The facts about coal plants Dominion didn’t want you to know

smokestack

Photo credit Stiller Beobachter

Last winter, during the fight to pass the Virginia Clean Economy Act, Dominion Energy lobbyists went out of their way to save the company’s youngest coal plant in Wise County. It worked. Legislators exempted the Virginia City Hybrid Energy Center from closure until 2045, when Dominion has to shutter all its fossil fuel generation.

VCHEC was approved in 2008 and built in 2013 as a boondoggle for Dominion, earning the company an enhanced rate of return. It was also intended as an expensive gift from then-Gov. Tim Kaine to coalfield Democrats, who went on to lose their seats anyway. Even then, it was a terrible deal for Dominion’s customers and the climate, with all the carbon pollution you expect from coal and a cost that was twice that of cleaner alternatives.

No wonder it proved to be one of the last coal plants ever built in the U.S.

Knowing this, and knowing the determination of this year’s General Assembly to turn the commonwealth in the direction of clean energy, you might not have expected VCHEC to have a lot of friends left in Richmond. But Dominion never told legislators what it would cost consumers to keep its coal plants running. Among all the criticism of the price tag associated with Virginia’s energy transition — much of that criticism coming from Dominion itself — one crucial fact gets lost: It’s coal that is hitting consumers the hardest.

An analysis Dominion reluctantly made public last month as part of its Integrated Resource Planning case shows that VCHEC is far and away the worst performing economically of all the utility’s fossil fuel-burning plants. This one coal plant carries a 10-year net present value of negative $472 million. (The analysts didn’t extend their calculations out to 2045, where it would certainly cross a billion dollars; maybe they were running low on red ink.)

VCHEC isn’t the only coal plant in Dominion’s fleet with a negative valuation, just the worst. In fact, all the Virginia coal plants have negative values.

These are Dominion’s numbers, not those of the Sierra Club or the other environmental and consumer groups challenging Dominion’s plans. The Sierra Club hired a consulting company to run its own analysis, using a standard utility model. That analysis concluded it would be cheaper for customers to build more solar now and speed up the closure not just of VCHEC but of all Dominion’s coal plants. This includes even the company’s Mount Storm coal plant in West Virginia, the only one assigned a positive economic value in Dominion’s analysis. From a customer standpoint, all of them should go.

Maybe that’s not too surprising. We already knew coal was dead. But how many of us knew we were paying to prop up the corpse?

Dominion’s lawyers tried to keep the terrible cost numbers out of the public’s hands, contending it was “confidential commercial and financial information that other entities could use to their competitive advantage in future negotiations.” I can imagine these future meetings: the other entities would be so busy mocking Dominion that, indeed, negotiations might stall permanently.

Fortunately for all of us, the Attorney General’s Office of Consumer Counsel persuaded the SCC the information should be public. Some information truly is confidential; this is merely embarrassing. Dominion’s customers—and the General Assembly—should know what it’s costing us to prop up coal.

This article originally appeared in the Virginia Mercury on September 24, 2020.

The analysis Dominion ultimately produced, showing 10-year Net Present Values for certain of its generating units, under various scenarios. Notice biomass doesn’t do too well either. The analysis omits some additional units, apparently because they are already scheduled for retirement.

Yeah, I’m not perfect either. Pass the Clean Economy Act.

People gathered with signs supporting climate action

Grassroots activists gather at the steps of the Virginia Capital on January 14. Photo courtesy Sierra Club.

When it was first introduced, and before the utilities and special interests got their grubby little paws on it, the Clean Economy Act was an ambitious and far-reaching overhaul of Virginia energy policy that turned a little timid when it came to particulars.

Sausage-making ensued.

The bill that emerged from the grinder inevitably allows Dominion Energy to profit more than it should. (Welcome to Virginia, newcomers.) The energy efficiency provisions, which I thought weak, became even weaker, then became stronger, then ended up somewhere in the middle depending on whether you were looking at the House or Senate version. The renewable portfolio standard, complicated to begin with, is now convoluted to the point of farce — and to the extent I understand it, I’m not laughing.

Yet the bill still does what climate advocates set out to do: It creates a sturdy framework for a transition to 100% carbon-free electricity by 2045 (the House bill) or 2050 (the Senate bill).

