needed to supply

electricity to northern Virginia based on data that showed

that an existing transmission line, the “Mt. Storm – Doubs

line,” was expected to begin experiencing intermittent

overloads in 2011 with increasing severity thereafter,

resulting in violations of NERC reliability standards on that

line and elsewhere within PJM’s operational area. VEPCO and

TrAILCo used PJM’s data showing the projected NERC violations,

which supported the federal regulatory finding of need for the

interstate transmission line, in their applications to the

Commission to support the assertion that the Virginia segments

of the line were a necessary improvement as required by Code

§§ 56-265.2 and 56-46.1(B).

Code § 56-579, and, accordingly, we will adopt that term for
use in this opinion.

5
 On June 1, 2007, the Commission issued an order directing

publication of public notice of VEPCO’s and TrAILCo’s

applications. The order also established a schedule for

reviewing the applications and set hearing dates to receive

public comment and evidence. The Commission appointed

Alexander F. Skirpan, Jr., as a Hearing Examiner, to conduct

further proceedings on the applications for approval of the

segments of the transmission line. On July 28, 2008, Skirpan

entered a 223-page report that detailed the extensive

proceedings which he conducted, summarized the voluminous

record, analyzed the evidence and issues, and made certain

findings and recommendations to the Commission for favorable

resolution of the applications.

As reflected in his report to the Commission, between

July 2007 and July 2008, Skirpan conducted 23 days of public

hearings in Richmond, as well as in Bristow, Front Royal,

Warrenton, and Winchester, communities located on or near the

proposed routes of the transmission lines. Skirpan identified

over 30 government entities, public interest organizations and

individuals, including the five appellants, who had directly

participated in these proceedings. In addition, the

Commission received over 1,300 written and electronic

communications during the course of the proceedings.

6
 Among the evidence and supporting documents received by

Skirpan was the post-hearing memorandum of the Commission

staff discussing the issues that the Commission would be

required to address and giving recommendations as to their

resolution. As relevant to the issues raised in these

appeals, the staff’s analysis of the utilities’ assertion of

need for the lines was based principally upon a report made by

Bates White, LLC (“Bates White”), a consulting firm retained

by the Commission “to conduct a review and independent

verification of the Applicants’ load flow modeling,

contingency analyses and reliability needs assessment as

introduced in the applications to justify the proposed

transmission line.” Bates White reviewed the reliability data

originally used by PJM in the federal regulatory process that

established the need for the new line in order to satisfy NERC

standards, as well as updates to that data provided by the

utilities at the request of the Commission. Bates White also

reviewed evidence from the record to determine whether there

were alternative methods to meet the anticipated future

transmission reliability requirements including increasing the

transmission infrastructure in other ways, introducing new

sources of power generation on the existing transmission

infrastructure, and through demand side management strategies

7
for increased conservation to reduce the need for increased

transmission and/or generation infrastructure.

On October 7, 2008, the Commission issued a final order

approving both applications. As relevant to the issues raised

in these appeals, the Commission found that the evidence

established that the transmission line was needed to ensure

future NERC reliability requirements within PJM’s region of

operation and specifically with respect to VEPCO’s

distribution of electricity to consumers in northern Virginia

in 2011. The Commission further found that reasonably

reliable estimates of new generation capacity within VEPCO’s

service area alone would not be sufficient to meet the future

needs of the northern Virginia area, and that conservation

through demand side management, alone or in combination with

other transmission upgrades and/or additional generation

capacity, would not be sufficient to avoid violations of NERC

reliability requirements.

The Commission addressed the environmental impact of the

proposed routes for the line segments and the review process

conducted under the auspices of the Department of

Environmental Quality in that regard. In giving final

approval to the applications, the Commission conditioned its

issuance of the certificates of public convenience and

necessity to the utilities on the approval of the remaining

8
segments of the line by the respective state commissions of

West Virginia and Pennsylvania. The Commission further

addressed the basis for the selection of the approved routes

for the line segments from among the options given in the

applications and placed additional restrictions and

requirements on the utilities that are not germane to the

issues raised in these appeals.

