Show up and be counted

Just in case you own neither a television nor a mailbox, don’t read a newspaper, only use your computer to watch videos of a Japanese cat with a thing for boxes, and never answer a telephone call from an unfamiliar number because it might be Rachel from Cardholder Services . . .

Tomorrow is Election Day in Virginia. Judging from the ads, politicians think you are most interested in which candidate has a hidden agenda of coddling violent gang members, or which one will dramatically lower our taxes simply by cutting the waste that every one of his predecessors somehow missed.

But I’d like to put in a plug for choosing candidates who support people over corporations, the public good over special interests, the environment over polluters, and the free market over monopoly. And if the candidates you’re choosing between don’t do any of those things as well as they should, vote anyway, because only by voting do you have the right to hold elected officials accountable.

The Virginia Chapter of the Sierra Club has endorsed candidates at the state and local level whose background and responses to questionnaires and interviews show they are most likely to support the environment in office. The endorsements are made by the chapter’s Political Committee and the volunteer Executive Committee, in consultation with members most knowledgeable about the issues and the candidates. As a non-partisan organization, the Sierra Club can and does endorse Republicans as well as Democrats, but the Republican vow of ignorance on climate change tends to make it hard to find ones the Club can endorse. (The standout exception is Republican Delegate Randy Minchew of Leesburg.)

A group called Activate Virginia has also compiled a handy list of candidates who have pledged not to take contributions from the likes of Dominion Energy, which has used its remarkable influence to enrich itself at the expense of consumers and lull even otherwise savvy leaders into supporting the expansion of fossil fuel infrastructure.

Personally, I find it pretty easy to know who to vote for. No serious candidate still denies that the planet is warming or that humans are causing it. (Regrettably, we have a lot of un-serious candidates.) Governor McAuliffe finally put in motion a proposed rulemaking that would lower carbon emissions from power plants. Ralph Northam has pledged to see it through if he is elected Governor. Ed Gillespie has pledged to kill it. Northam gets my vote.

New fracked gas pipelines will raise energy prices and commit Virginia to decades more of rising greenhouse gas emissions, while crowding out cleaner and cheaper renewable energies like wind and solar. Candidate for Lieutenant Governor Justin Fairfax opposes the pipelines, while Jill Vogel repeats the mindless “all of the above” pablum so popular with politicians who aren’t troubled by the difference between a mountaintop dotted with wind turbines and one blown up for its coal. Fairfax gets my vote.

Attorney General Mark Herring has been a champion for the environment and consumers in court and before the State Corporation Commission. His challenger John Adams has a cool name. Herring gets my vote.

New pipelines report shows the ACP is part of a widespread, systemic market failure

Photo courtesy of Chris Tandy.

Anyone who examines the corporate deals that underlie the Atlantic Coast Pipeline comes away with a strong sense of looking at a broken regulatory system. The Federal Energy Regulatory Commission (FERC) is supposed to approve only those pipelines that can demonstrate they are actually needed. Pipeline companies demonstrate need by showing that customers have contracted for most or all of the pipeline’s capacity. In the case of the ACP, Dominion Energy and its partners manufactured the need by making their own affiliates the customers of the pipeline.

What’s weird is that FERC seems to be okay with this. It recently approved another pipeline with a similar setup—the Nexus pipeline that will carry fracked gas from Ohio through Michigan to Canada. FERC ignored blatant self-dealing between the pipeline company and its regulated utility affiliate, including clear evidence the regulated utility affiliate increased its share of the pipeline’s capacity only to create a “need” for its parent company’s project.

A new report from Oil Change International concludes the U.S. is currently building unneeded fracked-gas pipelines as a result of FERC’s regulatory failures, including its failure to police self-dealing. The result will be excess pipeline capacity, paid for by regulated utility customers.

The primary cause of the overbuilding, and the reason companies like Dominion engage in self-dealing to create the impression of “need,” is that FERC sets an absurdly high rate of return on pipelines—14%, compared to a typical utility rate of return of 10%. FERC set the high rate back in 1997 when interest rates were double what they are now, so it was more expensive to build large infrastructure. FERC hasn’t changed the rate since then even though it is causing obvious market distortions—and creating an incentive for utilities to jump into the pipeline business.

What is even weirder is that Virginia’s State Corporation Commission seems to be okay with self-dealing, too. The ACP is also using affiliate contracts that commit the customers of state-regulated electric utilities (including Dominion Energy Virginia) to pay for the use of the pipelines.

The SCC’s job is to protect electric utility customers from precisely this kind of exploitation. These customers don’t have the option to walk away from the likes of Dominion Energy Virginia; they are required by law to get their electricity from that utility and no other. If the SCC looks at self-dealing and shrugs, where are the customers supposed to go for protection?

That’s why Virginia has a law called the Affiliates Act that requires SCC approval before a regulated utility can commit its customers to any contract or arrangement with an affiliated company. Dominion had to commit electricity customers to the ACP in order to show FERC the pipeline was needed. Yet Dominion never even asked the SCC for approval.