It’s worth taking a moment to marvel at the very idea of a strong energy transition bill passing in a state that still subsidizes coal mining. Even a year ago, this would not have been possible. That we have come this far is a tribute not just to the Democrats who are making good on their pledge to tackle climate, but to the thousands of grassroots activists who worked to elect them and then stayed on the job to hold them to their promises.

The Clean Economy Act works by tackling the problem from multiple directions in a belt-and-suspenders approach:

• The legislation puts an immediate two-year moratorium on any new carbon-emitting plants. The concept came straight from the grassroots-led Green New Deal, and it creates space for the other provisions to kick in.

• It requires DEQ to implement regulations cutting carbon emissions through participation in the Regional Greenhouse Gas Initiative. RGGI uses market incentives to cut carbon emissions from power plants 30 percent by 2030. The Department of Environmental Quality will auction carbon allowances to power plant owners and use the auction money primarily for coastal resilience projects and energy efficiency projects for low-income residents. The Department of Housing and Community Development will be in charge of this efficiency spending, not Dominion.

• The Clean Economy Act takes RGGI out further, ensuring that Virginia reaches zero emissions by 2045 (House bill) or 2050 (Senate bill).

• It requires the closure of most coal plants in Virginia by the end of 2024. The newest of these, the Virginia City Hybrid coal plant, must close by the end of 2030 unless it achieves 83 percent emission reductions through carbon capture and storage, the technology it was allegedly designed for. Biomass plants have to close by the end of 2028.

• In place of fossil fuels, utilities have to build or buy thousands of megawatts of solar, on-shore wind, offshore wind and energy storage. Yearly solicitations for wind and solar will ensure sustained job creation employing thousands of workers. Thirty-five percent of all this must be competitively procured from third-party developers, a requirement that lowers costs and makes it harder for utilities to overcharge for the projects they build themselves.

• The storage requirement in particular is notable because batteries compete directly with gas combustion turbines to serve peak demand. The more storage a utility builds, the weaker its case for building new gas peakers becomes.

• For the first time, Virginia utilities will have to achieve energy efficiency savings, not just throw money at the problem. Under the stronger House bill, Dominion must achieve 5 percent cumulative energy savings by 2025. Appalachian Power must achieve 2 percent. Starting in 2026, the SCC will set efficiency goals every three years. Achieving savings ought to be easy; a new ranking of progress on efficiency puts Dominion at 50th out of 52 utilities. Low-hanging fruit, anyone? The Clean Economy Act also calls for 15 percent of efficiency spending to be allocated for programs benefiting low-income, elderly, disabled individuals and veterans.

• Also for the first time, the legislation requires the State Corporation Commission to consider the “social cost of carbon.” That puts one more thumb on the scales weighing against fossil fuels.

• If by January of 2028 we are still not on track, the House bill empowers the secretaries of natural resources and commerce and trade to put a second moratorium on new fossil fuel facilities.

One other element of the bill is worth mentioning, given the questions about how much all these new projects and programs will cost. The legislation creates a “percentage of income payment program” for low-income ratepayers to cap electricity costs at 6 percent of household income, or 10 percent if they use electric heat. The program includes provisions for home energy audits and retrofits.

As I said at the outset, the bill is not without its flaws. The cost of offshore wind energy is “capped” in the bill at 1.6 times the cost of energy from a gas peaker plant, though I’m told negotiations continue and the adder may be reduced. Regardless of the number, this makes as much sense as capping the cost of apples at some number above the cost of Cheetos. Why are we comparing a carbon-free source of energy that is getting cheaper every year with one of the dirtiest and most expensive fossil fuel sources? On behalf of the offshore wind industry: Please, I’m insulted.

Virginia will be a leader on offshore wind, but we are not the first, and we know the price of electricity from the other U.S. projects already under contract. Prices are already well below gas peaker plant levels. The CEA ought to cap the cost of the Virginia project at 10 or 20 percent above the lowest-priced comparable offshore wind project, which would allow plenty of room for differences in wind speeds, distance from shore and other variables.

On second thought, as a point of pride, Dominion should reject any adder at all, and insist on capping its costs below those of all the northeastern projects. Have some confidence in yourselves, people!

My other complaint is that the Clean Economy Act’s nearly incomprehensible renewable portfolio standard fails to deliver. Yes, other provisions of the bill require the utilities to build a lot of wind and solar. But nothing requires them to use the renewable energy certificates (RECs) associated with those facilities for the RPS.

