by Kristen Wright, senior editor
This year editors at Electric Light & Power named Dominion Utility of the Year.
Dominion’s portfolio includes some 23,600 MW of generation, 6,400 miles of electric transmission lines and 10,900 miles of natural gas transmission, gathering and storage pipeline. The Richmond, Virginia,-based company with some 14,500 employees also operates one of the largest natural gas storage systems in the U.S. and provides services to customers in 10 states.
The company traces its roots back to the Colonial Era, when the goal was to promote navigation on the Appomattox River and commercial development on the James River. The business focus shifted to electricity in 1909. These days, Dominion stands out for its scope. Dominion companies include:
- Electric distribution companies Dominion North Carolina Power and Dominion Virginia Power;
- Electric Transmission in North Carolina and Virginia;
- Gas distribution companies Dominion East Ohio and Dominion Hope in West Virginia;
- Gas transmission companies Dominion Transmission (operates gas pipelines, facilities and gas storage system), Dominion Cove Point LNG LP (a liquefied natural gas import facility in Maryland), Dominion Gathering-Producer Services (oversees production gas delivery points into the Dominion pipeline system) and Dominion Midstream Partners (owns, operates and develops natural gas infrastructure assets); and
- Dominion Clearinghouse (trades and markets wholesale gas, electricity, coal, oil and emissions and provides commodity pricing and services to customers in target markets), Dominion Generation (manages the company’s generation stations) and Dominion Energy Solutions (the retail marketing arm that provides natural gas services in deregulated markets and includes Dominion Products and Services).
This year’s winner ranked high in numerous areas, especially for its safety record, reputation, infrastructure investments, financials, philanthropy and proactive measures to curb emissions.
To learn more, Electric Light & Power interviewed Dominion Resources Inc. Chairman, President and CEO Thomas F. Farrell II.
ELP: Since you became CEO of Dominion, the utility’s OSHA recordable incident rate has fallen 56 percent, and its OSHA lost time/restricted duty rate has dropped 64 percent. What did you change to get such a significant improvement?
Farrell: In our line of work, safety is of paramount concern. It is Dominion’s leading core value. We talk about it in employee meetings and shareholder meetings, and on all of our earnings calls.
Safety is ingrained in our culture, and all of our employees share a personal commitment to ensuring safety for themselves and those around them. Keeping the lights on and the gas flowing is critical to our nation’s economy and our energy infrastructure. But there is absolutely nothing more important than doing our jobs safely. It benefits our employees, customers, communities and investors.
ELP: In 2013, Fortune magazine ranked Dominion No. 2 of the “World’s Most Admired Companies” in the electric/gas utilities sector. How is the culture at Dominion different from other utilities, from both employee and customer perspectives?
Farrell: I can speak knowledgeably only about Dominion’s culture. Ours is grounded in the company’s four core values: safety, ethics, excellence and teamwork. The first-and most important-is safety. If we fail to create and maintain a safe workplace, then nothing else we do matters. Operating in a safe manner affects efficiency, reliability and our corporate reputation. Ethical behavior, integrity, individual responsibility and accountability matter as much as bottom-line results. Doing right and doing well are inseparable. All Dominion employees share the responsibility for making ethical conduct central to our business operations and outlook.
We often tell our employees that if they pay attention to our values, then everything else will take care of itself.
ELP: Dominion, under your leadership, is widely regarded as a common-sense, consensus-building force among utilities, industry regulators and even the White House. Why voluntarily spend $3 billion in the past 15 years to limit emissions from your fossil fleet instead of taking a wait-and-see approach?
Farrell: Part of Dominion’s mission is to minimize our impact on the environment. It is not only good business but also the right thing to do. We would rather act than react. We try to listen to those around us and get ahead of the trend. In 2003, proving that cooperation and negotiation could benefit regulators, customers and the company alike, Dominion voluntarily entered into an agreement with the Environmental Protection Agency (EPA) and five states to install environmental equipment at a number of our fossil-fueled facilities. The results have been dramatic: Emissions of mercury, nitrogen oxides and sulfur dioxide have dropped 80 percent or more. Before the EPA submitted its proposed power-sector greenhouse gas regulations, Dominion had already begun to implement a plan to retire, retrofit or convert older, less-efficient coal units. We have also closed or converted or plan to retire more than 1,400 megawatts of coal-fired generation serving our electric customers in Virginia and North Carolina. Since 2000, our carbon emissions have fallen nearly 20 percent.
ELP: People are critical when utilities post enormous profits, but many utilities give back to their communities in big ways. And since 2009, the Dominion Foundation has provided more than $80 million to philanthropic causes. Can you share some of those causes or stories?
Farrell: Giving back is part of the fabric of Dominion. Our philanthropic mission is to improve the social, physical and economic well-being of the communities we serve, with a focus on human needs, environmental stewardship, education and community vitality.Dominion’s philanthropic efforts are magnified by our employee volunteers. The company gives money to charitable organizations through the Dominion Foundation. But it is our employees who roll up their sleeves, get out in their communities and demonstrate their commitment to service. Each year, Dominion volunteers give more than 100,000 hours of their time winterizing homes, sprucing up parks and working at foodbanks, among other worthwhile causes. I am extremely proud of what we have done to support service veterans, particularly wounded and homeless veterans, including a thousand Dominion volunteers’ helping out nonprofit veterans organizations, a $250,000 Foundation donation to aid groups’ assisting homeless veterans, and a $100,000 charitable gift to make the Greater Cleveland Fisher House a reality.
ELP: I’ve talked to you before about Troops to Energy Jobs, and we ran a cover story about the program a few years ago. How are the efforts going today at Dominion?
