Dominion Energy Inc ($D) Q1 2026 Earnings Call

Thank you, Steven. I'll begin with safety on slide five. Our employee OSHA injury recordable rate for the first quarter of the year was 0.42, which remains well below the industry average. Safety is our first core value, and we're continuing our efforts to drive to zero workplace injuries. I'll start our business updates with the Coastal Virginia Offshore Wind project on slide six. The project is now over 75% complete. And as Steven mentioned, in March, we achieved a very significant milestone with the delivery of much-needed power to customers. General fabrication and installation continue to proceed very well. We've now completed installation of all 176 transition pieces that connect the monopile foundations to the turbine towers. All three substations are installed, and commissioning is proceeding as planned. Deepwater export cables are installed, and array cable installation is on track. All of the remaining cabling is now fabricated, and the majority is landed in Virginia. And we're making excellent progress on turbine fabrication. Over 86% of towers, approximately 69% of nacelles, and about 45% of blades have been fabricated. This progress tracks well relative to our schedule. With regard to wind turbine generators, we're seeing materially positive improvements in installation cadence as shown on slide seven. We affirm our previously communicated timeline for project completion, with the majority of turbines expected to be placed in service by the end of 2026, and the remainder in early 2027 prior to the end of June. As of this morning, we've completed nine turbines. During the first quarter, we successfully calibrated our procedures and equipment and navigated winter weather. Since then, we've been able to ramp the installation rate markedly, including averaging approximately two days per installation for our last four turbines, which supports our existing timeline for project completion. We continue to seek to optimize the process resulting in improved installation times. In addition, we're moving into better weather windows for the next several months. Please note the current project budget includes turbine installation schedule contingency for weather delays through July 2027 as needed, including Charybdis charter costs. I'll also reiterate our general rule of thumb. If the project extends beyond July 2027, we estimate that each additional quarter to complete turbine installation would add between 150 million and 200 million dollars to the project costs, a portion of which would be allocated to our financing partner. We'll continue to include data from additional installation iterations in our quarterly updates. As shown on slide eight, the project budget now stands at 11.4 billion dollars, which is approximately 100 million lower than our last update. We've updated the budget to reflect changes in tariff assumptions as a result of recent judicial and administrative actions. Unused contingency stands at 123 million. Looking forward on project costs, we're monitoring the potential of two recent events. First, certain regional transmission projects were captured in both the PJM transition cycle, which resulted in network upgrade costs allocated to CVOW, and the subsequent broader RTEP award package. As a result, we would expect the overall network upgrade costs allocated via the PJM transition cycle across all generation queue projects, including CVOW, to be reassessed and reduced. Second, recently updated steel and aluminum tariffs, which are pending additional information from suppliers and guidance from the applicable agencies. As shown on slide nine, the project's cost sharing and risk sharing continue to work as intended to protect customers and shareholders with no change to either LCOE or customer bill impacts. CVOW remains one of the most affordable sources of energy for our customers. Our updated analysis indicates that the project is expected to generate fuel savings of approximately $5 billion for customers during the project's first 10 years of operations. Taking a step back, an all-of-the-above approach to energy supply, including CVOW, is critical to ensuring continued reliability amidst real-time growing demand in our service areas. Building new energy generation is a core competency of ours, as demonstrated in recent years with our successful development of thousands of megawatts of renewable generation, as well as combined cycle plants in Greensville, Brunswick, and Warren County. We continue to advance the development of new generation capacity consistent with our update last quarter. In addition to producing much-needed energy for our customers, these projects will be an economic benefit for Virginia, generating thousands of new jobs, billions of dollars of economic investment, and meaningful local tax revenue. Turning to slide 10, I'll