If I totally lost you with those acronyms, it’s okay. Just know that RECs are the bragging rights associated with renewable energy, and they can be bought and sold separately from the electricity itself. If Dominion builds a solar farm in Virginia and sells the RECs to Microsoft or the good people of New Jersey, those folks have bought the right to claim the renewable energy regardless of whether they actually get their electrons straight from the solar farm. Virginia would be left with a solar farm, but legally, no solar energy.

RECs also fetch different prices according to the kind of renewable energy they represent and how many are on the market. Everyone wants solar, so solar RECs cost more. RECs from hundred-year-old hydroelectric projects are not in demand, so they are cheap.

As written now, the Clean Economy Act sets up an RPS that doesn’t require any wind or solar RECs at all (excepting a miniscule carve-out for small wind and solar that can also be met with “anaerobic digestion resources,” possibly a reference to pig manure).

The RPS can be met with RECs from several sources less desirable than solar, and therefore cheaper. These include old hydro dams, Virginia-based waste-to-energy and landfill methane facilities and biomass burned by paper companies WestRock and International Paper. As a result, utilities will buy RECs from those sources to meet the requirements.

Only once utilities run out of cheaper RECs from eligible sources will they be forced to apply RECs from any of the wind and solar they are building. Until that time, Dominion and APCo will sell the RECs from the new solar farms to the highest bidder, while Virginia customers shell out potentially hundreds of millions of dollars for RECs no one really wants.

That’s not fair to the Virginians who are paying for the wind and solar projects to be built and who have a right to expect wind and solar will be a part of their energy supply as a result. Legislators can correct this with a very simple requirement that RECs from the new facilities mandated by the law be applied to the RPS.

And, while I am telling legislators what to do, they ought to remove the eligibility of paper company biomass. This provision seems to have been added to the bill (in obscure, coded language) simply because WestRock has talented lobbyists and the political power to demand a cut of the action. But do we ratepayers want to buy their RECs? No, we do not.

WestRock is doubtless unhappy about losing the nice stream of unearned income it’s been getting from selling thermal RECs to Dominion under Virginia’s voluntary RPS. But there is no good reason for electricity customers to subsidize a Fortune 500 corporation whose CEO earned $18 million last year and whose Covington mill, according to EPA data, spews out more toxic air emissions than any other facility in Virginia including Dominion’s Chesterfield coal plant. That’s not clean energy.

Fortunately (I guess), the RPS is not the heart and soul of the Clean Economy Act. For the next several years, its slow ramp-up makes it barely even relevant, and it is the next several years that matter most in our response to the climate crisis.

Joining RGGI, cutting emissions, implementing energy efficiency, building renewable energy and storage, closing coal and biomass plants: those are the mechanisms of the Clean Economy Act that will drive Virginia’s transition to 100% clean energy.

And so, having offered my helpful suggestions to improve the nutritional content of this sausage, I will add just one more thing:

Pass the bill.

This column originally ran in the Virginia Mercury on February 24, 2020. That afternoon, the Senate Commerce and Labor committee conformed the House version of the bill to the weaker Senate version and passed it out of committee. House Labor and Commerce meets today and is expected to conform the Senate bill to the stronger House language. Assuming both chambers pass the bills without further amendments, the bills will then go to a conference committee (three senators, three delegates) to resolve the differences, and the resulting language will go to the Governor. 

It’s halftime at the GA, and do we ever have a show!

battle scene

Tense negotiations over the Clean Economy Act. (Aniello Falcone, Metropolitan Museum of Art)

Welcome to “Crossover,” the day on which the Virginia House and Senate have to finish the work on their bills and send them over to the other chamber. This is sudden death time; if a bill didn’t get across the finish line in time, it is dead for the year.

In past years, henceforth to be known as “the bad old days,” almost nothing good even got out of committee, much less reached Crossover. Clean energy advocates could pretty much plan vacations for the second half of February.

This year the Democrats are on a tear, especially in the House. Yes, a lot of good bills have been heavily watered down. This is still the Old Dominion, with the emphasis on Dominion. And it is definitely too early to break out the champagne, because the action isn’t over for the bills still in play. But overall, 2020 is shaping up to be a watershed year for clean energy.

BILLS STILL ALIVE

Energy Transition

HB1526/SB851, the Clean Economy Act, has been the subject of intense and continuous negotiation. First there were a bunch of amendments that weakened it; then there were a bunch that strengthened it. It’s been a wild ride, and we may still see more changes during the second half of Session. But it’s alive! (HB1526 passed the House 52-47; Democrats Rasoul and Carter voted no. SB851 passed the Senate on a party-line vote of 21-19.)

