Tag Archives: SB 966

A revised generation plan leaves Dominion’s case for its pipeline in shambles

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In December of last year, regulators at the State Corporation Commission (SCC) took the unprecedented step of rejecting Dominion Energy Virginia’s Integrated Resource Plan (IRP). Among other reasons, the SCC said the utility had over-inflated projections of how much electricity its customers would use in the future.

On March 8, Dominion came back with a revised plan. And sure enough, when it plugged in the more realistic demand projections used by independent grid operator PJM, and accounted for some energy efficiency savings, the number of new gas plants it planned for dropped in half. Instead of 8-13 new gas combustion turbines, the revised plan listed only 4-7 of these small “peaker” units.

Yet there is a good chance Dominion is still overinflating its demand numbers.  Although the re-filed IRP is short and vague, it appears Dominion isn’t figuring in the full amount of the energy efficiency programs it must develop under legislation passed last year.

SB 966 required Dominion to propose $870 million in energy efficiency and demand-response programs designed to reduce energy use and the need for new generation. But Dominion has proposed just $118 million in its separate demand-side management filing (case PUR-2018-00168).

Moreover, the company has concocted a theory whereby it can satisfy that $870 million requirement by spending just 40 or 50 percent of it and pocketing the rest. In its DSM case Dominion argues that since the Virginia Code allows a utility to recover lost revenue resulting from energy efficiency savings, it can simply reduce the required spending by the amount of lost revenue it anticipates.

It’s a great theory, and suffers only from being wrong. (Oh, and also from infuriating legislators, energy efficiency advocates, and pretty much everyone else who was involved in crafting SB 966.)

It also indicates that Dominion’s demand figures in the IRP are based on plans to spend just a fraction of the $870 million in energy efficiency, achieving much less demand reduction than backers of the law envisioned.

If the SCC decides Dominion can’t withhold hundreds of millions of dollars in efficiency spending, that additional spending will have to be factored into demand projections. Thus the IRP’s demand projection can only go down—and with it, the number of gas plants that might be “needed.”

And yet even the resulting number is likely too high. Several of Dominion’s large corporate customers have been trying to leave its fond embrace to seek better renewable energy offerings elsewhere. (The SCC recently rejected Walmart’s effort to defect.) If they were allowed to leave, how much would that further reduce the need for new generation?

For that matter, those customers and many others, including many of the tech companies responsible for what demand growth there is, say they want renewable energy, not fossil fuels. Dominion claims the renewable generation will have to be backed by gas peaker plants, but energy storage would serve the same purpose and further reduce the need for gas. The SCC will rule on that question when—and if—Dominion ever requests permission to build one of those peakers. It is possible the utility will never build another gas plant.

That’s bad news for Dominion Energy’s other line of business, gas transmission and storage. With demand for new gas generation falling off a cliff, Dominion’s ability to rely on its customer base as an anchor client for the Atlantic Coast Pipeline becomes increasingly doubtful.

Dominion may actually have conceded as much in its re-filed IRP. In response to the SCC’s order that Dominion include pipeline costs in its modeling of the costs of gas generation, Dominion merely stated, without discussion, that it is using the tariff of the pipeline owned by the ACP’s competitor Transco, which supplies gas to Dominion’s existing plants.

This statement continues a pattern of Dominion avoiding any mention of the ACP in SCC proceedings, lest it invite hard questions. But Dominion can’t have it both ways. If it will use Transco, it doesn’t need the ACP. If it plans to use the much more expensive ACP and just isn’t saying so, it has lowballed the cost of gas generation and is misleading the SCC.

This is unfair to customers, and it may backfire on Dominion. The ACP received its federal permit on the strength of contracts with affiliate utilities, but Dominion hasn’t yet asked the SCC to approve the deal. Leaving the ACP out of the discussion in the IRP year after year makes it harder to win approval. When and if the company finally asks the SCC for permission to (over)charge ratepayers for its contract with the ACP, it will not have built any kind of a case for a public need or benefit.

