Monthly Archives: May 2020

The dog that didn’t bark: the case of the missing electric co-op members.

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Photo by Seth Heald

 

Readers of Rappahannock Electric Cooperative’s monthly magazine, Cooperative Living, found a surprise when the magazine’s May 2020 issue arrived. The surprise wasn’t what was in the magazine, but what was missing, calling to mind Sherlock Holmes’s key insight in Arthur Conan Doyle’s story The Adventure of Silver Blaze, featuring a dog that didn’t bark. As Holmes explained to a Scotland Yard detective, sometimes what didn’t happen is as significant as what did.

In an annual tradition going back at least a decade and likely much longer, REC each May publishes in its member magazine a list of co-op members or former members whom REC owes money to but has lost track of. The list usually takes up around two full pages, with perhaps 500 to 800 names listed in small print. Readers are encouraged to look for their own names as well as names of others, and to notify REC if they have information about how to find these missing people. The funds in question are “retired capital credits,” a/k/a “patronage capital,” meaning money belonging to the co-op member-owners that has been invested in the co-op for a time and can now be returned. (As a cooperative, REC is owned by its customers, who are called “member-owners” or just “members.”)

But this year, instead of listing the names in its magazine, REC advised readers they could view the list online. The magazine gave no explanation why REC had changed its longstanding annual practice of publishing the list in the magazine, which is mailed to all of REC’s roughly 140,000 member-owners, some of whom don’t have internet service.

So, wondering why REC had changed its publication practice, I took a look at the list online and discovered that it was 74 pages long, with about 21,000 names.

One mystery solved. Others arise.

One mystery was solved. No wonder REC didn’t print the list in Cooperative Living—doing so would have taken up nearly two entire monthly issues of the 40-page magazine. But additional mysteries arose:

  • Why is the list so long this year (37 times longer than in most years)?
  • How does an electric co-op with around 140,000 members lose track of 21,000 members or former members?
  • Why didn’t REC explain in its magazine why this year’s list is so huge?
  • And is REC’s board at all concerned about a system that retains people’s money for such a long time that 21,000 of them can’t be located when it’s time to return the funds?

I checked with REC and learned that this year’s list of lost REC members is long because in 2017 REC’s power supplier, Old Dominion Electric Cooperative (ODEC), returned patronage capital (a/k/a capital credits) to its member owners, including REC. ODEC had originally obtained that patronage capital from margins (excess annual revenues) that ODEC received decades ago—in the 1980s and apparently even earlier.

REC’s practice for patronage capital it receives back from ODEC is to pass the funds through to REC’s members who bought electricity from REC during the years in which ODEC originally collected the patronage capital. REC said it waits three years after receiving the funds from ODEC before concluding that a former member cannot be located, and then publishes the list of those missing.

I looked at ODEC’s 2017 annual report and learned that in December 2016 its board of directors “declared a patronage capital retirement of $5.8 million, to be paid on April 3, 2017.” REC is the largest member-owner of ODEC, so REC received a good portion of that $5.8 million capital-credit retirement in 2017.

Of course, many of REC’s member-owners from over 30 years ago are no longer around. And that explains why REC can’t find some 21,000 of its former member owners—many of them are long since dead, and others moved away.

Perhaps some REC members will check the 21,000-name list and recognize a name or two, but it seems likely that most of those 21,000 people or their heirs won’t be found. One REC member who checked the list saw her deceased father’s name on it. He moved away from Virginia decades ago and then died in 2013. When the daughter contacted REC, the co-op sent her a letter explaining the cumbersome steps she will have to follow to collect the several hundred dollars owed to her father’s estate.

ODEC financial statements show that ODEC paid additional capital credits to its member-owners in years after 2017: $14.1 million in 2018 and $4.3 million in 2020. That 2018 payment is nearly three times the 2017 amount, meaning that when REC publishes next year’s list of lost members, which may be as long as this year’s, the amounts involved will be substantially greater. This is important, because some people recognizing names of deceased relatives on this year’s list might conclude that the amount they can get from REC now is not worth the considerable trouble it could take to gather the documentation needed to make a claim to REC.  But their calculus on that might change if they know that next year there might be nearly triple as much available. And if they gather and submit the paperwork this year, they won’t have to repeat that process next year.

The theory of cooperative ownership of an electric utility is that member-owners, who are the business’s customers, invest some of their funds in the business as capital, in order to keep the costs of goods sold (electricity) low. That’s why electric co-ops retain excess annual revenues (called “margins”) for a time and then later pay them back to members as retired capital credits, if conditions allow. (More on that here.)  But is that business model really working when a cooperative holds on to the funds for so many decades that a significant number of the member-owners whose funds were retained can no longer be found? One would hope that’s an issue REC’s board members find concerning, but we don’t know what REC’s board thinks because it operates in complete secrecy when setting REC’s capital-credit policies.