SB94 (Favola) rewrites the Commonwealth Energy Policy to bring it in line with Virginia’s commitment to dealing with climate change. The bill sets a target for net-zero greenhouse gas emissions economy wide by 2045, and in the electric sector by 2040. This section of the Code is for the most part merely advisory; nonetheless, it is interesting that Dominion Energy supported the bill. (Passed the Senate 21-18, on party lines.)

Delegate Reid’s HB714 is similar to SB94 but contains added details, some of which have now been incorporated into SB94. (Passed the House 55-45 with a substitute.)

HB672 (Willett) establishes a policy “to prevent and minimize actions that contribute to the detrimental effects of anthropogenic climate change in the Commonwealth.” State agencies are directed to consider climate change in any actions involving state regulation or spending. Local and regional planning commissions are required to consider impacts from and causes of climate change in adapting comprehensive plans. (Passed the House 55-44 with a substitute.)

HB547 (Delaney) establishes the Virginia Energy and Economy Transition Council to develop plans to assist the Commonwealth in transitioning from the use of fossil fuel energy to renewable energy by 2050. The Council is to include members from labor and environmental groups. (Passed the House 54-45.)

RGGI bills, good and bad

The Democratic takeover of the General Assembly means Virginia will finally join the Regional Greenhouse Gas Initiative (RGGI), either according to the regulations written by DEQ or with a system in place that raises money from auctioning carbon allowances.

HB981 (Herring) and SB1027 (Lewis) is called the Clean Energy and Community Flood Preparedness Act. It implements the DEQ carbon regulations and directs DEQ to enter the RGGI auction market. Auction allowances are directed to funds for flood preparedness, energy efficiency and climate change planning and mitigation. We are told this is the Administration’s bill. A similar bill, HB20 (Lindsey), was incorporated into HB981. (HB981 passed the House 53-46. SB1027 passed the Senate 22-18.)

SB992 (Spruill) requires the Air Board to give free allowances for three years to any new power plant that was permitted before June 26, 2019, the effective date of the carbon trading regulations. Essentially it gives special treatment to two planned gas generation plants that aren’t needed and therefore have sketchy economics unless they get this giveaway. Clean energy advocates will be looking to kill this one in the House. (Passed the Senate 27-13. A number of Democrats who should know better voted for the bill.)

RPS

The Clean Economy Act contains a renewable portfolio standard (RPS) requiring utilities to include in their electricity mix a percentage of renewable energy that ratchets up over time. In addition, HB1451 (Sullivan) is a stand-alone RPS bill that also includes an energy storage mandate. It appears to be identical to the RPS and storage provisions of the CEA (of which Sullivan is also the patron). (Passed the House 52-47.)

Customer-sited solar/net metering

Solar Freedom SB710 (McClellan) and HB572 (Keam) lifts barriers to customer-sited renewable energy such as rooftop solar. The changes include lifting the caps on PPAs and net metering, and eliminating standby charges. Nearly identical versions were filed by Delegates Lopez (HB1184) (rolled into HB572) and Simon (HB912) (ditto). SB532 (Edwards), a stand-alone bill to make PPAs legal, was rolled into SB710. (SB710 passed the Senate 22-18 with a substitute that is much more limited than the original bill. HB572 passed the House with just a minor substitute 67-31. HB1647 (Jones) is a Solar Freedom bill that also includes community solar. (Passed the House 55-45.) Several provisions of Solar Freedom also appear in the Clean Economy Act.

HOAs HB414 (Delaney) and SB504 (Petersen) clarifies the respective rights of homeowners associations (HOAs) and residents who want to install solar. The law allows HOAs to impose “reasonable restrictions,” a term some HOAs have used to restrict solar to rear-facing roofs regardless of whether these get sunshine. The bill clarifies that HOA restrictions may not increase the cost of the solar facility by more than 5%, or decrease the expected output by more than 10%. (HB414 passed the House 95-4. SB504 passed the Senate 40-0.)

Community solar

HB1647 (Jones) (see above) includes community solar in a bill that otherwise looks like Solar Freedom.

SB629 (Surovell) creates a program for “solar gardens.” (Substitute passed the Senate 39-0.)

