Robert M. Blue
Chair, President and Chief Executive Officer at Dominion Energy
Turning to Safety, Performance and affordability on Slide 10, we achieved near record setting safety performance in 2024 and as measured by our employee OSHA injury recordable rate on affordability, our rates continue to be lower than national and regional averages. We're intently focused on ensuring our service isn't just reliable, but that it remains appropriately affordable as well. Next, on our Coastal Virginia offshore wind project. We provided several updates last week, but I'd like to start with a few project highlights on Slide 11.
First, the project is 50% complete and on schedule for completion in 2026. Second, CVAL is supported by Virginia law and approved by the State Corporation Commission and federal agencies. Third, CVAL will provide much needed new generation to support America's AI and cyber preeminence in the largest data center market in the world.
Additionally, the project represents the fastest and most economical way to deliver 2.6 gigawatts of supply to Virginia's grid. And finally, CVAL has created approximately 2,000 direct and indirect American jobs and generated $2 billion in American economic activity in addition to having the robust bipartisan support of Virginia's state and federal elected leaders. In summary, this project is consistent with the goal of securing American energy dominance and is part of a comprehensive all of the above energy strategy to affordably meet growing energy needs.
Next, on recent construction progress and milestones in 2024 we completed a very successful first monopile installation season and work has continued this winter on export cable lay as well as transition pieces and in the coming days, offshore substation installation as shown on slide 12. We began installation of transition pieces on December 31st and have since completed installation of 20 in total.
The first offshore substation, jacket and Topside were delivered to Portsmouth at the end of January and will begin installation later this month. The remaining two offshore substations are on track to be delivered this summer and installed in the fall after completion of monopile season in October. On materials and equipment. Thus far, 130 monopiles have been loaded out, with 116 successfully delivered and 14 more in transit to Virginia. Presently, approximately 75% of the project monopiles are either installed or awaiting installation. Our partner EEW continues to make strong progress and we expect deliveries to continue steadily in the coming weeks. Out of the project's 176 transition pieces, all have been rolled. Of these, 152 have been successfully steel welded and of these, 91 have been completed, representing over 50% of the total. We expect the final transition piece to be completed in October. Additionally, the schedule for the manufacturing of our turbines remains on track. As a reminder, Siemens Gamesa, the project's wind turbine supplier, is manufacturing the same turbine model for CVAL as has been successfully fabricated, installed and is now operating at the Moray west offshore wind project. Eight towers have been completed with an additional 31 in progress. Blade fabrication is now underway and we expect nacelle production to begin next month. Turning to regulatory we made our quarterly Offshore Wind Construction Update filing on February 3, accompanied by a detailed explanation of the change in project costs from 9.8 billion to $10.7 billion. Let me share a few thoughts here. First, as you would expect, the cost increase is disappointing. We take great pride as an organization in delivering on time and on budget. Since the original cost submission 40 months ago, we've spared no effort institutionally to maintain fidelity to our original estimate. Ultimately, despite having about $300 million budgeted for network upgrades, which was more than sufficient based on PJM's initial estimates, that estimate has proved too low. New electric generation resources constructed within pjm, regardless of their generation type, are assigned costs by PJM that are deemed necessary to effectively integrate these resources and ensure the reliability and stability of the electric grid. Higher network upgrade cost estimates by PJM reflect the significant increase in demand growth that requires incremental generation transmission resources across the system. I think it warrants noting that the aggregate costs for other project inputs, including Offshore Scope, have remained in line with the original budget. Second, network upgrades do not impact project construction or timeline and represented the largest unfixed project cost by far. We now have a much clearer, though not final, view of those costs. Further, we've refreshed contingency to represent 5% of remaining project costs. Third, cost sharing and risk sharing is working as intended to protect customers and shareholders. As a result of the cost sharing settlement approved by Virginia regulators, the project. The cost update is expected to increase residential customer bills by an average of $0.43 per month over the life of the project, and the updated LCOE continues to benchmark very favorably with new generation alternatives including solar, battery and gas fire generation. CVAL remains one of the most affordable sources of energy for our customers. Of the $900 million cost increase, 80% or 700 million is expected to be recovered via rider and added to rate base subject to regulatory approval. 50% of the non recoverable portion of the increase will be borne by Stone Peak rather than Dominion Energy shareholders. Finally, I know investors are very focused on the probability of future cost increases. I recognize the critical importance of executing against any guidance offered. The project is on time and we're committed to delivering it in line with the now updated cost estimate. We don't have perfect insight into the information that PJM will use to finalize cost by midyear, but we've done a significant amount of analysis around the most recent estimate which informs our updated cost estimate. I am confident in our updated estimate and believe that if there is a revision up or down with respect to PJM network upgrades come July if it would not be of a similar magnitude Finally, a few updates on Charybdis. As shown on Slide 16, the vessel is 96% complete, up from 93% as of our last earnings call and sea trials are underway. What we're showing there is a picture of the 30,000 ton vessel fully jacked to its full height of almost 400ft. We continue to expect Charybdis to complete sea Trials in early 2025 consistent with our previous schedule, and be delivered to CVAL in the third quarter. There's also no change to the vessel's cost of $715 million. Turning now to data centers, we continue to see exciting developments here, so let me share a few updates. First, where things stand Today, Virginia hosts the largest data center concentration in the world by far. Since we started tracking, We've connected approximately 450 data centers representing nearly 9 gigawatts of capacity capacity. Data center sales today represent about 26% of total sales for dev. Data centers are attracted to Virginia by connections