This is not just a risk that Dominion Energy chose to take, it is a risk of the company’s own creation. It defied the Sierra Club’s efforts to have the SCC review the ACP contract early on, knowing it would face vigorous opposition from critics. But since then, its chances for approval have only gotten worse. Back then, the pipeline cost estimate came in at $3 billion less than it is today, Dominion Virginia Power was halfway through a massive buildout of combined-cycle gas plants, and the IRP included several more big, new, gas-hungry combined-cycle plants.

Now the ACP’s cost has climbed above $7 billion and may go as high as $7.75 billion, excluding financing costs, CEO Tom Farrell told investors last month in an earnings call. Meanwhile, the IRP includes an ever-shrinking number of gas plants, to be served by a different pipeline.

One investment management company told clients in January the spiraling price tag may make the ACP uncompetitive with existing pipelines. And Farrell faced a host of cost-related questions in his call with investors.

But Farrell downplayed the risk when it came to a question from Deutsche Bank about the need for SCC approval. Managing Director Jonathan Arnold asked, “On ACP, when you guys are talking about customers, does that include the anchor utility customers, your affiliate customers? Does whatever you’re going to negotiate with them need to be approved by the state regulatory bodies?”

Farrell’s answer sounds nonchalant. “In Virginia, it’s like any other part of our fuel clause. It will be part of the fuel clause case in 2021 or 2022 along with all the other ins and outs of our fuel clause.”

Oh, Mr. Farrell, it is not going to be that easy.

An earlier version of this article first appeared in the Virginia Mercury on March 20, 2019.

It’s time for the General Assembly to side with customers, not utilities, on solar

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Solar canopy over a parking lot

Solar panels on parking lots, landfills, rooftops and other sites could provide a lot of clean electricity if policy barriers are removed.

Last winter, the Virginia General Assembly passed legislation giving utilities the green light to develop 5,500 megawatts (MW) of wind and solar energy. This marks a milestone for Virginia, offering the possibility for an amount of solar equal in output to Dominion Energy’s newest gas-fired power plant in Greensville.*

Amid the general celebration of this support for utility solar and wind, few legislators noticed that the bill did nothing to help residents and businesses that want to build renewable energy for their own use. Private investment drives most of the solar market in many other states, so leaving it out of the picture means squandering an opportunity.

Customers—and the solar companies who depend on small-scale solar— hope it’s their turn this year. They’d like to see the General Assembly give customer-built solar the same level of love in 2019 that it gave utility solar in 2018.

Unfortunately, that doesn’t square with the agenda of our utilities, which want to protect their monopolies on electric generation. Over the past few years, Dominion Energy and its fellow utilities have blocked dozens of bills aimed at removing some of the policy barriers stifling the market.

Just one example: Fairfax County, like many jurisdictions across the state, owns a closed landfill. It can’t be used for most purposes, but it could hold a solar array large enough to power multiple county buildings.

Yet no fewer than four different provisions of Virginia’s net metering law keep a cost-effective project from moving forward: a 1 MW limit on commercial solar arrays; a requirement that electricity from a solar facility must be used onsite; a rule that a solar facility can’t be larger than needed to meet the site’s electric demand over the preceding year; and a prohibition on meter aggregation that keeps a customer with solar on one building from sharing it with another building.

These would all be simple legislative fixes, but for years now Dominion and the other utilities have opposed the reforms.

Other reforms are needed, too. The solar industry faces a ceiling on the total amount of solar customers can own under the net metering program; utilities killed bills that would raise the ceiling. Businesses tried to lift restrictions on third-party financing using power purchase agreements. Utilities killed the bills. Homeowners tried to get out from under the oppressive fees called standby charges that utilities impose to keep customers from putting up more than 10 kilowatts (kW) of solar panels. Utilities killed the bills.

Killing bills clearly must get tedious. So, this year, Dominion is using the occasion of a report to the General Assembly on solar energy last month to launch a propaganda campaign against the whole radical idea of customers producing their own energy supply.