Recognizing the risk to ratepayers, the Sierra Club petitioned the SCC to require Dominion to comply with the Affiliates Act by disclosing the affiliate relationship and seeking approval of the arrangement that affects captive customers. Without SCC approval, Dominion would seem to be on thin ice telling FERC it has the contracts in place that demonstrate the “need” for the ACP.

One would have thought the SCC would jump at the chance to weigh in. The FERC filings show it will cost ratepayers three to four times more to use the ACP than to stick with the competing pipeline that Dominion already has long-tem contracts with.

But on September 19, the SCC denied the Sierra Club’s petition. One of the reasons cited was that Dominion will have to get SCC approval before it actually charges ratepayers for any gas carried by the pipeline.

Meaning, the SCC says it will consider the merits of the problem only after Dominion has secured FERC approval, and after the ACP has already ripped a 600-mile gash across the countryside, dispossessing landowners, tearing up forests, and endangering streams and water supplies.

Well, that poses a bit of a problem, doesn’t it? If the SCC turns down Dominion’s rate recovery request at that point, its decision will cancel out the very argument of “need” that Dominion and its partners used to get the ACP approved by FERC. Meaning, the ACP should never have been built.

But the pipeline will be there in all its razed-earth, $5 billion glory. What then? Perhaps Dominion will instead use the pipeline to serve its LNG export terminal at Cove Point or go hawking its expensive gas to new industrial customers, as some politicians hope. But more likely, this being Virginia, we would expect our General Assembly to order the SCC to grant rate recovery anyway, citing energy security or whatever fig leaf Dominion comes up with.

And a systemic market failure will leave Virginians, along with residents of other states, paying more to burn fracked gas for decades, unwillingly and unfairly doing our part to exacerbate the climate crisis.

Who leads on climate and energy in the General Assembly—and how to get your legislators to up their game

Sierra Club Legislative Chair Susan Stillman presents the Good Government award to Senator Chap Petersen. Photo credit Sierra Club.

Each year the Virginia Chapter of the Sierra Club issues grades to Virginia legislators for their votes on bills related to energy and climate change. It’s not an easy task, especially in the House, where too many good bills die on unrecorded voice votes in small subcommittees, defying attempts to hold legislators accountable. Other bills become victims of party politics. In spite of this, the scorecard manages to separate the champions from the also-rans, not to mention the boneheads running in the opposite direction. Guest blogger Corrina Beall, Legislative Director for the Virginia Sierra Club, lays it all out for you.

 

By Corrina Beall

The Sierra Club Virginia Chapter 2017 Climate and Energy Scorecard grades the Commonwealth’s state-level elected officials on their votes during the 2017 General Assembly Session on legislation that will have an impact on Virginia’s energy policies and standards to fight climate change. Eighteen of Virginia’s 40 senators and 36 of 100 delegates received a score of 80 percent or better on the 2017 Scorecard, reflected in their A+, A and B grades.

Check out your Senator’s and Delegate’s grades and let them know what you think! Thank them for supporting good environmental policies, or let them know that they need to do better. Scorecard available online, here: http://www.sierraclub.org/virginia/general-assembly-scorecard

As a voter, your elected officials care about your opinions even when you disagree. Regardless of party affiliation, your legislator will be interested to know that passionate environmentalists live in his or her district. Even if you never thought it was possible, you may be able to find some common ground. Talk with your legislator about shared values, and from there, the outcome of a friendly conversation about how we govern is anybody’s guess.

Legislators at all ends of the political spectrum need to hear from environmentalists who live in the districts they represent. The environment isn’t a partisan issue: everyone wants clean air to breathe, clean water to drink, and to protect those resources for future generations.

Nine legislators deserve your special thanks this year for their work to protect our environment our air, water or land during the 2017 Legislative Session. Seven will be awarded by are receiving awards from the Virginia Chapter this summer:

  1. Senator Chap Petersen, Good Government Award
  2. Senator Scott Surovell, Water Champion Award
  3. Delegate Mark Keam, Energy Freedom Award
  4. Senator Jennifer Wexton, Energy Freedom Award
  5. Delegate Rip Sullivan, Legislative Leader Award
  6. Senator Jeremy McPike, Environmental Justice Award
  7. Delegate Kaye Kory, Environmental Justice Award

In addition, Senators Amanda Chase and Richard Stuart will be recognized for outstanding contributions on specific bills that help protect Virginia’s water quality from the consequences of our fossil fuel dependency.

Here is the full run-down:

Senator Richard Stuart (R-28) has led on water quality issues in coastal Virginia during his tenure in the Virginia Senate. Since the first commercial oil well was drilled in 1896 in Virginia, it is estimated that seven thousand oil and gas wells have been drilled in the state. Until 1950, there were no permitting or environmental requirements of well operators– and wells no longer in use were not plugged or closed, but simply abandoned. These abandoned wells, and those that are abandoned by insolvent companies, are called “orphan” wells.