to world class fiber networks, Virginia's attractive business climate, availability of a trained workforce and access to our affordable, reliable and increasingly clean energy. In recent years, to address this demand, we've advanced electric transmission projects to bring both new and upgraded infrastructure to enable continued connection and expansion of data center customers in eastern Loudoun County, Virginia. This work has included reconductoring lines, expanding substation infrastructure, as well as building a 500kV transmission line that we expect to complete on schedule by the end of 2025. Further, just last week the SEC approved another 500kV line into Eastern Loudoun county that we expect to be in service by year end 2027, and that will allow us to stay ahead of the region's rapidly growing electricity needs. Second, where do we go from here? The PJM DOM zone is experiencing unprecedented load growth. This growth is accelerating in orders of magnitude, driven by one the number of data centers requesting to be connected onto our system, 2 the size of each facility and 3 the acceleration of each facility's ramp schedule to reach full capacity. For some context, as shown on slide 17, PJM recently updated its DOM zone forecast but now projects peak summer load growth of approximately 6.3% per year for the next 10 years. To put that into perspective, the resulting peak load projected for 2034 has increased from 26.1 gigawatts as of the 2022 PJM estimate to 41.5 gigawatts as of this year's estimate, an increase of nearly 60%. Last year we implemented changes to our process on how we handle new delivery point requests on our system. This change will allow us to organize load requests into batches and serve them in the order they are received. Since we began communicating these changes, we've seen an increase in demand from customers. As shown on Slide 18, we've updated our data center contracted capacity. We now have approximately 40 gigawatts in various stages of contracting as of December 2024, which compares to around 21 gigawatts as of July 2024, an increase of 19 gigawatts, or 88%. As a reminder, these contracts are broken into 1 substation engineering letters of authorization, 2 construction letters of authorization, and 3 electrical service agreements. As customers move from 1 to 3, the cost, commitment and obligation by the customer increases. We're currently studying over 26 gigawatts of data center demand within the Substation Engineering Letters of Authorization stage, which means a customer has requested the company to begin the necessary engineering for new infrastructure required to serve the customer. This compares to approximately 8 gigawatts as of July 2024 and represents a remarkable 245% increase. We've analyzed the data several ways, and certainly we believe some of this growth is attributable to the new batch system, which naturally incents customers to get into the process early. But what's undeniable is that data center growth in Virginia is not slowing down. In fact, it's accelerating, and we're taking every step to meet this opportunity. There are also about 5 gigawatts of data center demand that have executed Construction Letters of Authorization, which are contracts that enable construction of the required distribution and substation electric infrastructure to begin. Should a customer in this stage elect to discontinue a project, they're obligated to reimburse. The company for its investment to date. Finally, the nearly 9 gigawatts included in electrical service agreements, or ESA, represent contracts for electric service between Dominion Energy and a customer. This has increased by nearly a gigawatt since July of 2024. Each contract is structured for an individual account. By signing an esa, the customer is committing to consume a certain level of electricity annually, often with ramp schedules where the contracted usage grows over time. As Steven mentioned, this is all evidence of opportunities for additional investment across the value chain for many years to come. Turning to slide 19, let me highlight a couple of additional business updates. First, an update on our transmission business and the Joint Planning agreement with AEP and FirstEnergy. A package of our own and jointly proposed projects has been shortlisted by PJM in their open window process, which is ongoing with final approvals expected this month. Dominion share of the Joint Planning Agreement will lead to approximately a billion dollars of incremental capital spend in the five year plan. When combined with our other DEV transmission projects, this will result in annual transmission capital spend of greater than $2.8 billion beginning in 2027 above the $2.5 billion we previously forecasted. Next, in South Carolina, policymakers are in session and and continue to evaluate potential energy legislation. We're appreciative of the significant time spent to date by the Legislature on this important topic. As we've indicated in the past, we're committed to supporting South Carolina's growing economy. However, as we've testified, the regulatory framework for DESC creates regulatory lag that makes it practically impossible to earn our allowed return, especially as compared to neighboring southeastern regulated jurisdictions, including Virginia. Finally, on Millstone, the facility provides over 90% of Connecticut's carbon free electricity and 55% of its output is under a fixed price contract through late 2029. The remaining output continues to be significantly de risked by our hedging program, which we've updated in the appendix of today's materials. During 2024, Millstone performed well and achieved a capacity factor of 92%, aligning with our expectations of exemplary performance and reflecting our unwavering commitment to safety and best in class operations. As many of you are aware, there's been recent legislative activity in New England and in Massachusetts specifically aimed at authorizing future additional procurements of nuclear power, and we've continued to engage with multiple parties there to find the best value for Millstone. In addition to state sponsored procurement, we continue to evaluate the prospect of supporting incremental data center activity as well. We feel strongly that any data center option needs to be pursued in a collaborative fashion with stakeholders in Connecticut. At this point, we don't have a timeline for potential announcements. We remain focused and will continue to provide updates as things develop. With that, let me summarize our remarks on slide. We achieved near record setting safety performance this year. We reaffirmed our long term operating earnings per share growth rate credit and dividend guidance for March 1 and narrowed our 2025 operating earnings guidance range. CVAL remains on schedule with robust cost sharing that protects customers and shareholders. In collaboration with our policymakers, regulators and stakeholders, we continue to make the necessary investments to provide the reliable, affordable and increasingly clean energy that powers our customers every day. And we're 100% focused on execution. We know we must continue to deliver and we will. With that, we're ready to take your questions.
