Manufacturing Development Commission

August 25, 2009

The second meeting of the 2009 interim was held at the AREVA NP, Inc. headquarters facility in Lynchburg. The Commission welcomed its newest member, Sean Kerlee of Suffolk, who is employed at International Paper Corp. and is the Southeast Regional Director of the Pulp & Paperworkers' Resource Council.

Presentations

Andy Cook, Sr. Vice President of Sales and Marketing, Kim Stein, Director of Wind Development, AREVA NP, Inc.
AREVA NP, Inc., a U.S. subsidiary of French-based AREVA Group, designs and constructs nuclear power plants and research reactors and their components. Mr. Cook outlined the company's $50 million of investments in Central Virginia, including a fuel manufacturing facility, service equipment refurbishment facility, pump and motor service center, and technical training center. Mr. Cook noted that AREVA NP has hired more than 300 new employees in each of the past three years.

AREVA's investments in the Commonwealth will expand sharply in the next few years with its development, through a joint venture with Northrop Grumman Shipbuilding, of a $363.4 million facility for manufacturing equipment and pressure vessels for the nuclear energy industry. The Newport News-based project is expected to create 550 new production and engineering jobs when it becomes operational in 2012.

In addition to manufacturing for the nuclear energy industry, AREVA manufactures offshore wind turbines at a facility in Bremerhaven, Germany. Mr. Stein advised the Commission that the firm has an interest in manufacturing offshore wind turbines in the Commonwealth. The turbines, each capable of generating 500 megawatts, would stand about 450 feet high. A production facility in Virginia, he reported, could generate between 8,000 and 10,000 jobs over a 20-year period.

Offshore Wind Project Development Commission
Senator Wagner presented a draft of a bill creating an Offshore Wind Project Development Commission. This commission would be charged with facilitating and coordinating the development of wind power projects in waters three miles or further off Virginia's coast. The proposed entity would be charged with applying, on behalf of the Commonwealth, to the federal Minerals Management Service for leases to develop offshore wind energy projects. Guidance is being sought regarding the extent to which this commission would be authorized to assign or sublet its leases to other entities. In addition, the proposed commission would be authorized to seek up to $4 billion in federal loan guarantees in connection with the development of such projects. The entity would be responsible for ensuring that the development of offshore wind projects does not interfere with naval facilities and operations off the coast of the Commonwealth, and coordinating the connection of electric power generated offshore to the power grid. The chairman touted Virginia's natural and infrastructure advantages as a home to offshore wind projects, and observed that the development of such projects could encourage AREVA to locate a wind turbine manufacturing facility in the Commonwealth.

Staff Report
At the Commission's April 2009 meeting, the chairman suggested that the Commission consider providing for an extended evaluation period during which the rate impact of electric utility legislation could be analyzed. Staff provided members with an overview of the role of the Special Advisory Commission on Mandated Health Insurance Benefits in reviewing proposed legislation. In addition, members were advised of other measures directing the preparation of impact statements for proposed laws, including the authority of standing committee chairmen to request the Joint Legislative Audit and Review Commission (JLARC) to analyze fiscal impact statements; the Administrative Process Act's requirement for an economic impact analysis of proposed regulations; and requirements that introduced bills creating or expanding felonies, increasing unemployment benefits, or affecting the Virginia Retirement System, include a statement of the proposal's impact.

Staff observed that developing a proposal to require that an entity conduct an analysis of the rate impact of bills pertaining to electric utilities would present a number of issues, including:

• Identifying the proper entity to be tasked with conducting the analysis.
• Ensuring that interpretations and methodologies used in preparing rate impact estimates are not binding in rate cases.
• Acknowledging that rate impact estimates are unlikely to be accurate predictors of the rates that would be set by the State Corporation Commission (SCC) in rate cases.
• Limiting the burden of conducting rate estimates for different utilities and classes of customers, and overstated periods of time.
• Defining the types of legislation that would require the rate analysis, or giving standing committee chairmen the authority to request an analysis of specific bills.
• Determining whether an entity to be charged with analyzing the impact of legislation will be limited to quantifying effects on rates, in which case its membership may be limited to persons with expertise in utility accounting and ratemaking procedures, or whether the entity would be charged with conducting a broader policy analysis, in which case a body modeled on the Special Advisory Commission on Mandated Health Insurance Benefits may be more appropriate.

A member remarked that, as an alternative to requiring the preparation of unreliable estimates of the future effects of pending legislation, the Commission should consider requiring JLARC to conduct an analysis of the impact on rates of aspects of electricity legislation, based on the SCC's application of the legislation in rate case proceedings.

Brett Vassey, Virginia Manufacturers Association
Mr. Vassey briefly commented on two education issues. Currently, Virginia is falling short of its stated goal of providing general funds for 30 percent of the cost of noncredit courses taught through the Virginia Community College System (VCCS). He cautioned that it will not be possible to meet workforce training goals over the next decade locally, and that a systemic approach is needed. Mr. Vassey advised that efforts are underway to develop legislation that would provide the VCCS with greater flexibility in the use of state funds.

The second education issue pertains to industry certifications in public school systems. Mr. Vassey noted that his organization supports the use of Pell funds for industry certifications. However, the existing industry certificate approval process often takes several years. He noted the Commission on Youth is examining the issue, and Mr. Vassey will report at a future meeting on its recommendations.

Alice Scott, Virginia Industry Foundation (VIF)
Ms. Scott updated the Commission on its campaign to improve the image of employment in Virginia's manufacturing sector. She reminded members that the Virginia Manufacturers Association's skilled trade gap analysis predicts that 23 percent of skilled manufacturing employees may be eligible for retirement by the end of 2010. In order to address this looming gap, the "Dream It-Do It Virginia" campaign promotes awareness of career opportunities in advanced technology fields. In addition to image marketing, the campaign includes a free online career resource. The VIF is attempting to expand the campaign by developing partnerships at regional and local levels.

Next Meeting

The Commission plans to convene its next meeting prior to the 2010 Session of the General Assembly. Issues to be addressed at that time include workforce training provided through the VCCS. The next meeting date will be posted on the Commission’s website and the General Assembly calendar as soon as information is available.

Chairman:
The Hon. Frank Wagner

For information, contact:
Frank Munyan, Ann Louise Mason, DLS Staff