HB1634 (Jones) requires utilities to establish shared-solar programs that allows customers to purchase subscriptions in a solar facility no greater than 5 MW. (Amended with a substitute; it now looks a lot like SB629. Passed the House 99-0.)

HB573 (Keam) affects the utility-controlled and operated “community solar” programs required by 2017 legislation. The bill requires that “an investor-owned utility shall not select an eligible generating facility that is located outside a low-income community for dedication to its pilot program unless the investor-owned utility contemporaneously selects for dedication to its pilot program one or more eligible generating facilities that are located within a low-income community and of which the pilot program costs equal or exceed the pilot program costs of the eligible generating facility that is located outside a low-income community.” (Passed the House 90-8.)

Offshore wind

The CEA contains detailed provisions for the buildout and acquisition of offshore wind. HB234 (Mugler) directs the Secretary of Commerce and Trade to develop an offshore wind master plan. (Passed House unanimously with substitute.)

SB860 (Mason) and HB1664 (Hayes) puts the construction or purchase of at least 5,200 MW of offshore wind in the public interest. (SB860 passed the Senate 22-18. HB1664 amended to incorporate HB1607, but with less gold-plating than the other bill. HB1664 passed the House 65-34.)

HB1607 (Lindsey) and SB998 (Lucas) allows Dominion to recover the costs of building offshore wind farms as long as it has a plan for the facilities to be in place before January 1, 2028 and that it has used reasonable efforts to competitively source the majority of services and equipment. All utility customers in Virginia, regardless of which utility serves them, will participate in paying for this through a non-bypassable charge. Surely this bill came straight from Dominion. (HB1607 amended to incorporate HB1664; only 1664 moves forward. SB998 passed the Senate 40-0.)

Nuclear and biomass

SB828 and SB817 declare that any time the Code or the Energy Policy refers to “clean” or “carbon-free” energy, it must be read to include nuclear energy. In subcommittee, Senator Lewis suddenly announced he was amending the bills to add “sustainable biomass” as well. After an uproar and a crash course on biomass, both bills eventually went back to being only about nuclear. (Both bills passed the Senate unanimously.) Unfortunately, some biomass from paper companies did creep into the Clean Economy Act in spite of the best efforts of clean energy advocates.

Energy Efficiency

HB1526/SB851, the Clean Economy Act, contains a mandatory energy efficiency resource standard (EERS) and contains other provisions for spending on low-income EE programs. HB981 (the RGGI bill) specifies that a portion of the funds raised by auctioning carbon allowances will fund efficiency programs.

There are also a few standalone efficiency bills. HB1450 (Sullivan) and SB354 (Bell) appear to be the same as the efficiency provisions of the CEA, though the standalone applies only to Dominion and APCo. (HB1450 passed House 75-24,picking up a respectable number of Republicans. SB354 stricken at request of patron in C&L.)

HB1576 (Kilgore) doesn’t set new efficiency targets, but it makes it harder for large customers to avoid paying for utility efficiency programs. In the past, customers with over 500 kW of demand were exempt; this bill allows only customers with more than 1 MW of demand to opt out, and only if the customer demonstrates that it has implemented its own energy efficiency measures. (Passed the House, 99-0.)

HB575 (Keam) beefs up the stakeholder process that Dominion and APCo engage in for the development of energy efficiency programs. (Passed the House 99-0 and referred to Senate C&L.)

SB963 (Surovell) establishes the Commonwealth Efficient and Resilient Buildings Board to advise the Governor and state agencies about ways to reduce greenhouse gas emissions and increase resiliency. Every agency is required to designate and energy manager responsible for improving energy efficiency and reducing greenhouse gas emissions. (Passed the Senate 40-0.)

SB628 (Surovell) requires the residential property disclosure statement provided by the Real Estate Board to include advice that purchasers should obtain a residential building energy analysis as well as a home inspection prior to settlement. (Passed the Senate 26-14.)

Energy storage

HB1183 (Lopez) requires the SCC to establish a task force on bulk energy storage resources. (Passed the House 91-9 with a substitute.)

SB 632 (Surovell) creates a storage target of 1,000 MW and states that this is in the public interest.  Senator Surovell says this bill originated with the Governor’s office. (Passed the Senate 20-19 with a substitute.)