According to the latest state review of oil and natural gas environmental regulations, there are at least 130 orphaned wells in Virginia. Orphaned wells that predate regulation often go unnoticed because their locations were never recorded. According to the Virginia Department of Mines, Minerals and Energy (DMME), the cost of plugging an orphaned well is between $50,000 and $60,000. It took fifteen years for DMME to accumulate sufficient funds to complete a project of plugging seven wells.

Virginia’s orphan well program is funded by fees charged to well operators when they apply for a well site permit. The fee was set at $50 in 1990, and remained stagnant until this General Assembly Session. Sen. Stuart introduced successful legislation Senate Bill 911 that will increase the fee from $50 to $200.

Senator Chap Petersen (D-34) showed remarkable leadership by proposing to repeal a statute enacted in 2015 (the now-infamous SB 1349), which froze electric rates at levels that are designed to allow Dominion and Appalachian Power to over-collect money from customers. Virginians are now paying too much for their electricity because our largest utilities are earning unjustified profits. Petersen’s bill would have unfrozen utility rates, and allowed for base rate reviews for both utilities, ultimately resulting in lower electric bills and possibly a refund to consumers.

Additionally, Petersen sponsored Senate Bill 1593, which would ban political contributions from regulated monopolies. Petersen’s stand brought the issue of money in politics to the forefront, a focus that has spilled over into the gubernatorial race.

Senator Scott Surovell (D-36) introduced successful legislation this year to place a moratorium on coal ash disposal permits until the issue has been studied and information has been provided to the regulating entity, the Department of Environmental Quality. Senate Bill 1398 requires Dominion to assess a range of alternatives for disposing or recycling coal ash, the toxic byproduct of burning coal for electricity.

Despite the dangers associated with coal ash, it remains both ever-present and under-regulated. Coal ash is the second largest industrial waste stream in the United States. Vast quantities of poorly-contained ash sit in numerous pits along many of the Commonwealth’s most prized rivers, including the James, the Clinch, and the Potomac Rivers. In many cases, coal ash disposal sites are located upstream from popular fishing, kayaking, and hunting destinations.

The bill is an important step toward protecting every Virginian’s right to clean water. Senator Amanda Chase (R-11) co-patroned the bill. Chase raised the profile of this issue and rallied support around this measure, and after a weakened version of the bill passed in both chambers, she pushed for the Governor to strengthen the bill by amending it to include a prohibition on future issuance of permits until the studies are submitted to DEQ in December of 2017.

At the Request of the Virginia Distributed Solar Collaborative, Senator Jennifer Wexton (D-33) and Delegate Mark Keam (D-35) introduced companion legislation to establish community-owned renewable energy programs in Virginia with Senate Bill 1208 and House Bill 2112. Community-owned projects are not legal in Virginia, but could provide the option to power homes and businesses with clean energy for renters, apartment and condo dwellers, low-income families, and buildings that have unfavorable characteristics for on-site generation like deep shade.

Development of wind or solar energy that provides power to multiple community members leverages an economy of scale to reduce the price for each individual customer. By owning or leasing the solar or wind system, each community member taking part in the project can reduce his or her utility bills. Although these bills failed, they helped legislators understand what a true “community solar” bill looks like, and have helped set the stage for future efforts.

Delegate Rip Sullivan (D-48) introduced a suite of bills on energy efficiency this year in addition to a bill to establish renewable energy property tax credits in Virginia, HB 1632. Sullivan’s bills include HB 1703 (energy efficiency goals), HB 1636 (adjusting energy efficiency programs’ criteria for approval by the SCC), and HB 1465. Only HB 1465 passed.

House Bill 1465, which will become law in July, requires the Department of Mines, Minerals, and Energy (DMME) to track and report on the state’s progress towards meeting its energy efficiency goal. Virginia has a voluntary goal, set in 2007, of reducing electricity consumption by 10 percent by 2022, and we are only a tenth of the way there. Despite the modesty of our goal, at our current pace we will not attain it. This legislation requires that the Governor, the General Assembly and the Governor’s Executive Committee on Energy Efficiency will receive an annual report on our progress. Sullivan’s bill will provide a tool to hold the Commonwealth accountable for reaching our energy efficiency goal, and increase government transparency.

Senator Jeremy McPike (D-29) and Delegate Kaye Kory (D-38) introduced Senate Bill 1359 and its companion, House Bill 2089, which require every public school board in the state to adopt a plan to test for lead in each school’s drinking water. Children are particularly vulnerable to the harmful effects of lead poisoning, but often do not look sick. Lead in the body can cause brain damage and developmental problems including learning disabilities, impulsive behavior, poor language skills and memory problems. This bill will become law in July.