For the past two years, the Repower REC reform campaign has urged REC’s board to be fully transparent about the co-op’s capital credit policies, but the board has resisted. REC doesn’t even tell its members what their accrued total capital credit balance is unless the members know enough to ask for that information. Repower REC urged REC to disclose that basic information at least once a year on each member’s bill, but the co-op hasn’t done it.

Lack of transparency discourages democratic participation.

By not fully informing REC member-owners about the details of their co-op’s (and its power supplier’s) capital credit practices, REC’s board indirectly discourages member-owner participation in the democratic governance of the co-op. For if more member-owners understood the details of how capital credits are supposed to work, and how they actually work in practice at REC, then more co-op members would be motivated to demand that board members address a situation where tens of thousands of co-op members (or their heirs) may be losing the funds they invested in the co-op decades ago.

According to the National Rural Electric Cooperative Association, “the return of [co-op members’] investment through the allocation and retirement of capital credits is one of the concepts that defines a cooperative and distinguishes it from another form of business.” To remain relevant as a legitimate form of business ownership for a monopoly utility, REC, ODEC, and other electric co-ops need to step up their game when it comes to transparency about capital credit practices and ensuring that patronage capital is actually returned to co-op members in a fair and timely manner.

When a 140,000-member Virginia electric cooperative can’t find 21,000 of its members or former members to return their investments, something is wrong.

Seth Heald is a member-owner of Rappahannock Electric Cooperative and co-founder of the Repower REC campaign.

 

 

 

 

 

 

 

 

What part of ‘zero’ doesn’t Dominion understand?

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Photo courtesy os the Sierra Club.

The more things change, the more they stay the same.

Dominion Energy Virginia filed its 2020 Integrated Resource Plan on May 1. Instead of charting the electric utility’s pathway to zero carbon emissions, it announced its intent to hang on to all its gas plants, and even add to the number. In doing so, it revealed a company so thoroughly wedded to fracked gas that it would rather flout Virginia law and risk its own future than do the hard work of transforming itself.

The Virginia Clean Economy Act may be new, but Dominion can hardly claim to be surprised by the commonwealth’s move away from fossil fuels. Gov. Ralph Northam’s executive order last September set a statewide target of zero carbon emissions from the electric sector by 2050. “Challenge accepted,” said a Dominion spokesman at the time, and in February of this year the company claimed it was embracing a 2050 net-zero-carbon goal company-wide. A month later, passage of the Clean Economy Act moved the deadline up to 2045 for Dominion, keeping it at 2050 for utilities that lack Dominion’s head start of 30 percent nuclear power.

Dominion’s IRP, however, does not accept the challenge to get off fossil fuels. It rejects the challenge, directing a giant middle finger at the governor and the General Assembly. Dominion’s “preferred” plan keeps the utility’s existing fracked gas generating plants — currently 40 percent of its electric generation — operating through 2045. The IRP acknowledges this violates the law, so it argues against the law.

The IRP posits that if Dominion stops burning gas in Virginia, it will instead simply buy electricity from out of state, some of which will be generated by gas, and this will cost more money without reducing carbon emissions at the regional level. Better, then, to keep burning gas in Virginia.

It gets worse. The IRP actually proposes increasing the number of gas combustion turbines in Dominion’s fleet. The VCEA imposes a two-year moratorium on new fossil fuel plants, so Dominion’s timetable has these gas peaker plants coming online in 2023 and 2024. The justification is vague; the IRP cites “probable” reliability problems related to adding a lot of solar, but it offers no analysis to back this up, much less any discussion of non-gas alternatives.

Dominion’s flat-out refusal to abandon gas by 2045 poisons the rest of the document. The IRP is supposed to show a utility’s plans over a 15-year period, in this case up to 2035. And for those years, the IRP includes the elements of the VCEA that make money for Dominion: the build-out of solar, offshore wind and energy storage projects. It also includes money-saving retirements of outmoded coal, oil and biomass plants, as the VCEA requires. Heck, it even includes plans to close a coal plant the VCEA would allow to stay open in spite of its poor economic outlook (the Clover plant, half-owned by Old Dominion Electric Cooperative.)

But the IRP proposes no energy efficiency measures beyond those mandated by the VCEA between now and 2025. Dominion hates energy efficiency; it reduces demand, which is bad for business. So the company has made no effort to think deeply about how energy efficiency and other demand-side measures can support a zero-carbon grid — or, for that matter, how customer-owned solar can be made a part of the solution, rather than part of the problem.

This isn’t surprising: a plan that contemplates keeping gas plants around indefinitely looks very different, even in the first 15 years, from a plan that closes them all within 10 years after that.

A company that really accepted the challenge of creating a zero-carbon energy supply would not just get creative in its own planning; it would look beyond generating and supplying electricity, at the larger universe of solutions. It would advocate for buildings constructed to need much less energy, including for heating and cooling, to lessen the seasonal peaks in energy demand.