Farrell: The Troops to Energy Jobs program is going extraordinarily well. Dominion has hired about 430 veterans since Jan. 1, 2011, and service veteran hires made up 22 percent of our new employees in 2013. There is a looming shortage of potential employees in critical utility functions because of baby boomer retirements. Those who have served in the military can fill those jobs. Above all, utilities seek those with a particular skillset-those who are safety-conscious, civic-minded, disciplined and risk-aware. In my opinion, military veterans display these traits in spades. During the two-year pilot phase of Troops to Energy Jobs, we learned that success in veteran employment depends on more than merely recruiting and hiring. We learned that our troops need support before they leave the military, and they need adequate resources and military-friendly corporate cultures after they are hired. We also have learned that there is a significant “language barrier” of sorts that makes it challenging for veterans to transfer skills, earn the right credentials and find jobs that fit their wants and needs. We believe we have addressed the challenges and impediments’ confronting veterans entering private-sector utility jobs. We have incorporated these lessons into a comprehensive plan that brings together the military, higher education, labor unions and others. We also recently launched the Dominion Veterans Network, an employee resource group focused on hiring, retention and mentoring. We expect it to play a major role in supporting Troops to Energy Jobs as we move forward.
ELP: The stock market really likes Dominion after you sold off the gas and oil exploration and production business and many of your merchant power stations-total shareholder return since January 2006 has been 154 percent. Is this what you expected or merely hoped for?
Farrell: The market has responded very well to Dominion’s strategic repositioning. As you mentioned, we sold our E&P assets and most of our merchant portfolio in the past several years. In part, we answered the question investors have asked for years: What exactly is Dominion? Is it a diversified, regulated electric and gas utility? An E&P company? An IPP? In short, there was a degree of confusion about the company’s identity, which we needed to address. We believed that many of our investors wanted to place their money with a company whose earnings stream was generally more predictable-governed by regulations and rules’ authorizing rates of return-rather than riskier, less predictable earnings subject to the greater volatility of the commodities markets. As such, Dominion has refocused itself as an energy infrastructure company-building and modernizing to meet the needs of our gas and electric customers. Between 2007 and 2019, we expect to have spent approximately $30 billion on growth projects alone, excluding operations and maintenance capital.
ELP: Dominion plans to spend some $19 billion on projects from 2014 to 2019, including new power stations and power lines, gas storage and processing, long-haul pipes and a liquefied natural gas export facility on the Chesapeake Bay. And about $10 billion is scheduled for your electric utility. What all does that include?
Farrell: As you said, it includes power stations, power lines, interstate gas transmission pipelines, a variety of midstream gas projects and other energy infrastructure. As a public service company, we must serve our customers’ needs, whether electric and gas utility consumers who expect reliable service 24/7 or natural gas producers’ seeking an outlet for their product. The three principal drivers of our growth include: (1) investments to serve our electric customers at Dominion Virginia Power and Dominion North Carolina Power; (2) a liquefaction facility at our liquefied natural gas (LNG) plant in Maryland; and (3) the Atlantic Coast Pipeline, a 550-mile pipeline that will bring natural gas from the Appalachian Basin to gas and electric utilities, principally in Virginia and North Carolina. As an aside, to suggest how large the latter two projects are, Dominion’s expected expenditures on them will be roughly equivalent to the market capitalization of our company in 2000.
At our electric utility, we are spending about $10 billion to modernize our generation fleet and our 63,000-mile T&D system. We are constructing new power stations to meet our customers’ growing demand. And we are working to replace our aging 500-kilovolt loop, which serves as the backbone of Dominion Virginia Power’s transmission system. In 2014 alone, we expect to place into service more than $900 million of new transmission assets.
Cove Point, our LNG facility on the Chesapeake Bay, is now under construction, and we anticipate that the $3.4 to $3.8 billion liquefaction plant will be operational in 2017. The facility will help open new markets for American gas producers while providing new jobs and tax revenue throughout the region. We expect that the Atlantic Coast Pipeline will enter service in 2018 to bring Appalachian basin gas to Southeastern utilities. The pipeline is end-user focused-that is, for the use of Dominion and its pipeline partners, including Duke Energy, Piedmont Natural Gas and AGL Resources.
With a final rule regarding greenhouse gas emissions expected soon, electric utilities will be building large gas-fired combined-cycle facilities to replace soon-to-be-retired coal-fired units. Gas combined-cycle technology provides efficient, baseload power, with a carbon emissions intensity of about 800 pounds per megawatt-hour-much lower than similarly sized coal-fired plants and natural gas combustion turbines. The pipeline will also provide economic development opportunities along the route for manufacturing and other industries.
ELP: Your proximity to the nation’s capital means you provide electricity to some heavy hitters, and Dominion must be considered a prime target for both cybercrime and physical security breaches. Have you noticed more attempts, as most utilities have reported, and how are you training employees to be extra cautious and aware?
Farrell: Like most large companies, especially those that operate critical infrastructure, Dominion is a target for a wide range of threat actors. In the past several years, there has been a notable increase in attempts to breach physical and cybersecurity measures at a variety of public and private sector organizations, including utilities. Utilities are not alone in this challenge. Seldom does a day go by without a report of another data breach at a major retailer or attack against a state or federal government website. That is why our cyber and physical security personnel always have to be on guard for attempted attacks. That is also why timely and confidential information sharing between the public sector and private sector is so vital to our industry and the nation as a whole.
We maintain strong relationships with a variety of state and federal partners to ensure we stay aware of the current threat environment. And because security at Dominion depends on the vigilance of everyone at our company, we routinely educate our employees about the risks.
ELP: What is your biggest challenge as chairman, president and CEO?
Farrell: My biggest challenge is to allocate our resources-our folks and our capital-across all of our businesses and business opportunities. We have very hardworking folks and a host of things to pursue.