Siting, permitting, and other issues with utility-scale renewable energy

HB1327 (Austin) allows localities to impose property taxes on generating equipment of electric suppliers utilizing wind turbines at a rate that exceeds the locality’s real estate tax rate by up to $0.20 per $100 of assessed value. Under current law, the tax may exceed the real estate rate but cannot exceed the general personal property tax rate in the locality. Wind developer Apex Clean Energy helped develop the bill and supports it. (Passed the House 81-12, now goes to Senate Finance.)

HB656 (Heretick) and SB875 (Marsden) allow local governments to incorporate into their zoning ordinances national best practices standards for solar PV and batteries. (Both bills passed their chambers unanimously with substitute language.)

HB1131 (Jones) and SB762 (Barker) authorize localities to assess a revenue share of up to $0.55 per megawatt-hour on solar PV projects, in exchange for which an existing tax exemption is expanded. (HB1131 Passed the House 54-42 with a substitute. SB762 passed Senate 40-0.)

HB657 (Heretick) and SB893 (Marsden) exempt solar facilities of 150 MW or less from the requirement that they be reviewed for substantial accord with local comprehensive plans. (HB657 passed the House with a substitute, 59-41. SB893 was passed by indefinitely—killed—in Local Government.)

HB1434 (Jones) and SB763 (Barker) reduces the existing 80% machinery and tools tax exemption for large solar projects. (HB1434 passed the House 57-41. SB763 passed the Senate 40-0.) 

SB870 (Marsden) authorizes local planning commissions to include certain regulations and provisions for conditional zoning for solar projects over 5 MW. (Passed Senate 40-0 with a substitute.)

HB1675 (Hodges) requires anyone wanting to locate a renewable energy or storage facility in an opportunity zone to execute a siting agreement with the locality. (Passed House 89-7.)

Grants, tax deductions, tax credits and other financing

HB654 (Guy) authorizes DMME to sponsor a statewide financing program for commercial solar, energy efficiency and stormwater investments. The effect would be to boost the availability of Commercial Property Assessed Clean Energy (C-PACE) in areas of the state where the locality has not developed a program of its own. (Passed House 75-23. Assigned to Senate Committee on Local Government.)

SB754 (Marsden) authorizes utilities to establish on-bill financing of energy efficiency, electrification, renewable energy, EV charging, energy storage and backup generators. (Passed Senate 40-0 with a substitute.)

HB1656 (O’Quinn) authorizes Dominion and APCo to design incentives for low-income people, the elderly, and disable persons to install energy efficiency and renewable energy, to be paid for by a rate adjustment clause. (Passed the House 95-4.)

HB1707 (Aird) makes changes to the Clean Energy Advisory Board, which is (already) authorized to administer public grant funding. (Passed the House 65-33 with a substitute. Referred to Senate Ag.)

SB634 (Surovell) establishes the Energy Efficiency Subsidy Program to fund grants to subsidize residential “efficiency” measures, interestingly defined as solar PV, solar thermal or geothermal heat pumps. It also creates a subsidy program for electric vehicles. (Passed the Senate 32-7. Senator Surovell has requested a budget amendment of $1 million for the fund. )

SB1039 (Vogel) allows a real property tax exemption for solar energy equipment to be applied retroactively if the taxpayer gets DEQ certification within a year. (Passed the Senate 40-0.)

SB542 (Edwards) repeals the sunset date on crowdfunding provisions and provides fixes for certain existing obstacles to this financing approach. (Passed the Senate 40-0.)

Customer rights to shop for renewable energy

HB868 (Bourne) and SB376 (Suetterlein and Bell) allows customers to buy 100% renewable energy from any licensed supplier, regardless of whether their own utility has its own approved tariff. (HB868 passd the House 55-44. But note that its Senate companion SB376 was passed by indefinitely in C&L.)

HB 889 (Mullin) and SB 379 (McPike), the Clean Energy Choice Act, is broader than HB868. The legislation allows all customers to buy 100% renewable energy from any licensed supplier regardless of whether their utility has its own approved tariff. In addition, large customers (over 5 MW of demand) of IOUs also gain the ability to aggregate their demand from various sites in order to switch to a competitive supplier that offers a greater percentage of renewable energy than the utility is required to supply under any RPS, even if it is not 100% renewable. Large customers in IOU territory who buy from competing suppliers must give three years’ notice before returning to their utility, down from the current five years. The SCC is directed to update its consumer protection regulations. (HB889 passed the House 56-44. But its Senate companion SB379 passed by indefinitely in C&L.)