In a separate concurrence to the order approving the

applications, Commissioner Preston C. Shannon 5 noted his

concern, echoing the position of some of the opponents to the

approval of the applications, that changes in the process for

regulating the electric utility industry in Virginia, which

had resulted in the mandatory transfer of control over

transmission infrastructure within Virginia to an RTE, Code

§ 56-579, “places a myriad of restrictions on Virginia’s

sovereign authority over its public utilities – including

effectively placing the responsibility for transmission

planning, as well as [VEPCO’s] ability to interconnect its new

generating facilities to its transmission facilities, under

the control of the federally-regulated PJM.” In Commissioner

Shannon’s view, the legislature’s decision to place Virginia’s

electric transmission infrastructure under the supervision of

5
Commissioner Shannon, who retired from the Commission in
1996, sat on this case by designation.

9
federally-regulated RTEs “has not served Virginia well” and

“could prevent critical generation, needed in Virginia, from

being implemented on a timely basis.” Nonetheless, he agreed

with the majority view of the Commission that approval of the

applications at issue here was in accord with “the current

laws that this Commission must follow in conjunction with the

facts presented.”

Following entry of the Commission’s order granting the

applications, the five appellants each noted appeals as a

matter of right pursuant to Code § 12.1-39. By orders dated

April 2, 2009, we consolidated the appeals for briefing and

oral argument.

STANDARD OF REVIEW

Under the Constitution of Virginia and in statutes

enacted by the General Assembly, the Commission is given broad

authority over the control and regulation of public service

corporations. Board of Supervisors of Campbell County v.

Appalachian Power Co., 216 Va. 93, 105, 215 S.E.2d 918, 927

(1975). In exercising this authority, “[t]he Commission is

charged with the responsibility of finding the facts and

making a judgment. This court is neither at liberty to

substitute its judgment in matters within the province of the

Commission nor to overrule the Commission’s finding of fact

unless we can say its determination is contrary to the

10
evidence or without evidence to support it.” Id.; see also

Appalachian Voices v. State Corp. Comm’n, 277 Va. 509, 516,

675 S.E.2d 458, 461 (2009).

Accordingly, our review of the Commission’s order in the

present cases is guided by the well established principle that

“[o]n appeal, the findings of the Commission are presumed to

be just, reasonable, and correct. The decisions rendered by

the Commission must be ascribed the respect due to the

judgments of a tribunal appointed by law and informed by

experience. Accordingly, a presumption of correctness

attaches to actions of the Commission, and its orders will not

be disturbed when they are based upon the application of

correct principles of law.” Swiss Re Life Co. Am. v. Gross,

253 Va. 139, 144, 479 S.E.2d 857, 860 (1997)(citations and

internal quotation marks omitted); accord Northern Virginia

Electric Coop. v. Virginia Electric and Power Co., 265 Va.

363, 368, 576 S.E.2d 741, 743 (2003). Moreover, although

questions of law are reviewed de novo, the practical

construction given by the Commission to a statute it is

charged with enforcing “‘is entitled to great weight by the

courts and in doubtful cases will be regarded as decisive.’”

Appalachian Voices, 277 Va. at 516, 675 S.E.2d at 461 (quoting

Commonwealth v. Appalachian Elec. Power Co., 193 Va. 37, 45,

68 S.E.2d 122, 127 (1951)).

11
 DISCUSSION

While Piedmont makes eleven assignments of error, which

are distilled into eight interrelated questions presented, the

arguments asserted in their opening brief and during oral

argument of these appeals may be fairly narrowed to the

following substantive issues:

(1) Whether the Commission erroneously interpreted
federal law and regulations governing RTEs as
requiring the Commission to limit the scope of its
inquiry as to the necessity for the Virginia
segments of the interstate transmission line to a
review of PJM’s determination that the new
transmission line was needed in accord with federal
regulations.

(2) Whether the Commission failed to conduct an
independent analysis of the applications for the
Virginia segments of the interstate transmission
line by failing to properly consider additional
generation and conservation alternatives in
determining whether the transmission line was
needed.

(3) Whether the Commission erred in approving the
applications because of the “inherent bias” of the
evidence relied upon by the Commission.