The 44-page, glossy brochure boasts photographs of sunlight slanting across solar panels nestled in fields of dandelions. Much of it is devoted to touting Dominion’s own progress in installing solar. Dominion claims its 1,600 MW of solar make it a national leader, though that might have to be taken with a grain of salt given that the U.S. now has more than 58,000 MW of solar.

And of course, most of Dominion’s solar is in other states; and of the solar in Virginia, most is being built in response to demand from the state government and corporate customers. Only a few of the solar farms Dominion includes will actually serve ordinary ratepayers.

The achievements amount to even less for Dominion’s customer-sited projects. The company’s Solar Partnership Program for commercial customers built only 7.7 MW out of the 30 MW the SCC approved five years ago. The Solar Purchase Program that Dominion once hoped might replace net metering has produced a grand total of 2 MW.

And then there are the 18 schools across the commonwealth that are the lucky recipients of solar panels in Dominion’s “Solar for Students” program. Each school gets 1.2 kW worth of solar panels, or roughly enough to run an old refrigerator. (In fairness, those old refrigerators are electricity hogs. If you have one, replace it.)

If these programs demonstrate Dominion’s level of competence building rooftop solar, that seems like reason enough to open up the private market.

It’s also worth keeping in mind that the reason customers are trying so hard to remove Virginia’s policy barriers is that they don’t just want electricity, they want solar. Yet absolutely none of the solar energy from any project Dominion builds or buys, even those paid for by Virginia ratepayers, will stay in Virginia to meet our voluntary renewable portfolio standard (RPS).

If that surprises you, check out a different document Dominion filed last month, with significantly less fanfare than it gave the solar report. The other filing, Dominion’s annual report to the State Corporation Commission (SCC) on renewable energy, confirms that Dominion sells the “renewable attributes” of solar energy produced here to utilities in other states in the form of renewable energy certificates (RECs).

Then, for the Virginia RPS, Dominion buys cheaper RECs from facilities like out-of-state, century-old hydro dams, biomass (wood) burners, trash incinerators, and a large but mysterious category called “thermal” that is nowhere defined but definitely has nothing to do with solar. So other states get the bragging rights to our solar, and we get dams, trash and wood, plus a mystery ingredient.

But regardless of who gets to claim it, all solar is good solar in a world threatened by climate change. That’s my attitude, anyway, and I only wish Dominion shared it. But, returning our attention to the glossy solar brochure, we find Dominion instead doing its darnedest to undermine the idea of solar built by anyone but the lovable monopoly itself.

The report offers up a poll that concludes: “Solar power is the most popular energy source of all those tested in this polling (Nuclear, Wind, Solar, Natural Gas, and Coal).” But then it goes on to suggest customers don’t understand solar, don’t want to spend much money on it, and don’t really value it very highly after all.

For example, the report follows news of solar’s 82% positive rating with this caveat: “However, when asked to choose what is most important to them regarding their own electricity provider . . .customers chose as follows: dependability and reliability 53%; affordability 28%; investing in renewable energy 16%.”

The poll apparently didn’t give respondents the option of choosing solar andreliability andaffordability. Pollsters must not have told folks that customers in other states enjoy all three at once, or that solar actually has a positive effect on grid reliability and customer savings.

If the question had been, “How biased is this poll?” I bet they could have scored 100%.

After delivering a few more similarly manipulated polling results, the report goes on to discuss the results of last summer’s solar stakeholder process. Readers may recall that Dominion hired consultant Meridian Institute to convene a series of meetings to get feedback on renewable energy policy questions. Hundreds of Virginians took the trouble to attend in person or by phone to share their expertise and opinions.

The result, presented in an 18-page appendix to Dominion’s report, is impressive only for how completely inane it is.

Here, for example, is how Meridian opens its summary of stakeholder feedback:

Most stakeholders who expressed a general opinion about the expansion of renewable energy in Virginia indicated that they support such expansion. Others indicated that their support for renewable energy was dependent on a variety of factors. Some stakeholders did not express a general opinion about the expansion of renewable energy in Virginia.

I am sorry to say it goes on like that for pages.

