Monthly Archives: July 2022

Your electric bills are skyrocketing. Blame our failure to invest in renewable energy.

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Photo by Pixabay on Pexels.com

Fossil fuel prices are higher everywhere, and the effect is hitting electric bills as well as prices at the gas pump. 

Utilities that generate power from natural gas and coal face fuel costs two or three times as high as they were just a couple of years ago —and those costs are passed on to customers. Some utilities employ hedging strategies and long-term contracts to reduce the impact of price spikes. But as a general matter, how painful your bill increase will be is a function of how much electricity your utility generates from fossil fuels. 

Gee, don’t you wish we had more renewable energy in Virginia? 

Let’s review the problem. Dominion Energy Virginia, our largest utility, generates most of its electricity from gas and coal, with 29 percent from nuclear and a tiny percentage from solar and biomass. Our second-largest utility, Appalachian Power, derives 85 percent of its power from coal and gas and only 15 percent from renewable energy, primarily wind and hydro. 

Both utilities are investing more in renewables now, but for years they lagged other states even as wind and solar became the lowest-cost sources of energy nationwide. Because the “fuel” for wind turbines and solar panels is free, those sources generate electricity at a stable price that looks even better when coal and gas prices go up. (Nuclear reactors are fueled by uranium, so they aren’t affected by the fossil fuel crunch either; even so, most of them need subsidies to compete in the wholesale market.) 

As previously reported in the Mercury, Dominion filed a request with the State Corporation Commission in May to increase the “fuel factor” portion of its customer bills, citing the higher prices. In the past year, according to Dominion, the price of the natural gas it bought has gone up 100 percent. High gas prices cause utilities to switch to coal generation when it’s cheaper, so the price of coal also rose by 92 percent. In all, the company said it incurred more than a billion dollars more in fuel costs over the past year than it budgeted for a year ago. 

Under Virginia law, Dominion and APCo “pass through” the costs of fuel directly to customers. They don’t collect a profit, but they don’t have to swallow unexpected increases themselves. Customers will have to pay higher rates for as long as it takes Dominion to recoup the extra spending. The only question for the SCC is how quickly Dominion should collect the money.

Consumers in other states are also being hit by higher electricity bills, but the effect is uneven across the country. States that built more renewable energy protected their residents from fuel price increases. 

Data collected by the U.S. Energy Information Agency shows that with few exceptions, states with lower electricity rates than Virginia’s have more renewable energy than we do. Since the EIA data doesn’t reflect all the planned increases due to rising coal and gas prices, the disparity will become even more pronounced over the coming year. 

States in the Pacific Northwest with a lot of inexpensive hydroelectric power have especially low rates, but wind and solar are the cheapest forms of new energy. The higher fossil fuel prices go, the better wind and solar look by comparison. 

States in the Great Plains have been building wind for years because it outcompetes everything else, so their rates are low and increasingly insulated from fossil fuel volatility. South Dakota residents pay less per kilowatt-hour than Virginians do, and the state gets a whopping 83 percent of its electricity from renewable energy, primarily wind. Even North Dakota, a deep red state wedded to fossil fuels, gets more than 35 percent of its electricity from wind and another 5 percent from hydro. Its rates are already much lower than Virginia’s, and its renewable energy will cushion fuel cost increases. 

Investments in solar are also paying off. Take Utah for example, where residential rates are also far lower than Virginia’s. Utah has a coal problem, with 61 percent of its electricity from that one dirty source, and another 24 percent from natural gas. But, as EIA reports, “almost all the rest of in-state generation came from renewable energy, primarily solar power.” Moreover, “solar energy powers about 93 percent of Utah’s electric generating capacity added since 2015.” Evidently, Utah spent the past seven years working to future-proof its energy supply, while Dominion kept building more gas plants. 

Virginia’s slow start on the transition to renewable energy is the direct result of poor investment decisions by our utilities and a disgraceful myopia on the part of the State Corporation Commission. Environmental advocates pointed out for years that our over-commitment to fracked gas meant we’ve been gambling on fuel costs and undervaluing price stability. But the SCC kept approving new fossil fuel projects, and actually urged Dominion to build more gas plants.