reiterate that we view customer affordability as central to our public service obligation, and accordingly, we have a long record of maintaining competitive rates, which continue to compare favorably to the national average. Even while executing one of the largest regulated investment programs in the sector, we expect our customer bills will continue to grow at rates comparable to inflation over the long term, demonstrating disciplined capital deployment and our regulatory construct working as intended. We recognize, though, that customers are feeling the pressure of higher costs for housing, groceries, and other essentials, including their electric bill. We have a number of programs designed to help our customers manage their bills, including budget billing, energy savings programs, and financial assistance programs such as EnergyShare. Late last year, we also launched a new online platform to put all our programs in one place, so customers can more easily find the best options to meet their needs. In addition to providing tools to help manage payments, we're also working to ensure fair and reasonable rates. For instance, the commission approved our recently proposed large load provisions in the 2025 biennial to ensure that our smaller customers aren't at risk of subsidizing our largest customer classes, nor be left with stranded costs. We also plan to pursue fuel securitization in Virginia for unrecovered fuel costs to minimize the rate impact on customers. We work continuously to improve the efficiency of our operations, while meeting high customer service standards and reliability needs. In recent years, we've driven out costs through improved processes, innovative use of technology, and other best practice initiatives. On the technology front, we're focused on implementing technology initiatives that accelerate our mission, and we've recently deployed a range of AI tools. For example, in our contact center, AI enables clear visibility into customer needs at scale and real-time insight into customer sentiment, allowing us to respond with greater precision and efficiency. Looking ahead, we're intently focused on ensuring our service isn't just reliable, but that it remains affordable as well. Now, I'll turn to other business updates as shown on slide 11. In South Carolina, DESC's electric rate case continues to progress. Staff and other interveners filed their testimony on March 31st. We filed our rebuttal testimony on April 21st and expect surrebuttal testimony on May 5th, consistent with the procedural schedule. Hearings are scheduled for mid-May, and we expect a decision in late June with rates effective in July. Yesterday, we filed an electric rate case application and testimony for Dominion Energy North Carolina to support the approximately $400 million investment placed in service by the company attributed to North Carolina since the 2024 rate case and ensure that we can continue to provide safe, reliable, and cost-effective service to our North Carolina customers. We expect a decision in February 2027 with interim rates effective December 26th subject to true up and finalization in March 2027. Recall DENC represents about 4% of the company's investment base. Finally, on Millstone. I'll start by noting Governor Lamont's comments last week highlighting the hundreds of millions of dollars that the current Millstone contract has saved customers and which is now resulting in a material customer bill reduction in Connecticut. In March, the facility submitted its bid in the Connecticut Department of Energy and Environmental Protection's zero carbon energy request for proposals. Per DEEP's published schedule, solicitation decisions are expected in the second quarter with negotiations with the local state utilities to begin in the third quarter. Contracts will be submitted to the Connecticut Public Utilities Regulatory Authority for approval thereafter. The timeline for which is up to 180 days. In addition to state-sponsored procurement, we continue to evaluate the prospect of supporting incremental data center activity as well. We remain focused on achieving a constructive outcome for the facility and will continue to provide updates as things develop. With that, let me summarize our remarks on slide 12 by reiterating where Steven began the call with a focus on our top three priorities: consistently achieving our financial commitments, continued on-time achievement of major construction milestones for the Coastal Virginia Offshore Wind project, and achieving constructive regulatory outcomes that demonstrate our ability to work cooperatively with regulators and stakeholders to deliver results that benefit both customers and shareholders. We're 100% focused on execution. We remain committed to delivering reliable, affordable, and increasingly clean power for our customers. With that, we're ready to take your questions.