Federal and State Regulation of Electric Utilities

Because the Commission does not operate in a vacuum at

any given time, it will be beneficial initially to summarize

the changes that have occurred over the past several decades

in the regulation of the generation, transmission, and

distribution of electricity in the United States. Generation,

transmission, and distribution of electricity historically

were provided by a single utility that had exclusive rights

12
over a limited geographic area within a state. The utility

was permitted to maintain this monopoly because its operations

were regulated by the state, which controlled the construction

of new generation and transmission infrastructure and the

rates the utility could charge for distribution of electricity

to consumers. However, over time as a result of efficiencies

of scale favoring the construction of larger generation

facilities that could supply electricity to wider geographic

areas, a division arose between generation and distribution,

with the owners of the generation infrastructure typically

also owning the transmission lines. Inevitably, this resulted

in electricity generated in one state being sent over

transmission lines to be sold by a distributor in another

state.

In Public Utilities Commission v. Attleboro Steam &

Electric Co., 273 U.S. 83, 90 (1927), the United States

Supreme Court, holding that the negative impact of the

Commerce Clause prohibits state regulation that would directly

burden interstate commerce, determined that the interstate

transmission of electrical power was subject to regulation

only “by the exercise of the power vested in Congress.” 273

U.S. 83, 90 (1927). Congress exercised this power eight years

after the Attleboro Steam decision by enacting the Federal

Power Act of 1935, now codified as amended at 16 U.S.C. § 824

13
et seq. (2006 & Supp. I 2007), which created the Federal Power

Commission (“FPC”), the predecessor of FERC, “to provide

effective federal regulation of the expanding business of

transmitting and selling electric power in interstate

commerce.” Gulf States Utils. Co. v. FPC, 411 U.S. 747, 758

(1973). Specifically, Congress recognized the FPC’s

jurisdiction as including “the transmission of electric energy

in interstate commerce” and “the sale of electric energy at

wholesale in interstate commerce.” 16 U.S.C. § 824(b).

Following passage of the Federal Power Act of 1935, the

generation and transmission of electric power has increasingly

become a matter of interstate commerce, and correspondingly

the federal role in the regulation of the electric industry

has also grown. With the passage in 1978 of the Public

Utility Regulatory Policy Act (“PURPA”), 16 U.S.C. § 2601 et

seq. (2006 & Supp. I 2007), the federal government required

utilities to allow the transmission of power from other

generators across their transmission and distribution lines,

even within the borders of a state. This was deemed necessary

because established producers of electric power continued to

control the majority of the transmission capacity and were

reluctant to purchase power from “nontraditional facilities”

or allow such competitors to have access to the existing

transmission infrastructure. PURPA directed FERC to

14
promulgate rules requiring utilities to purchase electricity

from “qualifying cogeneration and small power production

facilities” and allow transmission of power produced by other

generators on their lines. FERC v. Mississippi, 456 U.S. 742,

751 (1982); see also 16 U.S.C. § 824a. Overseen by FERC, this

“open access” mandate for wholesale interstate transmission of

electricity would prove to be the first step toward market

competition through the creation of regional distribution

systems on a nationwide structure of interconnected

transmission grids.

Subsequent federal legislation further expanded FERC’s

authority to order individual utilities to provide

transmission services to unaffiliated wholesale generators on

a case-by-case basis. See 16 U.S.C. § 824j and § 824k. In

addition, FERC was also authorized to override any state law

or regulation that “prohibits or prevents the voluntary

coordination of electric utilities.” 16 U.S.C. § 824a-1(a).

Applying this authority, FERC promulgated the so-called “Open

Access Rules” though its Orders 888 and 889. FERC’s Order No.

888 “remove[d] impediments to competition in the wholesale

bulk power marketplace and [brought] more efficient, lower

cost power to the Nation's electricity consumers” by requiring

any public utility that owns, operates or controls interstate

transmission facilities to provide service to any power

15
supplier needing to transport electricity across the utility’s

lines. Promoting Wholesale Competition Through Open Access

Non-Discriminatory Transmission Services by Public Utilities,

61 Fed. Reg. 21,450 (May 10, 1996)(codified at 18 C.F.R. pts.

35 & 385). FERC’s Order No. 889 required that there be a

functional separation of control by utilities that owned both

transmission and generation infrastructure. Open Access

Same-Time Information System & Standards of Conduct, 61 Fed.

Reg. 21,737 (May 10, 1996)(codified at 18 C.F.R. pt. 37).

These “Open Access Rules have been described as ‘the legal,

functional, and regulatory prerequisite to the implementation

of nationwide deregulation of the electric utility

business.’ ” State ex rel. Sandel v. New Mexico Pub. Util.