Indeed, our situation would be even worse if the General Assembly had not passed the Virginia Clean Economy Act in 2020. The VCEA requires our utilities to transition to carbon-free electricity by 2050 and establishes wind and solar targets for Dominion and APCo to achieve by 2035. The targets are still too low to meet the climate emergency — but until the VCEA became law, Dominion was planning to build even more gas plants. 

Now customers have to pay for Dominion’s folly. Dominion’s filing states that if it recovers the entire $1 billion shortfall over the coming year, residential bills would have to go up by 19.8 percent. Dominion instead proposes to spread the higher charges over three years to ease the shock, making the bill increase 12.2 percent.  The effect would be further moderated this year by other adjustments the company proposes, like moving the costs of participating in the Regional Greenhouse Gas Initiative into base rates, where they can be absorbed because those rates are so inflated. (On the other hand, the SCC just granted Dominion a separate rate increase for spending to extend the life of its aging nuclear plants—an undertaking projected to cost nearly $4 billion.) 

An SCC hearing examiner heard testimony in Dominion’s rate case on July 6 and 7. A ruling is expected later this summer, and the SCC seems likely to approve the three-year plan. 

Spreading the cost of higher fuel prices out over a longer time may reduce the rate shock, but there are drawbacks to this approach. First, Dominion will charge customers the financing costs of deferring collection on the full amount, adding to the total cost burden. (What, did you think the company was offering to absorb that cost itself?) The way it works is that ratepayers will borrow money to pay off our debt to Dominion, then repay the loan with interest over the next three years. 

The second problem is that if the high cost of fossil fuel isn’t temporary, extending the recovery period will lead to even greater shocks in coming years. If prices stay high and we keep kicking the can down the road, we will pay more financing costs and pile up more debt. Where does this end?

This is not mere speculation. Dominion’s filing already projects that “fuel costs will remain elevated over the next year,” and expert witness testimony in the case notes that Dominion revised its natural gas price projections upwards after it filed its request, without updating the amount it is seeking to collect to reflect the higher projections. 

Over at Appalachian Power the situation may not be any better. APCo typically seeks its fuel factor rate increases in September of each year. Last year the utility sought a $3 average increase in residential bills to cover higher fuel costs, at a time when coal and gas prices were still well below this year’s prices. When the company files for its next fuel factor increase two months from now, the rate increase it seeks is likely to pack a much bigger punch. 

What of other Virginia utilities? Our smallest publicly-owned utility, Kentucky Utilities (Old Dominion Power, which serves five counties in southwest Virginia), is also heavily dependent on fossil fuels although now planning to build more renewables. ODP filed for a modest rate increase in February of this year, just before Russia invaded Ukraine and sent world natural gas prices to heights not seen since the start of the fracking revolution. 

Chris Whelan, vice president for communications and corporate responsibility, told me ODP is able to dampen the effect of fuel price volatility through a “flexible fuel procurement strategy that includes long-term contracts to help hedge against price swings as well as the ability to purchase fuel on the spot market when prices drop.” Still, ODP will have to seek another increase next February unless prices suddenly plummet. The utility recovers excess fuel costs (or lowers rates if fuel costs fall) on an annual basis, so customers would pay off the full amount over 12 months. 

Electric cooperatives that buy electricity from Old Dominion Electric Cooperative also face price increases due to high fossil fuel prices and a paucity of renewables. ODEC’s 2021 energy profile shows it generates 38 percent of its electricity from gas, 14 percent from nuclear, and 4 percent from coal. It purchases the rest from the wholesale market (38 percent) and from renewable energy projects (6 percent). Electricity sold on the PJM wholesale market is generated mainly by natural gas, nuclear and coal, so wholesale market prices are also higher now.

