Area builders and developers feel Rappahannock Electric Cooperative is charging higher fees that are out of line with competitors to bring power to new builds.
For custom home builders like Dan Sandoval of Republic Homes, providing cost estimates to prospective buyers is a fairly straight-forward process.
Sandoval specializes in building homes on land that people already own, and he says that when someone comes through his doors on Route 3 he can often generate an estimate to build a home in a “couple hours” if the client is choosing from one of Republic’s “standard plans.”
One number has become harder to project, however, and it’s causing Sandoval and buyers headaches.
It’s the cost to bring power to the homes that he builds.
“We typically budget $5,000 to $10,000” to connect a home to power, Sandoval says. For homes built on land serviced by Rappahannock Electric Cooperative (REC), however, that projection has been steadily rising.
Sitting in his office, Sandoval pulled a bill that he received from REC to bring power to just one home. The bill was for $20,703.
Sandoval had a number of concerns with the bill.
First, it didn’t arrive until late in the project — after the construction loan had already been approved. And the $20,000 bill pushed the total cost for the project over the amount the homeowner had been approved for. Fortunately for the buyer in this situation, they were able to write a check for the amount above the loan amount.
That isn’t always the case. When people can’t raise the additional funds, Sandoval has to have a conversation that he says can be “uncomfortable.” We have to “remove options like a deck,” Sandoval says.
“REC won’t [provide an estimate] until I have a site plan done that shows the exact location of the house, and sometimes it doesn’t come until the foundation is in,” Sandoval says.
Second is the bill itself. The only itemized item on the $20,000 bill from REC (and all the other bills he showed the Advance from REC) was a single line-item.
“Contribution aid of Construction.”
No breakout for how much the cable cost per foot. No explanation of labor costs. Or machinery costs. Or the credit that is paid back to the builder.
When Will the Bill Arrive?
Sandoval isn’t alone in expressing concerns about the late arrival of costs to lay line. It is a complaint shared by a number of builders and developers across the region that the Advance has spoken with.
Figuring the costs associated with laying line is complex and requires builders and developers to go through an application process with the power supplier.
“A full design for a development has to be done before an accurate estimate can be provided,” said REC Spokesperson Casey Hollins. “Large developments take much longer than a single home.”
This process is not unique to REC, of course.
The Advance spoke with Jeremy Slayton, who works with media relations at Dominion Energy, via email about the company’s process.
“The builder/customer submits an application to Dominion Energy for service,” he said. “Once that application is received, we will contact them to advise them on what information is required to design the project…. we typically begin work on our design when we have: Proof of approved site plans, Completed and signed load letters (determines how we will serve the customer), The Riser Diagrams (schematics drawing that shows the distribution of electrical power within a building), [and an] Estimated ready date(s).”
Yet, builders do not appear to have the same level of difficulty securing timely estimates from Dominion that they do with REC.
Asked if there’s something that slows REC’s process, Hollins points to builders submitting incomplete applications.
According to Hollins: “At least 50% of the developer/builder applications are submitted with missing/insufficient information that requires follow-up requests from REC and then delays to complete designs while we wait for the missing information to be provided.”
Hollins did inform the Advance that “We are developing a documented list of requirements and guidance for developers and builders to provide the appropriate documentation to REC so that designs and estimates are returned in an efficient manner. This information will be posted on REC’s website.”
Further, she said that “We are working on processes and instituting deadlines to improve the turnaround time for cost estimates. In addition, more detailed cost estimates will be provided starting immediately.”
Comparing Costs
Complaints that REC’s prices are high has also been growing recently among local builders and developers. As those complaints have grown louder, many small, medium and larger homebuilders and developers began collaborating and sharing data.
When the information was analyzed, it showed a significant disparity in total costs to provide electricity to single-family attached and single-family detached homes.
The data set is far from perfect and should be read with care. The sample size of lots is small — about 1,500 lots with power supplied by REC, some 500 by Dominion, and about 90 by NOVEC. However, the results from this data set do suggest that REC’s costs are higher. Sometimes markedly so.
Dominion Energy’s costs were lower by a little over $1,100 for attached lots, which include town houses and attached villas, according to the data the builders and developers have gathered.
They’re lower by a lot — $5,601 — when looking at what it costs to supply power to a detached lot, frequently a single-family home. NOVEC’s are even lower.
It’s this stark difference in costs that has developers and builders questioning the bills that they receive from REC.
In its conversation with the Advance, REC did not deny that its costs are higher; rather, it focused on the business model under which it operates to explain why builders may see a difference in costs to bring power to a new-build single-family home or townhouse that REC supplies as opposed to Dominion.
As a cooperative, Hollins said, “our costs are passed on to our customers” and that REC’s commitment is to keeping their customers’ costs as low as possible.
“It’s not equitable,” she continued, “to compare REC to Dominion,” which she notes has an entirely different business model. “We serve 178,000 connections,… and Dominion’s customer base is in the millions. So there’s a difference when you spread out costs.”
Northern Virginia Electric Cooperative, however, functions under a similar business model to REC, and its charge to run power to a new build is also significantly lower than REC’s.
Asked why NOVEC’s costs were more in line with Dominion’s than with REC’s, Hollins responded: “I don’t know why our costs are higher. [Our leaders] are talking with others about why REC’s costs are higher.”
Concerns About Conduit
Another concern has emerged around the requirements REC places on builders when running wiring to the house. REC typically requires conduit — a type of sheathing that is laid in the ground first, and then the wiring is run through that — be installed with each new project.
There are a number of advantages to conduit. It does provide a layer of protection for the wiring, thus extending the lifespan of that wiring. And it does make it easier to replace wiring when that work needs to be done. Rather than digging up the old wire, the wiring can simply be pulled from the conduit and the new wire run through it.
According to Hollins at REC, the lines that connect homes to power have a lifespan of “30-40 years. The lifespan of wire buried in conduit,” she added, “is 40-50 years.”
The problem, said some builders who spoke off the record in order to speak frankly about the situation, is that they’re being asked to pay costs associated with laying conduit that they don’t have to pay with other companies.
For example, one source said that REC charges builders and developers to absorb the cost of digging the trenches to lay the line.
“Nobody (else) requires us to dig trenches for power lines,” this source continued.
Jeremy Slayton said via email that “A Dominion Energy contractor trenches the new underground lines and services” in most cases.
Further, this source questioned the value of using conduit, saying that they’d “never seen wire replaced in 30-40 years.”
Also, no other area energy supplier requires the conduit in all cases.
Hollins confirmed this in her interview with the Advance. “None of the surrounding utilities currently require conduit everywhere, but it is required in some situations,” she said.
“There is not a code requirement for the use of conduit,” Hollin continued, “but it is generally accepted in the industry that conduit is a good idea for safety and reliability.”
It Comes Back to Transparency
For the builders and developers, the issue consistently returns to transparency.
Bills with no cost breakdowns. A high percentage of incomplete applications that REC is now working to reduce by “developing a documented list of requirements and guidance for developers and builders to provide the appropriate documentation to REC.” Questions surrounding why conduit is required for projects when other companies do not require it. And costs that according to builders and developers are out of line with other electric companies.
“With so little transparency on information,” said one source, “it’s hard to know the numbers.”
As for Dan Sandobal, REC’s fees are one more thing that is driving up the cost of homes and making it harder for builders to be successful.
“Homebuilders are dying a death of a thousand cuts,” he said. And homebuyers, in the end, are the ones who will pay.
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