Comm'n, 980 P.2d 55, 59 (N.M. 1999) (quoting Michael Evan

Stern & Margaret M. Mlynczak Stern, A Critical Overview of the

Economic and Environmental Consequences of the Deregulation of

the U.S. Electric Power Industry, 4 Envtl. Law. 79, 95

(1997)).

Concurrent with the expanding role of the federal

government in regulating the interstate transmission of

electricity, members of the electric utilities industry

recognized the need to assure that the expanding interstate

transmission infrastructure would be sufficient to meet the

rapid increase in demand for electricity in growing urban

16
markets. Compacts between electric utilities, originally

known as “power pools” and now more commonly referred to as

“interconnections,” date to the early twentieth century.

Following the “Great Blackout” of November 9, 1965, which

resulted from a catastrophic failure of the interconnected

electric transmission grids in the northeastern United States

and Ontario, Canada, the FPC, at the direction of President

Lyndon Johnson, recommended the formation of a council on

power to assist in resolving interregional coordination of

transmission reliability. See, e.g., Steven Ferrey, Power

Future, 15 Duke Envtl. L. & Pol'y F. 261, 276 n.55 (2005);

Scott V. Heck, Lights Out For New Jersey: The August 2003

Blackout and the End of Electricity Regulation in New Jersey,

29 Seton Hall Legis. J. 279, 280-81 (2004).

The resulting entity, the National Electric Reliability

Council, the predecessor of NERC, was formed in 1968 and

originally served only in an advisory capacity with no

official regulatory function. See, e.g., Garkane Power Ass’n

v. Public Serv. Comm'n, 681 P.2d 1196, 1201 (Utah 1984). The

Federal Power Act of 2005, however, directed FERC to designate

a national Electric Reliability Organization charged with

establishing and enforcing reliability standards for the

interstate transmission of electricity. 16 U.S.C.

§ 824o(a)(2). Not surprisingly, NERC was the sole applicant

17
which sought to be designated as the national Electric

Reliability Organization and was subsequently designated by

FERC to fulfill that role. See Alcoa Inc. v. FERC, 564 F.3d

1342, 1345 (D.C. Cir. 2009). Following the designation of

NERC as the national Electric Reliability Organization, FERC

adopted through a rulemaking process the majority of NERC’s

formerly voluntary transmission reliability standards, making

them mandatory and subject to penalty by fines against RTEs

and independent utilities that fail to adhere to those

standards. 6 Id. at 1344 (citing Mandatory Reliability

Standards for the Bulk-Power System, 72 Fed. Reg. 16,416 (Apr.

4, 2007) (codified at 18 C.F.R. pt. 40) (FERC’s final rule

adopting NERC standards)).

In apparent response to increased federal regulation and

industry emphasis on assuring the reliability of the

interstate transmission grids, a number of states began to

revise their regulatory schemes governing the operation of

electric utilities within their borders. State restructuring

of regulations governing the operation of electric utilities

was driven principally by the worthy belief that increased

competition in the generation and transmission of electricity

6
NERC has already sought, and FERC has approved,
imposition of fines in many cases. See, e.g., Scott Grover,
FERC Guidance Order Shows Inter-Agency Tension, 23 Nat.
Resources & Env’t 61, 61-62 (2009).

18
would lead to reduced costs for all consumers, but especially

for large industrial users, who became strong advocates of

deregulation. See, e.g., David B. Spence, The Politics of

Electricity Restructuring: Theory vs. Practice, 40 Wake Forest

L. Rev. 417, 446-47 (2005).

As part of Virginia’s restructuring of regulation of the

operation of electric utilities, in 1999 the General Assembly

enacted the Virginia Electric Utility Restructuring Act, now

known as the Virginia Electric Utility Regulation Act, Code

§ 56-576 et seq. As relevant to the issues raised in these

appeals, the Act required electric utilities within the

Commonwealth that own, operate, or otherwise have control over

transmission infrastructure to “join or establish a regional

transmission entity” and “transfer the management and control

of its transmission system” to the RTE. Code § 56-577(A)(1).

The Act further provided that “the Commission shall continue

to regulate . . . to the extent not prohibited by federal law,

the transmission of electric energy in the Commonwealth.”