According to Kirk Johnson, ODEC’s senior vice president for member engagement, ODEC has had to raise energy prices twice since the beginning of the year, effective May 1 and July 1. Assuming individual distribution cooperatives passed those costs through immediately, residential co-op customers will have seen a 16 percent increase in their electricity rates since Jan. 1. That’s a really steep increase, but Johnson notes ODEC will collect the full amount of the excess cost by Jan. 1, 2023. 

ODEC’s increase for six months is almost four percentage points lower than the increase Dominion would impose for 12 months if it were to collect its full $1 billion in the shortest time possible. Johnson said ODEC engages in a hedging strategy that acts like an insurance policy to limit the effect of fuel price volatility, and that this strategy has saved their ratepayers hundreds of millions of dollars.

So hedging and long-term contracts can smooth out fossil fuel volatility, but rates are going up everywhere in Virginia. The lesson is clear enough: “cheap” fracked gas was a bad bargain. Our utilities should have been building wind and solar over the last several years to protect us from fossil fuel price volatility, rather than waiting for the General Assembly to force them to act. 

Going forward, the more we invest in wind and solar, the more price stability we will have in our electricity rates, and the less we will have to worry about high fossil fuel prices in the future.  

This article originally appeared in the Virginia Mercury on July 18, 2022. I’ve corrected information for Utah.

*EIA’s webpage lists each state’s average residential price of electricity per kilowatt-hour, but finding the fuel mix for each state requires looking up each one separately. For those of you who like to dive into these details, I’ve assembled the information for you. Note that most of EIA’s data is for 2021, but some state data is for 2020. Unfortunately this includes Virginia.

StatePrice cents/kWh% REsource of RE
Virginia12.837biomass, hydro, solar
Idaho9.8674mostly hydro
Washington10.1275mostly hydro
North Dakota10.4840mostly wind
Utah10.6615mostly solar
Montana11.0052mostly hydro
Wyoming11.0619mostly wind
Nebraska11.1128mostly wind
Oregon11.2268mostly hydro, some wind
Missouri11.5412mostly wind
Arkansas11.7510mostly hydro
Louisiana11.984biomass
South Dakota12.0382wind, hydro
Iowa12.0960almost all wind
North Carolina12.2616mostly solar and hydro
Oklahoma12.3845mostly wind
Kentucky12.637hydro

Dear readers: Many of you know that although I write independently of any organization, I also volunteer for the Sierra Club and serve on its legislative committee. The Sierra Club’s Virginia Chapter urgently needs funds to support its legislative and political work towards a clean energy transition. So this summer I’m passing the hat and asking you to make a donation to our “Ten Wild Weekends” fundraising campaign. Thanks!

Getting gas out of buildings is critical for climate action, but the recipe isn’t easy

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I grew up with brothers, so I knew from an early age that the surest way to make friends with guys was to feed them homemade cookies. I took this strategy with me to college, commandeering the tiny kitchenette tucked into the hallway of my coed dorm. The aroma of chocolate chip cookies hot out of the oven reliably drew a crowd.

One fan was so enthusiastic that he wanted to learn to make cookies himself. So the next time, he showed up at the start of the process. He watched me combine sugar and butter, eggs and flour.

Instead of being appreciative, he was appalled. It had never occurred to him that anything as terrific as a cookie could be made of stuff so unhealthy. It’s not that he thought they were created from sunshine and elf magic; he just hadn’t thought about it at all. He left before the cookies even came out of the oven.

I felt so bad about it, I ate the whole batch.

Cookies are practically health food compared to other things we consume without really understanding the dangers. 

It’s not just food. Plastic packaging, chemical additives, PFAS, phthalates and numerous other chemicals enter our homes and bodies without our conscious acquiescence, causing havoc for ourselves, our children and the rest of life on earth. It’s hard to know the risks, harder still to avoid them. So maybe you carry reusable bags and water bottles, buy organic if you can, and otherwise, try not to think too hard about it.

Where ignorance is bliss—or at any rate, a state of mind sufficient to keep you from a complete mental breakdown — you could be excused for feeling ‘tis folly to be wise. Why not just eat the cookies?