If you persist in reading the Meridian summary, the most you will get out of it is what we all knew going into it: utilities disagree with customers and the solar industry about whether existing restrictions on customer solar are good or bad.

Except, the report does not even say that. It only says the “participants” in the solar stakeholder process disagreed on these questions. Putting it that way leaves open the possibility that some customer, somewhere, in one of those meetings, might have taken the utilities’ side.

If so, the customer’s name was Tooth Fairy.

I have little doubt Dominion provided a copy of its pretty solar report to every legislator in Richmond, and is already using it in its fight against expanding the rights of customers in Virginia to go solar. Dominion will point to its report as proof that customers are too stupid and too conflicted to be allowed to make their own decisions. Ergo, Dominion should control all solar in Virginia, on rooftops as well as elsewhere.

Legislators should indeed read the report. And then after they’ve had a good laugh, they should tell Dominion no.

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*That equivalence is because Dominion projects its 1,588 MW Greensville plant will run at 80% of its full capacity. Solar farms, generating only during daylight hours, achieve capacity factors in the range of 25%, while rooftop solar comes in a little less.

This post originally appeared in the Virginia Mercury on December 7, 2018.

After the grid mod bill, the SCC wants to know how much authority it still has over utility spending

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offshore wind turbines

Offshore wind turbines, Copenhagen, Denmark. Dominion Energy has asked the SCC for permission to proceed with building two wind turbines off the Virginia coast as a test project. Photo by Ivy Main.

It’s no secret the State Corporation Commission didn’t like this year’s big energy bill, the Grid Transformation and Security Act. SCC staff testified against SB 966 in committee, and their objections played a major role in amendments removing the “double dip” provision that would have let Dominion Energy Virginia double its earnings on infrastructure projects. Since passage of the bill, the SCC has raised questions about the constitutionality of the law’s provisions favoring in-state renewable energy, and its staff has issued broadsides about the costs of the legislation.

Now the SCC is mulling the question of how much authority it still has to reject Dominion’s proposals for spending under the bill. Dominion has filed for approval of a solar power purchase agreement (case number PUR-2018-00135) and two offshore wind test turbines it plans to erect in federal waters 24 nautical miles out from Virginia Beach (PUR-2018-00121). The utility has also requested permission to spend a billion dollars on grid upgrades and smart meters (PUR-2018-00100).

In an order issued September 12, the SCC asked participants in the solar and offshore wind cases to brief them on legal issues arising from the legislation. The SCC has focused in on two new sections of the Virginia Code. One is the language making it “in the public interest” for a utility to buy, build, or purchase the output of up to 5,000 megawatts (MW) of Virginia-based wind or solar by January 1, 2024. The SCC noted that subsection A of the provision says such a facility “is in the public interest, and the Commission shall so find if required to make a finding regarding whether such construction or purchase is in the public interest.”

The other new Code section gives a utility the right to petition the SCC at any time for a “prudency determination” for construction or purchase of a solar or wind project located in Virginia or off its coast, or for the purchase of the output of such a project if developed by someone else.

Together these sections give Dominion a good deal of latitude, but they don’t actually force the SCC to approve a project it thinks is a bad deal for ratepayers. In other words, wind and solar may be in the public interest, but that doesn’t mean every wind and solar project has to be approved.

The SCC asked for briefs on seven questions:

  • What are the specific elements that the utility must prove for the Commission to determine that the project is prudent under Subsection F?
  • Is the “prudency determination” in Subsection F different from the “public interest” findings mandated by Subsections A or E?
  • Do the public interest findings mandated by either Subsections A or E supersede a determination under Subsection F that a project is not prudent? If not, then what is the legal effect of either of the mandated public interest findings?
  • If the construction (or purchase or leasing) is statutorily deemed in the public interest, is there any basis upon which the Commission could determine that such action is not prudent? If so, identify such basis or bases.
  • In determining whether the project is prudent, can the Commission consider whether the project’s: (a) capacity or energy are needed; and (b) costs to customers are unreasonable or excessive in relation to capacity or energy available from other sources?
  • Do the statutorily-mandated public interest findings under either Subsections A or E override a factual finding that the project’s: (a) capacity or energy are not needed for the utility to serve its customers; and/or (b) costs to customers are unreasonable or excessive in relation to capacity or energy available from other sources, including but not limited to sources of a type similar to the proposed project?
  • Does the utility need a certificate of public convenience and necessity, or any other statutory approval from the Commission, before constructing the proposed projects?