Other utility regulation

HB528 (Subramanyam) requires the SCC to decide when utilities should retire fossil fuel generation. (Passed the House 55-44.)

HB1132 (Jones, Ware) put the SCC back in control of regulating utility rates. (Passed the House 77-23.)

SB731 (McClellan) also affects rates, in this case by addressing a utility’s rate of return. The SCC determines this rate by looking first at the average returns of peer group utilities, and then often going higher. The bill lowers the maximum level that the SCC can set above the peer group average. (Passed the Senate 38-1.)

HB167 (Ware) requires an electric utility that wants to charge customers for the cost of using a new gas pipeline to prove it can’t meet its needs otherwise, and that the new pipeline provides the lowest-cost option available to it. (Note that this cost recovery review typically happens after the fact, i.e., once a pipeline has been built and placed into service.) Last year Ware carried a similar bill that passed the House in the face of frantic opposition from Dominion Energy, before being killed in Senate Commerce and Labor. (Passed the House unanimously with a substitute. It will now go to Senate C&L, where it may still have trouble from a Dominion-friendly committee.)

DEAD FOR THE YEAR

Green New Deal HB77 (Rasoul) sets out an ambitious energy transition plan and includes a fossil fuel moratorium. (Sent from Labor and Commerce to Appropriations, where it was not brought up. This is a polite way of killing a bill without anyone having to vote on it).

Undercutting RGGI HB110 (Ware) says that if Virginia joins RGGI, DEQ must give free carbon allowances to any facility with a long-term contract predating May 17, 2017 that doesn’t allow recovery of compliance costs. Rumor has it the bill was written to benefit one particular company. (Left in Labor and Commerce.)

Clean energy standard Instead of an RPS, SB876 (Marsden) proposed a “clean energy standard” that made room for some coal and gas with carbon capture. (Recognizing a number of problems with this approach, Senator Marsden rolled his bill into SB851; that’s GA-speak for killing a bill while still giving the patron points for trying).

Greenhouse gas inventory HB525 (Subrmanyam and Reid) require a statewide greenhouse gas inventory covering all sectors of the economy. (Laid on the table in a subcommittee, which also means it was killed.)

Brownfields HB1306 (Kory) directs the Department of Mines, Minerals and Energy to adopt regulations allowing appropriate brownfields and lands reclaimed after mining to be developed as sites for renewable energy storage projects. (Stricken from docket in House Ag.) HB1133 (Jones) makes it in the public interest for utilities to build or purchase, or buy the output of, wind or solar facilities located on previously developed sites. (Continued to 2021, yet another polite way of killing a bill, though it leaves them not technically dead. So should we call them the undead? Let’s hope the concept is resurrected next year, anyway.)

Local action HB413 (Delaney) authorizes a locality to include in its subdivision ordinance rules establishing minimum standards of energy efficiency and “maintaining access” to renewable energy. (Left in Cities, Counties and Towns.)

Retail choice SB842 (Petersen) provides for all retail customers of electricity to be able to choose their supplier, and instructs the SCC to promulgate regulations for a transition to a competitive market for electricity. Existing utilities will continue to provide the distribution service. The bill also requires suppliers of electricity to obtain at least 25% of sales from renewable energy by 2025, 50% by 2030, and 100% by 2050. Renewable energy is defined to include “sustainable biomass” but not waste incineration or landfill gas. (Continued to 2021.)

Resilience hubs HB959 (Bourne) directs DMME to establish a pilot program for resilience hubs. These are defined as a simple combination of solar panels and battery storage capable of powering a publicly-accessible building in emergency situations or severe weather events, primarily to serve vulnerable communities. (Continued to 2021.)

Net metering HB1067 (Kory) deals with a specific situation where a customer has solar on one side of property divided by a public right-of-way, with the electric meter to be served by the solar array on the other side. The legislation declares the solar array to be located on the customer’s premises. (Item 4 of Solar Freedom would also solve the problem.) (Continued to 2021.)

Utility restructuring

HB1677 (Keam) replaces Virginia’s current vertically-integrated monopoly structure with one based on competition and consumer choice. Existing monopoly utilities would be required to choose between becoming sellers of energy in competition with other retail sellers, or divesting themselves of their generation portfolios and retaining ownership and operation of just the distribution system. Other features: a nonprofit independent entity to coordinate operation of the distribution system; performance-based regulation to reward distribution companies for reliable service; consumer choices of suppliers, including renewable energy suppliers; an energy efficiency standard; a low-income bill assistance program; and consumer protections and education on energy choices. (This was politely continued to 2021 in Labor and Commerce with no debate. The patrons were complimented for “starting a conversation.”)