Well, because sometimes reading the ingredients can make a difference. Public pressure has been the major driver of government action on climate, particularly in decarbonizing the electric sector. People saw the recipe for their power supply and recoiled at all that fossil fuel. Short of installing solar panels on their rooftops, individuals in most states have little control over their source of electricity. It was a collective outcry that led to nearly half of all states setting carbon-free electricity targets. 

It seems odd, then, that we have not seen the same outcry when it comes to fossil fuel use in buildings, including natural gas in homes. As our electricity gets cleaner, buildings must become all-electric on the way to a fully decarbonized energy economy.  

Turns out, that’s a tall order. About 48 percent of American homes use natural gas for heating, and many also have gas appliances like stoves and hot water heaters. Starting in 2019, a few cities started banning new gas connections in an effort to speed the transition to all-electric homes. But in response, the gas industry persuaded legislatures in 20 states to prohibit localities from enacting such bans. (An industry effort to “ban the bans” in Virginia failed mainly because no localities have tried to go that route.)

For now at least, the industry seems to have public sentiment on its side. Natural gas is truly the chocolate-chip cookie of fossil fuels: it heats the air reliably, chefs love it and it’s lower in calories—I mean, carbon—than coal. Even the name sounds benign. What can be wrong with something “natural?” 

Disillusionment sets in only when you read the recipe. (“First, frack one well…”) Understanding the harmfulness of the ingredients is the key to getting people to insist on all-electric homes and businesses. The primary component of natural gas is methane, a greenhouse gas far more potent than CO2. Methane leaking from wellheads, pipelines, compressor stations and storage facilities contributes alarmingly to climate change. Older cities are riddled with leaking distribution pipelines running through neighborhoods, especially those housing low-income and non-White residents. Occasionally, they explode. 

Those beloved gas stoves leak methane even when turned off, and burning gas in buildings causes high levels of indoor air pollution. Cooking with gas releases respiratory irritants, including nitrogen dioxide, ultrafine particulate matter (PM 2.5), carbon monoxide and formaldehyde. The effect is particularly harmful to children, with studies showing children living in homes with gas stoves are 42 percent more likely to suffer from symptoms of asthma.

It used to be that gas outperformed electricity in buildings, but no longer. Recent advances in technology mean electric heat pumps provide heating and air conditioning efficiently and effectively even in very cold climates. Every gas appliance has an electric counterpart. Even for cooking, gas has met its match in electric induction stoves, which have been winning over chefs nationwide. In a few years, we will wonder why we ever allowed open flames in our kitchens.  

Cost and convenience also favor all-electric buildings. An electric heat pump instead of both a gas burner and electric air conditioning means only one system to maintain and one utility bill instead of two. 

The question isn’t why homeowners would give up gas, but why builders still include it. Clearly, no one is reading the recipe.

With so much gas infrastructure already in place, and so little public awareness of the dangers, getting the gas out of buildings will be a slow process. In Virginia, gas companies continue to propose pipeline projects that would actually increase supply, in the hopes of locking in new customers. This is, to use the technical term, nuts. Those pipelines will have to be abandoned within a couple of decades, not “just” because the climate crisis demands it, but because consumers won’t keep buying.

Certainly, it will take time for most people to grasp how harmful methane is and how superior the alternative is. Once consumers begin insisting on all-electric buildings, however, gas utilities will enter a death spiral as they are forced to raise prices for remaining customers, who will then switch to electricity, too. 

At that point, electrification of the building sector will be complete, and we will begin to close the (cook)book on gas.

This article originally appeared in the Virginia Mercury on July 7, 2022.

Dear readers: Many of you know that although I write independently of any organization, I also volunteer for the Sierra Club and serve on its legislative committee. The Sierra Club’s Virginia Chapter urgently needs funds to support its legislative and political work towards a clean energy transition. So this summer I’m passing the hat and asking you to make a donation to our “Ten Wild Weekends” fundraising campaign. Thanks!