Code § 56-580(A). Moreover, the Act expressly provided that

the Commission would retain “authority over transmission line

or facility construction, enlargement or acquisition within

this Commonwealth.” Code § 56-579(D)(1).

In 2004, the Commission approved the applications of

VEPCO and Allegheny Power, the parent affiliate of TrAILCo, to

19
transfer operational control of their transmission

infrastructure within Virginia to PJM. 2004 S.C.C. Ann. Rept.

294 (VEPCO); 2004 S.C.C. Ann. Rept. 300 (Allegheny Power).

Thus, the transmission infrastructure of these utilities

became part of the regional transmission grid administered by

PJM and was thereafter included in its ongoing RTEP process

for evaluating the reliability of its members’ transmission

infrastructure in order to respond to projected reliability

violations of NERC standards.

With this background in mind, we now address the issues

raised by Piedmont in these appeals.

Reliance on PJM’s Application of NERC Reliability Standards

Piedmont contends that the Commission erred, as a matter

of law, when it “conclud[ed] that it was obligated under Va.

Code §§ 56-46.1 and 56-265.2 to grant the Applications if a

clear reliability need had been shown and the transmission

line at issue is an ‘acceptable’ option to meet that need.”

Piedmont reasons that the Commission must have “erroneously

concluded that it was prevented by federal regulation or

policy from conducting the investigation and analysis that is

prescribed by state statutes” to make an independent

determination of the need for the transmission line.

The Commission responds that the record does not support

Piedmont’s contention that the Commission premised its

20
decision on a presumption that it was preempted by federal

regulation or policy from conducting a full and independent

review of the applications to determine that the construction

of the transmission line was necessary and otherwise comported

with the requirements of Code § 56-46.1. Rather, in the

Commission’s view, Piedmont’s contentions are based on a

mischaracterization of the Commission’s recognition that the

federal regulations were mandatory as applied to the

utilities, and that the Commission could take this factor into

account in its review process. We agree with the Commission.

In his hearing examiner’s report, Skirpan noted that Code

§ 56-46.1(B) directs the Commission to verify “the

applicant[s’] load flow modeling, contingency analyses, and

reliability needs presented to justify the new line.” Skirpan

further noted that “[t]he determination of need begins with a

review of NERC transmission planning reliability standards,

and the procedures and tests employed by PJM and [VEPCO]” to

comply with those standards. While acknowledging that

Piedmont and other opponents to approval of the applications

“questioned whether the PJM tests are appropriate” for

determining whether the line was specifically needed for the

benefit of Virginia consumers, Skirpan concluded that “the

NERC transmission planning standards are mandatory and that

21
the tests employed by PJM and [VEPCO] properly apply the NERC

standards.”

The Commission agreed with Skirpan’s conclusions,

expressly adopting his findings that:

(i) “[t]he PJM generation deliverability and load
deliverability tests and the [VEPCO] test properly
apply mandatory NERC transmission reliability
planning standards;” (ii) “[t]he Applicants’ load
forecasts are based on reasonable assumptions for
transmission planning purposes, including
assumptions that project future savings from [demand
side management programs] to remain at current
levels;” (iii) “[t]he Applicants’ assumptions
regarding future generation are consistent with the
federally-mandated functional separation of
transmission and generation, and PJM’s general lack
of authority to cause generation to be constructed;”
and (iv) “[t]he Applicants’ projected load-flow
results for 2011 and 2012 support the need for
additional transmission to address violations of
NERC transmission reliability planning standards.”

Piedmont contends that these statements show that the

Commission incorrectly presumed it could not base its decision

to grant or deny the applications on factors other than

verification of the utilities’ own data showing the

anticipated violation of NERC reliability standards. As a

result, Piedmont asserts the Commission assumed “that because

PJM was obligated to find a solution to a violation of the

NERC criteria, the Commission was bound to accept PJM’s

solution and ignore the requirements of Va. Code §§ 56-46.1

and 56-265.2.”

22
 Our review of a decision by the Commission requires that

we undertake an examination and study of the entire record.

Rappahannock League for Environmental Protection, Inc. v.