It would want the state to embrace strong efficiency standards. It would press its corporate and institutional customers to upgrade their facilities and operations to save energy, especially at times of peak demand. It would partner with communities to create microgrids. It would invest in innovation.

In short, it would ask “How can we achieve our fossil-free goal?” instead of asking “How can we keep burning gas?”

It’s not hard to understand why Dominion clings to gas; its parent company is fighting desperately to keep the Atlantic Coast Pipeline project alive in the face of spiraling costs (now up to $8 billion), an increasingly uphill battle at the State Corporation Commission to stick utility ratepayers with the costs of a redundant gas supply contract and a dearth of other customers anywhere along the route.

What is really hard to understand, though, is why Dominion chose to be quite so transparent in its disdain for the VCEA. Senator Jennifer McClellan and Delegate Rip Sullivan, both Democrats, who introduced the law and negotiated its terms with Dominion lobbyists and other stakeholders through many long days and nights, reacted to the IRP with entirely predictable outrage. In a statement they responded:

“The VCEA requires Virginia utilities to step up to the plate and be active leaders in carbon reduction. Dominion Energy’s IRP is tantamount to quitting the game before the first pitch is thrown. The law sets clear benchmarks for Virginia to reach 100 percent clean energy by 2045, not for utilities to plan to import carbon-polluting energy from West Virginia or Kentucky.”

Senator McClellan, it might be pointed out, could be on her way to becoming Virginia’s next governor. Most companies would hesitate to offend a leader of her stature, as well as such a prominent Democratic leader as Delegate Sullivan.

A growing number of legislators also seem interested in ending Dominion’s monopoly and bringing retail choice to Virginia. Though the bill that would have done that didn’t make it out of committee this year, the high-handed tone of the IRP will push more legislators into the anti-monopoly camp.

Arrogance and complacency seem like dangerous traits in times like these, but that’s Dominion for you. It will rise to any challenge, as long as the challenge doesn’t require anything the company didn’t already want to do.

A version of this article appeared in the Virginia Mercury on May 14, 2020.

Want a better understanding of how this year’s legislation works? I’m presenting the ins and outs of over a dozen bills in these three webinars:

  • What to expect when you’re expecting an energy transition, May 14, 2020 (recording available here)
  • New solar opportunities for homeowners, businesses and nonprofits, May 21, 2020, 5:30 p.m., register here
  • New tools for local governments to cut carbon, May 28, 2020, 5:30 p.m., register here

COVID-19 throws a lemon at Virginia’s plan for an energy transition. It’s time for lemonade.

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solar panels on a school roof

The solar panels on Wilson Middle School are saving money for Augusta County taxpayers. Photo courtesy of Secure Futures.

In mid-March, the Virginia General Assembly passed legislation to transition our economy from fossil fuels to clean energy over the coming years. Two weeks later, Virginia shut down in response to the COVID-19 pandemic. Among the businesses whose very existence is now in peril are the energy efficiency companies and solar installers we will be counting on to get us off fossil fuels.

Home weatherization and energy efficiency programs have come to an almost complete halt in Virginia, including programs run by Dominion Energy Virginia. Nationwide, the energy efficiency sector has lost almost 70,000 jobs. Meanwhile, companies that install solar, especially rooftop systems, report plummeting sales. The Solar Energy Industries Association reports that nationally, 55 percent of solar workers are already laid off or suffering cutbacks.

The timing seems terrible — although to be fair, there’s no good time for an economy-crushing, worldwide pandemic. Eventually, however, the virus will run its course or be defeated through vaccine or cure. At that point, we will face a choice: we can stagger blinking out into the sunlight aimlessly wondering now what?, or we can execute the well-developed plan we have spent these weeks and months formulating.

Let’s go with the second option.

First, it’s worth remembering that nothing happening now will change the trajectory of clean energy. Solar and wind had banner years in 2019, continuing their steady march to dominance. Wind has become the largest single source of electricity in two states, Iowa and Kansas. The island of Kauai in Hawaii is now 56 percent powered by renewable energy, mostly solar. Across the U.S. wind, solar and hydro produce more electricity than coal. Wind is the cheapest form of new electric generation nationally; solar takes pride of place in Virginia.

Meanwhile, fossil fuel is even more firmly on its way out. Six of the top seven U.S. coal companies have gone into bankruptcy since 2015. That was before the lockdown sent energy demand down, further hurting high-priced coal.

Fracked gas helped kill coal but is itself vulnerable to price competition from renewables. Odd as it sounds, the collapse in oil prices will make natural gas more expensive. That’s because oil producers in Texas and North Dakota are closing wells that produced natural gas along with oil. The tightening supply of gas may finally make fracking companies in Appalachia profitable, but it means higher prices for utilities. Wind and solar will just keep looking better.