Morning.

Morning.

Hey Shar, first of all, it's great that we can talk about Millstone with you again. I feel like it's been a while. And you're right, we were very pleased with the governor's comments. Commissioner Dykes also talked about the value of the existing PPA. Just as a reminder, currently contracted a little more than half through August of 2029. And so the process at Millstone today in Connecticut would be for procurement, we would expect after the expiration of the existing PPA. There's not in that process a limit on how much could be potentially contracted with the state. As we've talked about in the past, other states in New England have also expressed an interest and we're certainly happy to work with them as well, because they recognize the value of Millstone the same way that we do. At the data centers, we continue to have some interest from data centers to contract there. But I do want to reiterate what we've said in the past, which is our view is any outcome there needs to have the support of stakeholders in Connecticut. We think that's the smart way to pursue it. And what's in front of us right now is this RFP and we'll continue working on that.

Yeah, sure. We do have an early site permit at North Anna and we also, as you know, have been exploring SMRs as well. I mean, if you step back, as we've talked about before, we're in a very pro-nuclear state in Virginia. I think arguably the most nuclear-friendly state in the US and you can see that from the support of the governor. Both Senators Kaine and Warner have expressed support for nuclear. The General Assembly a couple years ago passed legislation allowing us to recover some costs for nuclear project development. We filed with the SEC and got an approval for that. We have a lot of the nuclear supply chain here, the nuclear navy here, and the units at Surry and North Anna. As we think about nuclear development in any sense, we're going to continue to be guided on three principles that we're resolute on. The first is any structure has to address first-of-a-kind risk. So, if we're talking about SMRs, we need to address that. It's got to address cost overrun risk so that our customers and our shareholders are not bearing that burden. We need to protect our balance sheet and our business risk profile. So, we'll continue to investigate and explore alternatives on the nuclear front, but we're going to be guided by those principles and we'll continue to work with policymakers.

Thanks.

Morning, Paul.

Yeah, Paul, thanks for that question. We support PJM's effort to develop a backstop auction or process to get additional capacity for load-serving entities that aren't developing generation or lack a state-regulated framework to do that. We're different. We're vertically integrated. So, it doesn't change our existing process. We don't expect a change to our plan. We have an integrated resource plan that's designed to meet policy goals in Virginia and the incredible demand growth that we're experiencing. And that includes, as you know, incremental generation. It is also important to note, as you think about this, the difference between the DOM zone, which we serve as a transmission operator, and our load-serving entity that we serve from a generation standpoint. So, we'll take a look at the process that PJM is ultimately doing. But the plan that we have is through our state-regulated utility, vertically integrated. And we're going to need to build generation to serve load in Virginia, regardless of the outcome of the PJM process.

Morning.

That's a great question, Anthony. Let's take a step back for a second. We've been building projects on time and on budget for a long time, whether it's Cove Point or the combined cycles we built in 2010 or big transmission projects. Building infrastructure well is one of our strengths. And for CVOW, we got first power to the grid in March, which was in line with the original timeline. That was a big milestone. And then as for turbine installations, we noted up front we have been able to ramp installation productivity meaningfully. If you think about some of the other parts of this project, think about transition pieces or monopiles, when we started off those were modest. I think we did four monopiles in May of '24 the first month we were doing those. We did something like 13 transition pieces in January of '25 which was the first month. By the time we got to the end, we were doing 21 monopiles in a month and 38 transition pieces. So really dramatic improvement as we went along, and we're seeing that same dynamic playing out here where we start with the measure-twice-and-cut-once approach that we've learned in doing big projects over the years. That rate is accelerating. I think we've got a lot of opportunities to optimize that process more. We also started in the winter. The winter months are the worst weather months. Now that we're in the summer, that'll give us more opportunities to refine our process and improve cadence. So if you think about that, you take all that together, the productivity progression, improving weather windows, that's what gives us confidence in hitting the timeline. And I'd say, really what's most important, three things. One is it's the fastest source of new power for our customers. Two, it's the most affordable option. And three, we have great confidence in our financial plan to be durable and resilient as we work through construction.

Morning.

We're always interested in getting that number down. And we will continue to push for that. I just, the main message here is the really impressive improvement that the team has made each time with the pace that they've been able to install. I mean, there's obviously a limit on that curve, but we're going to continue to push our way down that. So, we'll update on installation cadence on every call and we'll have an opportunity to talk about the ways that we have improved. I expect we're going to continue, like we did with monopiles and transition pieces, to get the pace up faster as we go along.

No, we continue to see incredibly strong demand for new data centers in Virginia. We noted in our prepared remarks, we've added commitments in all stages of contracting since December. That interest has not waned at all in recent months. So, short answer is no detectable change.

Thanks everyone for taking the time to join the call today. Please enjoy the rest of your day.