Sierra Club files petition with SCC seeking Affiliates Act review before Dominion commits to Atlantic Coast Pipeline deal

 

By Pax Ahimsa Gethen – Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=55451003

Today the Sierra Club filed a petition with the Virginia State Corporation Commission seeking a Declaratory Judgment that Dominion Virginia Power’s arrangement to obtain gas capacity in the Atlantic Coast Pipeline is subject to Commission approval under the Virginia Affiliates Act. That law requires a public service corporation to get the approval of the Commission before it enters into a “contract or arrangement” with an affiliated company.

The Affiliates Act applies, according to the Sierra Club, because Dominion Virginia Power’s parent corporation, Dominion Resources, is a partner in the Atlantic Coast Pipeline joint venture, and Dominion Virginia Power’s (DVP) fuel procurement subsidiary, Virginia Power Services Energy Corporation (VPSE), contracted for capacity on the pipeline. Put more simply, a utility—Dominion Virginia Power– and two of its corporate affiliates have negotiated a business deal, and the Affiliates Act directs the Commission to carefully review that deal to ensure that consumers don’t get the short end of the stick.

If the Commission grants Sierra Club’s petition, DVP will have to submit its agreement with Atlantic Coast to the Commission for formal review and approval. Sierra Club and other interested parties will then have a chance to weigh in on whether the agreement will actually benefit consumers.

There is good reason to think it won’t benefit consumers. Bill Penniman, a retired energy attorney who serves as Conservation Co-Chair for the Virginia Chapter of the Sierra Club, has studied Atlantic Coast’s filings with the Federal Energy Regulatory Commission (FERC). He notes that as of now, the amount of money that DVP (via VPSE) will pay Atlantic Coast for pipeline capacity is secret. The public filings reveal, however, that the maximum amount Atlantic Coast can charge any customer is more than three times the amount that another company, Transcontinental, can charge for pipeline capacity that services the exact same power plants as Atlantic Coast. And as it happens, says Penniman, DVP already has twenty-year shipping agreements with Transcontinental. The fact that DVP is now trying to enter into a whole new contract to ship gas to the same power plants via a much costlier pipeline ought to raise a lot of eyebrows.

If this talk of parent companies and subsidiaries is confusing, it might help to picture Dominion Resources as a giant spider with DVP as one leg and other Dominion-owned companies as other legs. Some of those legs have hairs on them; they are subsidiaries of the subsidiaries, but still part of the spider. VPSE is a hair on the DVP leg; its job is to buy fuel and whatever else the utility needs to run its power plants and make electricity.

In this case, VPSE has contracted with Atlantic Coast to buy a big chunk of space on the pipeline. DVP will use this pipeline capacity to deliver the gas needed to fire its Greenville and Brunswick facilities. Yet another leg on the spider, Dominion Transmission, has been hired to build and operate both Atlantic Coast and a connecting line called the Supply Header (which ups the price of the whole system).

To top it all off, the spider itself, Dominion Resources, owns 48% of the Atlantic Coast venture, along with Duke Energy and Southern Company. You can picture the Dominion spider teaming up with its spider buddies on the project, but I don’t recommend that if you tend towards arachnophobia and are already not happy with this analogy.

Having VPSE contract for capacity on Atlantic Coast is absolutely critical to the success of the whole pipeline venture. Atlantic Coast can’t get permission from the Federal Energy Regulatory Commission (FERC) to build the pipeline unless it can show the pipeline is needed, and the only way to show need is by having customers lined up to buy the capacity. If VPSE didn’t sign that contract, Atlantic Coast couldn’t get built.

But here’s the thing: while FERC has final authority for approving or rejecting the pipeline itself, Virginia’s State Corporation Commission has authority to decide whether any agreements between regulated utilities and their corporate affiliates are in the public interest. In fact, the law says that the Commission must review and approve inter-affiliate agreements before they take effect.

However, even though DVP has directed VPSE to buy pipeline capacity on Atlantic Coast for DVP to use at its power plants, DVP has never submitted VPSE’s arrangement with Atlantic Coast for Commission review. Atlantic Coast has assured FERC it has enough customers to justify building the pipeline, but the fact of the matter is, one of its key customers—VPSE (and, by extension, DVP)—may not have had authority to enter into the deal in the first place.

This is what the Affiliates Act is supposed to prevent. Virginia Code section 56-77 says that any “contract or arrangement” between a public service company and an affiliated interest for goods, property, or services requires prior approval from the Commission. The fact that VPSE is acting as a contractual middle man between DVP and Atlantic Coast makes no difference: this is an arrangement between DVP, VPSE, and Atlantic Coast that is made specifically for the benefit of DVP. They’re all the legs (and leg-hairs) of the same spider, and they are likely to put the spider’s welfare above anyone else’s. And that’s exactly the reason the General Assembly passed the Affiliates Act.

