Dominion Energy Inc. increased the cost of its massive offshore wind project to nearly $10 billion, but company executives maintain all 180 turbines should be spinning by the end of 2026.

Regulated utility subsidiary Dominion Energy Virginia, known legally as Virginia Electric and Power Co. will file plans with the Virginia State Corporation Commission, or SCC, on Nov. 5 for approval to build the 2,640-MW Virginia Beach Offshore Wind Project, Dominion Energy announced in a news release prior to the company's third-quarter earnings call.

In addition, Dominion now expects a project investment of $9.8 billion.

When Dominion Energy Virginia in September 2019 announced plans to build the project in a federal lease area about 27 miles off the coast of Virginia Beach, Va., executives pegged the investment at about $8 billion.

"The cost increase can be attributed to, among other things, commodity and general cost pressures ... and the completion of the conceptual design phase of the onshore transmission route," Dominion Chairman, President and CEO Robert Blue told analysts and investors.

Still, the CEO said the project is "essential to meeting the policy goals" laid out in the Virginia Clean Economy Act.

The Virginia Clean Economy Act requires Dominion to procure 100% of its electricity from renewable resources by 2045, with up to 5,200 MW of offshore wind in service by 2035.

"As was contemplated in the [Virginia Clean Economy Act], this investment will be 100% regulated and eligible for rider recovery," Blue said.

"In Virginia, rider recovery mechanisms use a forward-looking test period and allow for construction work in progress, all of which minimizes traditional regulatory lag," the CEO added.

Dominion now estimates the levelized cost of energy for the Virginia Beach project at $87/MWh, which management said is within previous guidance of $80 to $90 per MWh and lower than the $125/MWh maximum established by the Virginia clean energy law.

"You can't focus just on the capital input here on a project like this," Blue said. "You also have to focus on how much electricity is it generating since it's going to be generating more than we had previously assumed. That's what lands that customer impact right where we've been talking about in the $80 to $90 [per MWh] range."

The costs could be offset by federal tax credits of more than $1 billion and expected fuel costs savings of more than $3 billion for the project's first 10 years, according to Dominion.

Throughout the life of the project, Dominion estimates "the net average cost" to a typical residential customer at about $4 per month.

Dominion also is requesting approval to build approximately 17 miles of new transmission lines and other onshore infrastructure.

Company executives noted that the pilot 12-MW Coastal Virginia Offshore Wind project, which began generating power in fall 2020, "has provided considerable benefit to the development and planning of the full-scale development."

"For example, the pilot project is providing better information about the wind resources off the coast of Virginia," Blue said, noting that Dominion had assumed a 41.5% capacity factor for the commercial project.

"After further evaluation of turbine design and wind resources, in addition to the real-time data we've gathered from our test turbines, we've determined that our original assumption was too low," Blue said. "We've revised the lifetime capacity factor to be 43.3%."

Dominion expects a final order from the SCC in the third quarter of 2022, with onshore construction expected to begin in the third quarter of 2023.

The company expects to receive approval for the construction and operations plan from the U.S. Bureau of Ocean Energy Management in summer 2023.

Offshore construction is slated to begin in the second quarter of 2024 with the project online in late 2026, according to the company.

Siemens Gamesa Renewable Energy SA will supply the turbines, which are expected to be more than 800 feet tall. Each 14-MW turbine can produce up to 15 MW of electricity using power boost technology.

Virginia election results

Dominion management said they did not expect the Nov. 2 election results to have an immediate impact on the company when it comes to energy policy and their clean energy investment plans.

Republican Glenn Youngkin defeated former Virginia Gov. Terry McAuliffe, a Democrat, and it appears increasingly likely that Republicans will regain control of the Virginia House of Delegates.

The results come two years after a sea change that gave Democrats control of the Virginia General Assembly and led to more aggressive state clean energy policies.

Blue noted that the party in power in the governor's mansion has changed twice over the past 15 years.

"What's remained consistent throughout that period is that our company has maintained constructive relationships with members of both parties, and we don't see any reason that that would change," Blue said, adding that there has been a "bipartisan commitment to economic growth and jobs and the economy in Virginia."

Q3 results

Dominion Energy on Nov. 5 reported third-quarter operating earnings of $918 million, or $1.11 per share, compared to operating earnings of $916 million, or $1.08 per share, for the third quarter of 2020.

The S&P Capital IQ normalized consensus EPS estimate for Dominion in the third quarter was $1.06.

The company narrowed 2021 operating earnings guidance to between $3.80 and $3.90 per share. Dominion affirmed its 6.5% long-term earnings growth forecast and 6% dividend growth through 2025.