Even if the Commission decides it has latitude in deciding which wind and solar projects to approve, that doesn’t necessarily spell disaster for the two projects at issue. The SCC could still decide they meet the standard for prudency and approve them.

Oral argument on the issues is scheduled for October 4.

Should approval of smart meters depend on how the meters will be used?

The SCC is also mulling over its authority in the grid modernization docket. One day after it asked lawyers in the solar and offshore wind cases to weigh in on the meaning of prudency, it issued a similar order asking for input on what the new law means by “reasonable and prudent” in judging spending under the grid modernization provisions. (Yes, the grid mod section of the law insists that spending be “reasonable” in addition to “prudent,” begging the question of whether spending can be prudent but not reasonable. Perhaps thankfully, the SCC order does not pursue it.)

The SCC’s questions to the lawyers show an interest in one especially important point: Dominion wants to spend hundreds of millions of dollars of customer money on smart meters, without using them smartly. Smart meters enable time-of-use rates and customer control over energy use, and make it easier to incorporate distributed generation like rooftop solar. None of these are in Dominion’s plan. Is it reasonable and prudent for Dominion to install the meters anyway, just because they are one of the categories of spending that the law allows?

Or as the SCC put it:

If the evidence demonstrates that advanced metering infrastructure enables time-of- use (also known as real-time) rates and that such (and potentially other) rate designs advance the stated purposes of the statute, i.e., they accommodate or facilitate the integration of customer-owned renewable electric generation resources and/or promote energy efficiency and conservation, may the Commission consider the inclusion or absence of such rate designs in determining whether a plan and its projected costs are reasonable and prudent?

Reading the tea leaves at the SCC: Staff comments on Dominion’s IRP

The SCC’s question about smart meters surely indicates how the commissioners feel about the matter: they’d like to reject spending on smart meters, at least until Dominion is ready to use them smartly. If the SCC concludes it has the authority to reject this part of Dominion’s proposal as not “reasonable and prudent,” it seems likely to do so.

It is harder to know where the SCC might land on the solar and offshore wind spending. The SCC’s staff, at least, are skeptical of Dominion’s plans to build lots of new solar generation. In response to Dominion’s 2018 Integrated Resource Plan (IRP), Commission staff questioned whether Dominion was going to need any new electric generation at all, given the flattening out of demand. But if it does, according to the testimony of Associate Deputy Director Gregory Abbott, Dominion ought to consider a new combined-cycle (baseload) gas plant, not solar. (Combined-cycle gas was the one generating source Dominion almost completely ruled out.)

Abbott criticized Dominion’s presentation of the case for solar, though he took note of the technology’s dramatic cost declines. Instead of seeing that as a reason to invest, however, he suggested it would be better to wait for further cost declines, or at least leave the construction of solar to third-party developers who can provide solar power more cheaply than the utility can. Remarkably, he also suggested Dominion offer rebates to customers who install solar, urging that Dominion’s spending under the grid transformation law “is designed specifically to handle these [distributed energy resources].”

Abbott also seemed supportive of Dominion’s venture into offshore wind. The only offshore wind energy in the IRP is the 12 MW demonstration project known as CVOW, but as Abbott noted, “the Company indicated that it will pursue a much larger roll-out of utility-scale offshore wind, beginning in 2024, if the demonstration project shows it to be economic.”

This suggests staff are inclined to support Dominion’s spending on the CVOW project, but for Abbott, it was one more reason Dominion should not invest in solar. He concluded, “If the demonstration project proves that utility-scale offshore wind is economic compared to solar, then it may make sense to get the results of the CVOW demonstration project before deploying a large amount of solar.”

