Case Title: Piedmont Environmental Council v. VEPCO

Citation: 

Docket Number: 090249

State: virginia

Court: Virginia Supreme Court

Date: 2009-11-05T00:00:00Z

Document:
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 
entity4 (“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. Shannon5 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 
 
24
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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