The Atlantic Coast Pipeline is a big deal for Dominion Resources. The company is all-in on natural gas, and building this $5 billion pipeline is expected to generate a lot of profit for shareholders. What’s missing from this equation is the public interest, and there are good reasons for the Commission to be skeptical. How does it benefit Virginians to construct an extraordinarily expensive pipeline when much cheaper pipeline capacity already exists? That’s the question the Sierra Club will pose to the Commission if grants the petition and requires DVP to submit its Atlantic Coast agreement for review.

Furthermore, why should DVP commit itself (and its customers) to a huge amount of natural gas capacity over twenty-year period when there are better, cleaner options available? While Dominion and all its spider legs may think that burning more gas is a great idea, the reality is, natural gas increasingly looks less like a long-term energy solution and more like a trap for companies that made the wrong bet. At the same time, renewable energy and efficiency resources are growing ever cheaper. The Commission might well question Dominion’s plan to lock its customers into a bad investment in fossil fuels over the next twenty years at the expense of smarter renewable alternatives.

There’s a reason the Affiliates Act exists, and this is it. Here’s hoping the Commission grants Sierra Club’s petition and gives the Dominion spider a good, hard look under the microscope.

 

The “fuel” that’s helping America fight climate change isn’t natural gas

You’ve heard the good news on climate: after a century or more of continuous rise, U.S. CO2 emissions have finally begun to decline, due largely to changes in the energy sector. According to the Energy Information Agency (EIA), energy-related CO2 emissions in 2015 were 12% below their 2005 levels. The EIA says this is “because of the decreased use of coal and the increased use of natural gas for electricity generation.”

Is the EIA right in making natural gas the hero of the CO2 story? Hardly. Sure, coal-to-gas switching is real. But take a look at this graph showing the contributors to declining carbon emissions. Natural gas displacement of coal accounts for only about a third of the decrease in CO2 emissions.

Courtesy of the Sierra Club Beyond Coal Campaign, using data from the Energy Information Agency.

Courtesy of the Sierra Club Beyond Coal Campaign, using data from the Energy Information Agency.

By far the biggest driver of the declining emissions is energy efficiency. Americans are using less energy overall, even as our population grows and our economy expands

Energy efficiency is sometimes called the “first fuel” because cutting waste is a cheaper and faster way to meet energy demand than building new power plants. Improvements in energy performance cut across all sectors of the economy, from industrial machines to home electronics to innovations like LED bulbs replacing famously wasteful incandescent light bulbs.

Energy efficiency’s stunning success in lowering carbon emissions should get more attention, and not just because it is cheaper than building new natural gas-fired power plants. Efficiency has no downsides. Natural gas has plenty. Indeed, when methane leakage from drilling and infrastructure is factored in, natural gas doesn’t look much like a climate hero at all.

And that’s not the full story. A growing share of the credit for carbon reductions also goes to non-carbon-emitting sources, primarily wind, and solar. Both sources exhibit double-digit growth rates. Wind power in the U.S. has grown from a little over 9,000 megawatts (MW) in 2005 to more than 74,000 MW by the end of 2015. In 2005, the solar market scarcely existed. By early this year, we had 29,000 MW installed.

The solar trend is particularly exciting because we are just starting to see the big numbers that result from solar’s exponential growth. In the first quarter of 2016, more solar came online in the U.S. than all other power sources combined. Analysts like Bloomberg New Energy Finance see solar becoming the world’s dominant energy source over the next 25 years, driving out not just coal but also a lot of gas generation as solar becomes the cheapest way to make energy.

For an inspiring look at how this will happen, check out this presentation by author Tony Seba. As Seba argues, solar isn’t a commodity like fossil fuels; it is a technology like computers and cell phones. When technologies like these take off, they take over. Seba refers to solar technology, battery storage, electric vehicles and self-driving vehicles as “disruptive” technologies that are advancing together to upend our energy and transportation sectors.

Another graph shows us how critical these advancements will be. The U.S. is on track to achieve President Obama’s goal announced last year of lowering carbon emissions 17% below 2005 levels by 2020, but we will need more aggressive measures to meet our Paris Agreement target of 26-28% below 2005 levels by 2025. After 2025, of course, we will have to cut greenhouse emissions even further and faster.

Slide4Given the urgency of the climate crisis, we don’t have the option of waiting around for the solar revolution to bankrupt the oil and gas industry and fossil-bound electric utilities. These companies will not go quietly; already they are maneuvering to lock customers into fossil fuels. Power producers are engaged in a mad rush to build natural gas plants, and wherever possible, to stick utility customers with the costs.

For Virginians who have felt especially under attack from fracked gas projects recently, this final graph shows it’s not your imagination: Virginia is second only to Texas in new gas plant development underway. And this graph captures only a fraction of the new gas that Virginia’s major utility, Dominion Virginia Power, wants to build. In presentations to state officials, it revealed plans for more than 9,000 megawatts of additional gas generating capacity.

Based on Energy Information Agency data. Chart excludes natural gas generating units already under construction as well as those scheduled to come online after 2020.

Based on Energy Information Agency data. Chart excludes natural gas generating units already under construction as well as those scheduled to come online after 2020.

