Virginia regulators reject Dominion renewable energy tariff

Virginia’s State Corporation Commission (SCC) has rejected Dominion Energy Virginia’s application for approval of a new rate schedule “CRG” under which it would offer renewable energy to large users of energy.

The SCC concluded Dominion had failed to show the tariff would result in “just and reasonable rates.” The Commission focused especially on two issues. First, the tariff relied on a formula made up of a long list of unknown variables including half a dozen different cost and price forecasts, producing “simply too much uncertainty and subjectivity.”

Second, Dominion proposed to collect a profit on the renewable energy it purchased for customers, equivalent to the return on equity it is allowed to charge on projects it builds. This would be unusual (typically the costs of purchased power are simply passed through to customers), and the Commission wasn’t having it.

This puts Dominion back at square one in developing a renewable energy tariff it can offer to large customers other than the Amazons and Facebooks of the world, who negotiate their own terms.

On the one hand, that’s good for customer choice and free market competition; as long as the utility does not have an approved tariff for 100% renewable energy, customers are allowed to buy renewable energy from other providers.

On the other hand, the SCC opinion also seems to suggest that when Dominion comes back with a new proposal, it might have to be one that, while cheaper, could be even less appealing to customers than the already-questionable CRG tariff. Pointing to the very broad definition of renewable energy in § 56-576 of the Code, the SCC makes the peculiar assertion that “The Commission must find that the energy provided by the proposed tariffs meets the General Assembly’s definition of renewable energy, not an individual customer’s preferred definition of such.”

This language concerns Cale Jaffe, Assistant Professor of Law at the University of Virginia and the Director of the Environmental and Regulatory Law Clinic. He says:

I take that as a not-so-thinly veiled criticism of Tier 1 renewables like wind and solar by the Commissioners.  I.e., Va. Code 56-576 defines “renewable energy” to include, “biomass, sustainable or otherwise, (the definitions of which shall be liberally construed), energy from waste, landfill gas, municipal solid waste….” I read the Commission as advising Dominion that if it comes back with another 100% Renewable Energy tariff, it needs to include “cheaper” options (if externalities are excluded), which the Commission would define to include unsustainable biomass along with other Tier 3 resources (e.g., waste to energy).

For customers, the result could be the worst of both worlds if a tariff with a mix of cheap, crummy stuff won SCC approval. It would close off the market to competition, yet probably not attract many takers.

Taking the optimistic view, though, there’s little out there in the renewable energy world that can compete with today’s wind and solar prices, with the exception of hydropower in places that have a lot of it. If Dominion’s prices are high, that’s because it insists on mixing in high-cost biomass to satisfy its own insistence that a renewable energy tariff consist of renewable energy 100% of the time.

The SCC’s focus on cost to customers has implications for Dominion’s proposed Schedule CRG-S, which would offer residential and smaller non-residential customers a mix of renewable sources at a fixed price that would increase the bills of participating residential customers by nearly 18%, or more than $20 per month for someone using 1,000 kWh. (Again, it’s that insistence on “100% of the time” that appears to be driving up the price.) This is a greater increase than the similar tariff Appalachian Power proposed, and the SCC rejected as too high, just a year ago.

For Dominion, the answer to every problem is more gas

Dominion Energy Virginia just released its 2018 Integrated Resource Plan (IRP), and the message it conveys could not be clearer: no matter what happens, the utility plans to build more fracked gas generation.

The IRP lays out five scenarios for meeting electric demand over the next 15 years, each one responding to a different set of assumptions. Yet weirdly, no matter which assumptions you choose, Dominion’s plan involves building a little bit of solar and a lot more gas.

Dominion Energy Virginia IRP; table showing alternatives considered

Dominion’s “Alternative Plans” (from page 24 of the IRP) prove to be very short on actual alternatives.

Everywhere you see “CT” in the table, that’s another gas plant–and they show up in every “alternative.” Assume no carbon tax? Great, Dominion will build gas. What if Virginia follows through on plans to cut carbon by joining the Regional Greenhouse Gas Initiative (RGGI)? No problem, Dominion will build gas. How about if the Feds impose a national carbon plan? Alrighty then, Dominion will build gas!

Seriously, folks, if fracked gas is always the answer, somebody isn’t asking the right question.

The question we’d like to see addressed is how the utility intends to help Virginia transition to a clean energy economy. The question Dominion seems to be answering is how to create a need for the Atlantic Coast Pipeline.

This isn’t a surprise; Dominion’s parent company, Dominion Energy, is the majority partner in the pipeline, and the pipeline’s approval was premised on the utility “needing” the pipeline to serve its gas plants. It’s a blatant conflict of interest that the SCC should have addressed by now, but it declined to do so. (The Sierra Club has taken the SCC to court over this dereliction of duty.)

Dominion would prefer we talk about its plans for more solar. It is true the 2018 IRP proposes more solar generation than the 2017 IRP did. Last year’s IRP revealed that solar had become the lowest-cost energy in Virginia, but it forecast only 240 MW per year. This year’s IRP shows solar increasing over the next few years to a maximum of 480 MW per year beginning in 2022 (about half of what North Carolina installed in 2016). To put that in perspective, Microsoft recently announced it was contracting for 350 MW of Virginia solar to be built in one fell swoop, to serve just its own operations.

Meanwhile, the IRP notes that Dominion’s newest combined-cycle gas plant, the 1,585 MW Greensville behemoth, will enter service next year. Running at full capacity, it would provide the equivalent amount of electricity to 13 years’ worth of planned solar construction, since the expected output of a solar farm is about 25% of its “nameplate” capacity. (To be fair, the Greensville plant will likely run at more like 75-80% capacity. But it follows three other new gas plants Dominion built this decade. Together the four plants add a total of  4,862 MW. And those are nowhere near all the gas plants Dominion operates.)

The fact that all of Dominion’s IRP scenarios look alike and rely heavily on gas seems to be intended to send a message not to the SCC but to Governor Northam. Dominion doesn’t like the carbon reduction rulemaking now underway at the Department of Environmental Quality, which aims to lower emissions from Virginia power plants by 30% between 2020 and 2030. So the IRP “assumes” Dominion will comply by purchasing dirtier power from states not subject to regulation, actually driving up both cost and carbon emissions. Meanwhile, it’s going to build gas no matter what.

Welcome to Dominion’s game of hardball, Governor Northam.

Of course, the IRP is only a planning document. The SCC may approve it but still reject a proposed facility when the utility asks for permission to build it. Market watchers will question whether Dominion will be able to justify all—or any—of the 8 proposed gas combustion turbine facilities in hearings before the SCC. Virginia has too little solar now to need combustion turbines for back-up, and by the time there is enough to challenge the capabilities of the grid, experts predict battery storage will be the better and cheaper choice.

But never mind that; for Dominion, what matters now is justifying the Atlantic Coast Pipeline.