The Trump administration is still trying futilely to hold back the tide, but the U.S. will get a lot farther riding the wave than struggling against it. Congressional leaders should declare the country “all in” on clean energy. Instead of bailing out the highly polluting fossil fuel industries, they should put that money to work creating more jobs and economic development — and actually doing something about climate change — with energy efficiency and renewables.

Congress should return the Investment Tax Credit for solar (and offshore wind) to the 30 percent level in effect last year and keep it there, instead of continuing the phase-out now in effect. Congress should also give solar owners the option of taking the credit as a cash grant, as it did during the last recession, and for the same reason: tax-based incentives are less useful in a recession, when companies can’t use the credits.

Virginia’s Sens. Tim Kaine and Mark Warner have a critical role to play in convincing their colleagues to support solar. So far neither is rising to the task.

On the state level, Northam did the right thing in signing this year’s energy legislation, allowing utilities and industry members to start planning for the future. But the Clean Economy Act gets wind and solar off to a very slow start; Dominion doesn’t have to build Virginia solar for five years yet. And though the new laws remove many policy constraints on customer-sited solar, they offer next to nothing in the way of financial incentives.

Governor Northam should make it clear he intends to make rooftop solar a priority for next year, along with projects on closed landfills, former coal mine areas, and other brownfields, with a special focus on areas hardest-hit economically. He can also encourage corporations that do business in Virginia to meet their sustainability goals with Virginia wind and solar, starting right now.

The governor should also prioritize building efficiency. Virginia will be adopting a new residential building code this year, and if past years are any indication, its energy efficiency provisions will fall short of the most recent model code standard. It’s up to the governor to make sure Virginia adopts the full code.

Local governments are already taking advantage of suddenly-empty buildings to accelerate maintenance and repairs. But it’s a good time to think bigger, with new financing tools available that make energy efficiency retrofits and solar facilities cash-positive right from the start.

Energy performance contracting allows the energy savings to pay for retrofits. The Department of Mines, Minerals and Energy keeps a list of pre-qualified energy service companies and offers expertise to help local government employees navigate the process.

This year’s legislation also greatly expanded local governments’ ability to finance on-site solar through third-party power purchase agreements, effective July 1. The PPAs are structured so that a school district, municipality or any commercial or non-profit customer can have a solar array installed at no cost, paying just for the energy produced.

In December, Fairfax County awarded contracts for PPAs to install solar on more than a hundred sites, including schools and other government buildings. The county’s contract is “rideable,” which allows other counties and cities to piggyback, getting the same terms without the need for new contract negotiations.

Unfortunately, local governments in southwest Virginia are prevented from pursuing PPAs — not by state legislation, which allows it starting July 1, but by a contract with Appalachian Power that governs their electricity purchases from the utility. The contract is up for renewal this year; disgracefully, APCo is refusing to agree to new terms allowing the localities to use solar PPAs. APCo should back off, and let local governments in economically depressed southwest Virginia start saving money and supporting solar jobs this year.

Arlington County has gone beyond on-site solar, contracting for a share of a large solar farm in southern Virginia that will provide more than 80 percent of the electricity for county government operations. It’s a model any locality can adopt.

Virginia residents and businesses also have good reasons to focus on clean energy. The enforced down-time many people are experiencing means more time to research options, and companies are motivated to offer low prices on energy efficiency upgrades and rooftop solar.

The federal government offers more generous tax credits this year than next. Credits for residential energy efficiency equipment and a deduction for energy efficient commercial buildings expire at the end of this year.

The investment tax credit for solar (as well as for geothermal heat pumps, fuel cells and small wind turbines) stands at 26% for projects placed in operation this year, but it will drop to 22% in 2021. It falls to 10% for commercial customers and disappears altogether for residential customers in 2022. If Congress acts to raise the credit to 30%, buyers will get an even bigger boost. If it doesn’t, there will be a rush this year to get projects done by the end of the year, so customers should secure their place in line now.

Virginia nonprofits have helped hundreds of residents and businesses save money on solar and EV chargers through bulk purchasing programs. Virginia Solar United Neighbors just announced a series of virtual information sessions to promote the Arlington Solar EV Co-op. And LEAP, which closed operations temporarily due to the virus, reports it has restarted two programs, Solarize NOVA and Solarize Piedmont.

In an ideal world, the U.S. would already be well along in executing a comprehensive plan for a clean energy transition, one that includes job retraining for workers, and that resists counterproductive efforts to save the fossil fuel industry. But we can do the next best thing, and use the tools of government, the market and consumer choice to speed us in the right direction.

COVID-19 has handed all of us a big, fat lemon. Let’s make some lemonade.

 

A version of this article appeared originally in the Virginia Mercury on April 30, 2020.