Dominion and other gas-happy utilities are betting that once plants are built and consumers are on the hook, regulators won’t want to see them idled ten years from now just because renewable energy has made them obsolete.

Indeed, Dominion and other utilities, including Duke Energy, Southern Company, and NextEra in the Southeast and DTE Energy in the Midwest, even plan to use electricity customers to make money for the gas pipelines they are building, locking Americans further into gas.

This is madness. The only sound energy plan today is one that looks forward to an era of minimal fossil fuel use. It puts efficiency and renewables front and center, shifting natural gas and other fuels to supporting roles that will shrink over time.

The shift is inevitable. Delaying it means allowing the climate crisis to worsen, while sticking customers with higher bills for decades to come. That may suit some utilities just fine, but the cost is too high for the rest of us.

 

Southeastern electric utilities find their way to higher profits through gas pipelines and captive consumers

Charlie Strickler of Harrisonburg, Virginia, was one of a dozen activists who fasted last September in protest of FERC's role in approving natural gas pipelines, citing their contribution to climate change and harm to communities in their path. Photo by Ivy Main.

Charlie Strickler of Harrisonburg, Virginia, was one of a dozen activists who fasted last September in protest of FERC’s role in approving natural gas pipelines, citing their contribution to climate change and harm to communities in their path. Photo by Ivy Main.

Duke Energy, Southern Company, NextEra Energy and Dominion Resources—four of the largest investor-owned utilities in the U.S., all headquartered in the Southeast—have simultaneously adopted a growth strategy reliant on large volumes of fracked gas. With the nation’s energy sector turning decisively away from coal and nuclear energy, these companies are betting natural gas will be the dominant fuel for at least the next several decades. All four are investing billions of dollars in gas pipelines and other gas infrastructure to profit from the fracking boom.

Pipelines are attractive investments because they are typically allowed rates of return of around 14%, compared with the average regulated utility return allowed by public utility commissions of about 10%.

For the southeastern utilities, however, that rate of return is only part of the attraction. In a strategy that ought to concern regulators and electricity consumers, Duke, Dominion and NextEra all plan to use their regulated electric power subsidiaries to guarantee demand for the pipelines they’re building. The subsidiaries will build natural gas generating plants, paid for by electricity consumers, to be supplied with gas carried through the pipelines owned by their sister companies.

Southern is also investing in pipelines, but it currently doesn’t need new generation beyond the coal and nuclear plants it is struggling to complete—themselves object lessons in why coal and nuclear are kaput.

Southern just announced completion of its $12 billion acquisition of AGL Resources, a natural gas pipeline and distribution company. The move makes Southern Company “the nation’s second-largest combined gas and electric utility by customer base,” according to Utility Dive.

Dominion Resources was already heavily invested in the natural gas sector before it announced a $4.4 billion purchase of Questar Corp. News reports say the acquisition will bring Dominion an additional 27,500 miles of gas distribution pipelines, 3,400 miles of gas transmission pipeline and 56 billion cubic feet of working gas storage.

Duke Energy is making a $4.9 billion purchase of Piedmont Natural Gas, a natural gas transmission and distribution company. And NextEra recently spent $2.1 billion to acquire Texas-based NET Midstream through the limited partnership it formed, NextEra Partners, LLC.

Moody’s Investor Services issued a report in March criticizing Dominion, Southern and Duke for their natural gas transmission buys, saying the added financial risks offset the benefits of diversifying their businesses.

Moody’s may not have known how the utilities plan to use electricity customers as a hedge for at least two planned pipelines, the Atlantic Coast Pipeline (ACP) and Sabal Trail.

Using electricity customers to pay for pipelines

Companies owned by Duke, Southern and Dominion are partners in the 550-mile ACP, which will carry fracked gas from West Virginia through Virginia to the North Carolina coast. Duke and NextEra are partners in Sabal Trail, a 515-mile pipeline proposed to run from an existing pipeline in Alabama through Georgia to Florida, where Duke says it will fuel gas plants owned by Duke Energy Florida and Florida Power and Light, a subsidiary of NextEra.

ACP and Sabal Trail are only two of 15 new pipelines proposed on the East Coast competing to carry fracked gas flowing out of the Marcellus shale in Pennsylvania and West Virginia. So many pipelines are in development that analysts say there simply isn’t enough gas to fill them all. At the 2016 Marcellus-Utica Midstream Conference in February, attendees were warned that pipeline capacity “will be largely overbuilt by the 2016-2017 timeframe.”

But the ACP and Sabal Trail have an advantage most of the competition lacks. The utility partners all own electric power subsidiaries that use fracked gas to generate electricity. If the subsidiaries build new gas plants, these pipelines will be guaranteed a customer base. That means they can be profitable for their investors even when other pipelines struggle to find customers.