This post originally appeared in the Virginia Mercury on September 24.

Virginia buys Dominion’s pig in a poke

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How Dominion sees the bill.

A pig in a poke is defined as “an object offered in a manner that conceals its true value, especially its lack of value.” The expression is said to go back about five hundred years to English marketplaces. A poke was a sort of sack, but why 16th century people bought pigs in sacks, and why they would have bought a sack without looking inside, is not at all clear. I’m guessing the seller was the local pig monopoly, and the buyers were timid leaders who meekly paid their farthings and hoped for the best. After all, that is how we do it in the marketplace of Virginia’s General Assembly when Dominion Energy Virginia comes peddling legislation.

And indeed, the true value (or lack of value) of this year’s boondoggle bill (HB 1558/SB 966) will probably not be understood for months or even years to come. The General Assembly passed this legislation that will govern billions of dollars of new spending paid for by Virginia customers after just a handful of hearings over a few weeks, and with no study or input from outside experts. If you will excuse the expression, this is a lousy way to make sausage.

Arguably, the only thing worse than this bill is the law it seeks to fix, the infamous “rate freeze” legislation of 2015 that simply let Dominion keep a billion dollars of customer money to line its own pockets. You’d think legislators would have learned something about legislating in haste and repenting at leisure.

But the legislation could have been worse. We know this because it was worse; the bills Dominion originally put forward returned even less money to consumers, gave the utilities even more leeway on spending, and included the infamous “double dip” that the SCC said would let Dominion charge customers twice for the same projects. The bills improved over the next few weeks under pressure from progressive Democrats, conservative Republicans, the SCC, the Attorney General’s office, the Governor, and consumer and environmental groups.

Whether it is good enough now remains a matter of debate. Conservatives for Clean Energy and the League of Conservation Voters support the bill, especially the provisions relating to investments in energy efficiency and renewable energy. The Sierra Club, an early opponent, used what leverage it had to get the worst provisions changed before removing its opposition late in the game (while still not supporting the bill). The AG’s Office of Consumer Counsel and Appalachian Voices never dropped their opposition.

Nevertheless, the poke has been bought, so you should definitely take a look at the pig. The Virginia Poverty Law Center and the Southern Environmental Law Center produced a handy summary of the bill’s final provisions compared to both the original bill and the status quo under the 2015 law (and sometimes also to the pre-2015 law).

The summary describes the categories of new spending authorized by the law, but a lot is left to interpretation—Dominion’s interpretation, mostly. Customers don’t seem to have any say in how their money gets spent. They are just supposed to feel happy with the provisions granting them some initial refunds reflecting a portion of the overearnings from past years, plus the utility’s savings from the federal tax cut. Going forward, though, the likelihood of further refunds or rate cuts seems remote. The whole point of the bill is to allow utilities to spend overearnings and avoid refunds. And as always, rates can continue to go up through “rate adjustment clauses” (RACs) like the ones that tacked new charges onto electricity bills even when base rates were frozen.

Moreover, what VPLC’s summary (understandably) lacks is a comparison to what ought to be in there: full refunds based on a review of past earnings rather than legislative guesstimates; mandatory—and much higher—levels of energy efficiency, wind and solar; proper regulatory oversight of rates and spending; and an independent assessment of grid modernization needs rather than blanket permission for a utility to indulge in projects that benefit itself most.

We’ll have to wait until next year for any new legislation, but it is not too early to start laying the groundwork. Governor Northam should direct his administration to begin working with national experts on a comprehensive grid modernization study. The goal should not be to tinker around the edges of current law and policy, but to draft a new and better approach from the ground up. (For a great discussion of why we need this study and what it should look like, see Tom Hadwin’s blogpost from last week.)

Meanwhile, legislators should promise their constituents that they will never again allow a public utility to write our energy laws and force through massive and complex changes over the course of a few weeks of the legislative session. Next time Dominion offers a pig in a poke, the answer should be no.