Virginia Electric & Power Co., 216 Va. 774, 783, 222 S.E.2d

802, 808 (1976). When so viewed, we find no support for the

assertion that the Commission presumed it was required by the

federal regulatory process to limit its consideration of the

applications to a review of PJM’s determination that the

proposed transmission line was an “acceptable” solution to the

anticipated NERC reliability violations or that the Commission

actually limited its consideration of the applications in that

way. By focusing on isolated statements in the hearing

examiner’s report and the Commission’s order to support its

contention that the Commission somehow viewed federal

regulations as preempting the Commission from conducting the

independent review of the applications required by Virginia

law, Piedmont has discounted the overwhelming weight of

evidence in the record that is plainly contrary to Piedmont’s

assertion.

Skirpan correctly noted that as part of the Commission’s

responsibility under Code § 56-46.1 to determine that the line

is needed “the Commission shall verify the applicant’s load

flow modeling, contingency analyses, and reliability needs

presented to justify the new line.” (Emphasis added.) A

23
plain reading of the statute does not support the conclusion,

apparently urged by Piedmont, that to accomplish this

verification the Commission is required to obtain new data

from an independent source, rather than giving any weight to

the data provided by the applicant.

Moreover, the record amply demonstrates that the

Commission, through its staff, fulfilled its statutory

obligation to verify the applicants’ assertion of need for the

transmission line by having Bates White analyze the

reliability data originally used by PJM and VEPCO that showed

the projected violations of NERC standards. Bates White

independently reviewed the assumptions on which this data was

based, finding that these assumptions were reasonable. While

the Commission’s ultimate decision to accept Skirpan’s

recommendation to use PJM’s data in determining the need for

the new transmission line was obviously contrary to the

desires of Piedmont and the other opponents to approval of the

applications, the record simply does not support the

conclusion that the Commission determined that it was

compelled to accept this data because it also had been used in

the federal regulatory process approving the need for the line

by NERC. Rather, the record more readily supports the

conclusion that the Commission, aided by its staff and the

employment of a skilled, independent consultant, properly

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verified the utilities’ load flow modeling, contingency

analyses, and reliability needs presented to justify the new

line. Accordingly, we hold that the Commission did not err in

using PJM’s NERC data to determine the need for the proposed

transmission line as required by Code § 56-46.1.

Consideration of Generation and Conservation Alternatives

Piedmont contends that the Commission also erred, as a

matter of law, in that it failed to independently review

alternative solutions for addressing the anticipated deficit

in transmission reliability on the Mt. Storm - Doubs line.

According to Piedmont, rather than conduct its own analysis,

the Commission effectively “delegated its statutory

responsibility to PJM” by accepting PJM’s assertion that there

were no alternatives that could successfully address the

increased demand for electricity in northern Virginia by 2011,

which the new line was intended to resolve.

The Commission responds that the record shows it reviewed

options for developing new generation capacity within VEPCO’s

service area, the use of conservation through demand side

management, and the availability of alternative transmission

infrastructure upgrades, but concluded that none of these

alternatives, alone or in combination, were sufficient to

assure that PJM’s transmission capability to avoid violations

of NERC reliability standards would not be adversely affected

25
by the anticipated increase in demand for electricity in

northern Virginia in 2011 and beyond. In doing so, the

Commission acknowledged that the assumptions regarding future

generation and conservation through demand side management

were in part based upon data developed though the federal

regulatory process overseen by NERC, and that these

assumptions favor increased transmission capacity as the

principal method for assuring compliance with mandatory

reliability standards. Nonetheless, the Commission maintains

that its decision was reached through an independent

examination of the data as required by Virginia law. Again,

we agree with the Commission.

The record reflects that Bates White “studied five

additional transmission solutions to overloads on the Mt.

Storm - Doubs line,” finding only one alternative to the

proposed new transmission line that could sufficiently reduce

the chance for reliability violations in the short term. The

utilities contended that this alternative would not provide a

long-term solution, while Bates White concluded that the

utilities’ projections for long-term reliability problems were

speculative. Similarly, Skirpan concluded that “PJM’s

generation assumptions produce less and less reliable power-

flow model results as the forecasts project farther into the

future.”

26
 The record also shows, however, that the Commission

concluded that the interpretations of the data for

transmission alternatives that were presented by opponents to

approval of the applications were equally speculative. Thus,

the Commission ultimately adopted Skirpan’s view that “the

focus of the needs analysis should be on results for 2011 and

2012,” and that the Commission should accept PJM’s data as

being the most accurate for verifying that the new

transmission line was the only viable option for assuring that

NERC reliability standards would be timely met.