Indeed, Duke and Dominion’s electricity subsidiaries are making the kinds of investments you’d expect to see if the success of the pipelines were their top priority. Dominion Virginia Power is in the middle of a three-plant, 4,300 MW gas generation build-out. In the ACP’s application to the Federal Energy Regulatory Commission (FERC), Dominion Resources justifies the ACP in part by saying it will supply the newer of these plants. And the utility is just getting started with new gas generation; Dominion Virginia Power told Virginia officials last fall it expects to build another 9,000 MW of gas plants by 2040.

Meanwhile, Duke’s regulated subsidiaries, Duke Energy Carolinas and Duke Energy Progress, filed integrated resource plans in North and South Carolina that call for up to nine new natural gas generating units, totaling 8,300 MW. In February of this year, Duke received approval to build two 280 MW gas units in Asheville, NC, and sought approval for a third.

Bigger investments, greater risks

Linking pipelines to captive customers should prove a profitable arrangement for the utilities. For the customers who bear the costs and risks, it’s much more problematic. But state law gives them no say in the matter. In these southern states, the electric power subsidiaries hold legal monopolies in their designated territories. Once federal regulators approve the pipelines and state regulators approve the gas plants, the captive customers bear the loss if the bet turns sour.

Any one of several scenarios would make the gas investments a bad bet. The age of plentiful shale gas could end almost as quickly as it started, as some analysts predict, or gas prices could resume their historic volatility for other reasons. The U.S. could adopt newer, tighter carbon rules to meet international climate obligations, or enact a carbon tax that increases the cost of fossil fuels. Alternatives like wind, solar and energy storage seem likely to continue their astonishing march towards domination of the electric sector. As they become increasingly competitive, much new gas infrastructure is destined to become stranded investments.

And finally, the demand for natural gas, and for the pipelines themselves, may simply not be there; Americans are using less electricity, and generating more of it themselves through rooftop solar systems. The vertically-integrated, monopoly utility model that prevails in the Southeast relies on ever-increasing sales, which means it doesn’t require much of a change in consumer behavior to turn black ink red.

So while environmentalists are enraged by the recklessness of the southeastern utilities’ natural gas strategy in an age of climate change, customers who only care about the bottom line on their utility bills have reason to be just as upset. Capitalism is supposed to ensure that corporate shareholders bear the costs as well as receive the benefits of risky bets. With the risks of their gas gamble shifted onto captive customers, the utilities won’t be punished for not choosing clean energy instead.

Bucking the trend towards renewables and efficiency

It’s worth noting that the plans of Dominion, Duke and their fellow monopoly utilities run counter to the expressed desires of their customers. Natural gas companies work to brand their product as “clean,” but polls show Americans overwhelmingly believe the U.S. should emphasize wind and solar over oil and gas production, and oppose the use of fracking to extract oil and gas. Major corporations now threaten to vote with their feet, refusing to locate where they can’t access electricity from renewable sources.

It is not a coincidence that Duke and Dominion fall near the bottom of a just-released survey conducted by Ceres that ranks major utilities by their performance on energy efficiency and renewable energy. NextEra and Southern do no better. NextEra’s electricity subsidiary, Florida Power and Light, came in dead last for renewable energy sales. Ceres says it was unable to include Southern this year because it did not respond to requests for data, but in 2014 Southern ranked 31 out of 32 on renewable energy sales.

The southeastern utilities stand in marked contrast to utilities like Berkshire Hathaway’s Mid-American, which has announced a goal of meeting 85% of its customers’ needs with wind power. Even Dominion’s Virginia rival, Appalachian Power Company, filed an integrated resource plan last year with more new wind and solar generation projected than new natural gas. Perhaps that’s because neither Appalachian Power nor its parent company, American Electric Power, own any gas pipelines.

Effects on competition and consumers trigger an antitrust complaint

Customers may be the biggest losers when utilities use their electricity subsidiaries to guarantee the success of their gas subsidiaries, but the arrangement also harms other business interests. These include pipeline operators who don’t have the same self-dealing opportunity; non-utility electricity generators who can’t sell their product to utilities because the utilities now prefer to build their own gas generation; and companies that build wind and solar projects, who find themselves boxed out.

Already one non-utility generator is crying foul: Columbia Energy LLC, an operator of a 523 MW independent combined cycle gas generating plant that wants to sell electricity to Duke Power but finds itself left out in the cold. Columbia is challenging both Duke’s application for approval of a new gas plant in Ashville and the merger of Duke with Piedmont Natural Gas, another partner in the Atlantic Coast Pipeline.

The potential of the ACP to harm consumers and competition led to the filing in May of a complaint with the Federal Trade Commission (FTC). The complainant, retired Department of Justice antitrust lawyer Michael Hirrel, believes the utilities’ abuse of their legitimate monopoly power violates federal antitrust laws, and he is urging the FTC to investigate.

The Virginia Chapter of the Sierra Club, which opposes both the ACP and Dominion’s gas build-out, followed up with its own letter delving more deeply into the facts of Duke and Dominion’s self-dealing. (The letter and supporting documents, including Hirrel’s complaint, can be found at http://wp.vasierraclub.org/LetterInFull.pdf. Note that it’s a big file and may take time to load.) Hirrel has added both documents to the FERC file on the ACP application.

(Full disclosure: I led the team compiling the information for the Sierra Club submission. I’ve never met Mr. Hirrel and only learned about his complaint weeks after it was filed. However, I had been doing my own complaining—though evidently not to the proper authorities—about the utilities’ conflict of interest.)

But is anyone listening?

Aside from the FTC filing, opponents of the gas plants have pinned their hopes on state public utility commissions, while pipeline opponents are focused on the Federal Energy Regulatory Commission (FERC). Neither venue offers grounds for optimism. Virginia’s State Corporation Commission (SCC) has approved three of Dominion’s new gas plants in a row over the objections of environmental advocates, and North Carolina’s Utility Commission recently approved Duke’s new gas units in Asheville (though for now it has turned down a request for a third).

FERC poses its own challenge. Activists want FERC to review gas transmission proposals collectively instead of singly, to avoid overbuilding and the unnecessary damage to the environment and local communities that would result. This would be a departure for the agency, which traditionally reviews proposals individually, and has approved nearly every pipeline proposal that has come before it.

So far FERC has resisted arguments of this nature, as well as objections based on climate concerns. But in a possible sign that the agency recognizes times are changing, it has recently slowed the approval process for some proposed new pipelines, apparently to conduct more thorough environmental reviews.

There is no sign yet that the public utility commissions and FERC are communicating with each other or with the FTC. That leaves anti-pipeline groups and environmental activists in a difficult position. They can make a strong case the utilities are taking unfair advantage of captive ratepayers for a purpose that harms both the environment and the public. But is anyone listening?

Northern Virginia activists are ready for 100% renewable energy future

 

Ready for 100 Community Outreach Coordinator Taylor Bennett, Mount Vernon Group of the Sierra Club Chair Dean Amel, and Virginia Chapter Sierra Club Chair Seth Heald.

Ready for 100 Community Outreach Coordinator Taylor Bennett, Mount Vernon Group of the Sierra Club Chair Dean Amel, and Virginia Chapter Sierra Club Chair Seth Heald at Alexandria’s Earth Day celebration in April.

Clean energy advocates in Virginia know we are engaged in a steep uphill climb, and are still so far from the top that we have only a general idea of what it will look like. But activists in Arlington and Alexandria believe it’s time for bold leadership. They are calling on their communities to set a goal of 100% clean and renewable electricity by 2035.

The Ready for 100 Campaign launched today as part of a push by the Sierra Club to show that a future without fossil fuels is achievable. Sierra Club volunteers are working with community groups and other leaders to promote the benefits of clean energy locally. According to Seth Heald, Chair of the Virginia Chapter of the Sierra Club, fifteen U.S. cities, including San Diego, CA, Georgetown, TX, and Columbia, MD, have already committed to 100% clean energy.

Arlington County already has a reputation for its leadership in the energy sector, with a commitment to reduce its greenhouse gas emissions by 80% by 2050 and a number of innovative programs to reduce energy consumption. Now, says Heald, it is time for Arlington to take the next step to “eliminate the fossil-fuel generated pollution that comes from electricity production and is damaging our health and undermining our quality of life.”

Arlingtonians for a Clean Environment (ACE) has signed on as a partner in the effort. “Arlington County has already set a high bar for Virginia, but we can do even better,” said Executive Director Elenor Hodges. “I think this is an effort many residents will get behind.”

Copy of Copy of 1168 ReadyFor100_Logo_Color“Our current dependence on fossil fuels means that my generation will be dealing with the impact of climate change for our entire lives,” said Helene Turvene a junior at Washington-Lee High School. “A commitment now to 100% renewable energy not only will help to begin reversing those impacts, but it will position our community for a more sustainable future. Students want to know that local leaders are acting with us, and future generations, in mind.”

Alexandria residents are also behind the effort. Samantha Adhoot is an Alexandria-based pediatrician who has often sounded the alarm about the effects of climate change and fossil fuel pollution on children’s health. “By transitioning to 100% clean energy, our city could prevent thousands of asthma attacks and dozens of premature deaths every year,” she said. “This would be a big step in the right direction toward allowing our kids to breathe easier.”

Although the 2035 goal is long-term, the campaign’s benefits could be immediate. The solar industry now employs over 200,000 people nationwide, and with fewer than 1% of them in Virginia, we have tremendous room for growth. And of course, investments in energy efficiency mean savings on utility bills that keep adding up. Stanford scientists say the transition to 100% renewable energy will save the average American family $260 dollars per year in energy costs, and another $1,500 per year in health care costs.

Taylor Bennett, Community Outreach Coordinator for the Ready for 100 Campaign, is hoping to hear from others who want to join the effort. She can be reached at Taylor.Bennett@SierraClub.org.