Similarly, the record reflects that consideration was

also given to the data analysis presented by the utilities and

the opponents on generation and conservation alternatives. In

his report to the Commission, Skirpan extensively detailed

these alternatives, including the environmental impact of the

proposed line and the alternative solutions. Based on the

independent analysis by Bates White and the recommendations of

the staff and the hearing examiner, the Commission found that

it was not “reasonable to assume that a sufficient amount of

additional new generation necessarily will be available . . .

to obviate the reliability need,” and concluded that “the

generation assumptions used in the PJM and [VEPCO] tests . . .

are reasonable.” Ultimately, the Commission adopted the

conclusions drawn by Bates White, the staff, and Skirpan that

27
none of the alternative scenarios, whether applied

individually or in combination, “is a reasonable proposal to

meet the need satisfied by the [new] transmission line.”

We agree with the Commission that the record as a whole

demonstrates that the Commission fulfilled its statutory

obligation to consider alternative solutions to the need for

the proposed transmission line. We hold that the Commission

acted within its authority to evaluate the evidence presented

by the utilities on this issue and determine whether that

evidence, when considered against evidence presented by other

participants in the process, was reliable and could serve as

the basis for the Commission’s determination that no other

alternative was available that would obviate the demonstrated

need for the line.

It is understandable that the opponents would have

preferred that the Commission not rely on the utilities’ data

and analysis concerning alternatives to the transmission line.

Nonetheless, the record simply will not support a conclusion

that the Commission’s decision to do so was arbitrary or

capricious so as to amount to a “delegation” of its

responsibility to PJM or any other entity. Rather, it is

clear that the Commission reached its conclusion through a

deliberative consideration of all the evidence consistent with

28
the authority given to it by the Constitution and the General

Assembly.

Approval of the Applications

Piedmont asserts that the Commission erred in approving

the applications because the Commission failed to consider the

“inherent bias” of VEPCO, TrAILCo, and PJM in reviewing the

data submitted by them. Citing Virginia Electric and Power

Company v. Citizens for Safe Power, 222 Va. 866, 869, 284

S.E.2d 613, 614 (1981), Piedmont contends that the Commission

erred because it “deferred” to the utilities and the RTE by

accepting their data instead of exercising its statutory

authority to “obtain all relevant . . . information reasonably

necessary for it to make a considered judgment.” In

Piedmont’s view, because federal law prohibits direct

cooperation between the entities that control generation and

transmission infrastructure, PJM’s assumptions of future NERC

violations are arbitrary in that they consider only the effect

of future demands on the transmission grid without regard to

the effect of additional generation capacity or conservation

efforts. Piedmont contends that “[a]ny arbitrariness in PJM’s

assumptions, then, [is] imputed to the Commission” and, thus,

to its decision to approve the applications. Piedmont asserts

that the Commission should have used its authority to order

the utilities to undertake an integrated resource planning

29
(“IRP”) process, Code § 56-597 et seq., or otherwise exercised

its general investigative powers to challenge PJM’s

assumptions concerning the lack of sufficient generation or

conservation alternatives. Piedmont also asserts that the

Commission erred in not exercising its authority under Code

§ 56-235.1 “to consider generation and conservation

alternatives to the proposed transmission line, [and] to

require [VEPCO] to implement them.”

In its order approving the applications, the Commission

noted that Piedmont and other opponents to approval of the

applications contended that because the assumptions used by

VEPCO and TrAILCo were, in their view, inherently suspect, the

Commission should initiate an IRP “to mesh the myriad of

transmission, generation and conservation (including [demand

side management]) options into a comprehensive plan that could

be presented as a better alternative than building the

proposed transmission line.” While indicating that it was

“sympathetic to the opponents’ position that planning for

transmission, generation and conservation should be done in an

integrated and holistic process, in order to arrive at the

most rational and cost-effective plan to meet Virginia’s

future load growth and transmission reliability needs,” the

Commission concluded that “the law and facts applicable to

this matter do not enable us to use a transmission line case

30
brought under Va. Code §§ 56-265.2 and 56-46.1 to conduct an

IRP exercise . . . and then use the result of that exercise as

a legal basis to deny the application[s] when a clear

reliability need has been shown and the proposed transmission

line is an acceptable option under Virginia statutes to meet

that need.”

The Commission went on to observe that

[a]s a matter of policy, transmission planning and
control of transmission assets are now conducted on
a regional, multi-state basis by a regional
transmission entity (“RTE”), which in this case is
PJM. This is a direct result of [Code § 56-579]
that requires Virginia’s utilities to join an RTE
. . . . It is also undisputed from the record of
this case that under federal policy PJM itself
cannot order a generating plant to be built to solve
a clear reliability problem on a transmission line
. . . that clearly tilts the field towards PJM
recommending more and more new transmission lines
when other options might be a more efficient use of
capital and much less intrusive on the landscape.
Since PJM is regulated by FERC, whether these
federal rules represent sensible policy is
ultimately for the United States Congress to decide.

The Commission further noted that even if it were to find that

future additions to the transmission and generation

infrastructure could obviate the need for the proposed

transmission line if it ordered VEPCO to accelerate the

timetable for building that infrastructure, it did not have

the authority to independently order the inclusion of that

infrastructure into PJM’s federally-regulated, interstate

operations.

31
 Like the Commission, we are not unmindful of the tensions

that have been created as the result of the significant

changes in the manner in which electric utilities are

regulated. The IRP process, enacted by the General Assembly

in 2008, is clearly intended as a response by the legislature

to reassert some modicum of state control over future

development of new transmission and generation infrastructure.

However, we agree with the Commission that the IRP process is

a separate and independent provision of the law, and nothing

within Code § 56-265.2 would permit the Commission to delay

action on or deny approval of an otherwise proper application

for a new transmission line under that statute by asserting

the need for a completed IRP. 7 Similarly, even if Piedmont

were correct that by ordering VEPCO to accelerate the building

of new generation infrastructure the need for the proposed

line could be obviated, the Commission is correct that its

authority does not extend to requiring that PJM introduce this

new generation infrastructure into its interstate transmission

grid on an accelerated schedule.

7
Code § 56-599 required electric utilities subject to
regulation by the Commission to file their initial biennial
IRPs by September 2009. Thus, while the Commission will have
access to current IRPs in considering future applications for
additional transmission and generation infrastructure, we
express no view in this opinion as to the role that IRPs
should or will play in the evaluation of such applications.

32
 It is undeniable that the evidence in the record

submitted to the Commission by VEPCO and TrAILCo was

influenced by the nature of the federal regulatory process

that preceded it. And, as the Commission observed, as

presently constituted, it is equally undeniable that this

process is “tilted” toward favoring improvements in

transmission infrastructure over increased generation and

improved conservation. However, the resulting “inherent bias”

of PJM and the transmission divisions of its member utilities

in seeking approval of new transmission lines does not render

their evidence concerning the need for such improvements

necessarily unreliable. Moreover, it would be an

irresponsible approach for the Commission to resolve the issue

of the need for a new transmission line by ordering the

utilities to build additional generation capacity but waiting

until that additional generation was connected to the

interstate transmission grid before ascertaining whether the

identified need had been met, as Piedmont seems to suggest in

these appeals.

The record in this case amply demonstrates that the

Commission understood the federal regulations or policies

which influenced the evidence presented to it by VEPCO and

TrAILCo, but based upon its independent review of that

evidence, found that the data presented by them was reliable

33
and established that the proposed interstate transmission line

was both needed and, in consideration of all other factors, an

acceptable solution to resolve the anticipated need for

reliability in the delivery of electricity to the affected

areas of northern Virginia.

In short, while Piedmont may question the efficacy of the

collaborative governance between the federal and state

governments that has resulted from the restructuring of

electric utility regulation, the Commission was required to

make its decision to approve the applications at issue in

these appeals based on the record before it and under the

current state of the applicable law. We hold that the

Commission’s decision to approve the applications is supported

by the evidence in the record and proper interpretations of

the law.

CONCLUSION

In summary, we hold that the record manifestly

demonstrates that the Commission conducted its review of the

applications for a new transmission line in accord with the

requirements of Code §§ 56-46.1 and 56-265.2, and that the

Commission’s decision to grant the applications is supported

by the evidence. For these reasons, the order of the

Commission approving VEPCO’s and TrAILCo’s applications to

34
construct their respective segments of the 500kv transmission

line, as conditioned, will be affirmed.

Affirmed.

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