HB206 (Ware) was, I’m told, the beta version of Delegate Keam’s HB1677. (Incorporated into HB1677, which was continued to 2021.)

SB842 (Petersen) seeks to achieve the same end as HB1677 and HB206, but it puts the SCC in charge of writing the plan. The bill provides for all retail customers of electricity to be able to choose their supplier, and instructs the SCC to promulgate regulations for a transition to a competitive market for electricity. Existing utilities will continue to provide the distribution service. The bill also requires suppliers of electricity to obtain at least 25% of sales from renewable energy by 2025, 50% by 2030, and 100% by 2050. Renewable energy is defined to include “sustainable biomass” but not waste incineration or landfill gas. (Continued to 2021.)

Anti-renewable energy bills

HB205 (Campbell) adds unnecessary burdens to the siting of wind farms and eliminates the ability of wind and solar developers to use the DEQ permit-by-rule process for projects above 100 megawatts. (Laid on the table in subcommittee.)  HB1171 (Poindexter) is a make-work bill requiring an annual report of the acreage of utility scale solar development, as well as the acreage of public or private conservation easements. (Continued to 2021.) HB1636 (Campbell) prohibits the construction of any building or “structure” taller than 50 feet on a “vulnerable mountain ridge.” You can tell the bill is aimed at wind turbines because it exempts radio, TV, and telephone towers and equipment for transmission of communications and electricity. (Laid on the table in subcommittee. FWIW, we’re told it was aimed at hotels, not wind. Yeah, sure . . .) HB1628 (Poindexter) prohibits the state from joining RGGI or adopting any carbon dioxide cap-and-trade program without approval from the General Assembly. (Passed by indefinitely in subcommittee. Yep, another way to kill a bill.)

Financing

HB461 (Sullivan) establishes a tax credit of 35%, up to $15,000, for purchases of renewable energy property. It is available only to the end-user (e.g., a resident or business who installs solar or a geothermal heat pump). Unfortunately, loose drafting would have also made the credit available for wood-burning stoves and other non-clean energy applications. (Died in a Finance subcommittee on a 5-5 vote.)

HB633 (Willett) establishes a tax deduction up to $10,000 for the purchase of solar panels or Energy Star products. (Stricken from docket in a Finance subcommittee.)

HB947 (Webert) expands the authority of localities to grant tax incentives to businesses located in green development zones that invest in “green technologies,” even if they are not themselves “green development businesses.” Green technologies are defined as “any materials, components, equipment, or practices that are used by a business to reduce negative impacts on the environment, including enhancing the energy efficiency of a building, using harvested rainwater or recycled water, or installing solar energy systems.” (Continued to 2021.)

SB1061 (Petersen) allows residential customers to qualify for local government Property Assessed Clean Energy (PACE) financing programs for renewable energy and energy efficiency improvements; currently the availability of this financing tool is restricted to commercial customers. (Continued to 2021.)

HB754 (Kilgore) establishes the Virginia Brownfield and Coal Mine Renewable Energy Grant Fund, which will support wind, solar or geothermal projects sited on formerly mined lands or brownfields. (Left in Appropriations.)

[Updated February 12 to include late votes and fix a random meaningless line, and later to correct various other screw-ups that people have kindly brought to my attention.]

A first look at the Clean Economy Act and the Green New Deal

Three young women holding climate action signs

Students joined more than 200 other grassroots activists for a lobby day at the General Assembly on Tuesday. Photo Ivy Main

Climate and energy activists have been pinning their hopes on the 2020 legislative session to produce a framework for transitioning our economy to 100 percent carbon-free energy.

After years of talking big but delivering little in the way of carbon reductions and clean energy, the General Assembly is under pressure to finally deliver.

Much of the initial focus and discussion so far has been on two very different omnibus bills, the Clean Economy Act and the Green New Deal Act. But dozens of other bills also aim to reform Virginia energy law in ways both big (breaking up the monopolies) and small (clarifying HOAs’ abilities to regulate solar panels) — and everything in between (removing barriers to customer solar, taxing fossil fuel investments).

In the coming days I’ll post summaries of many of these bills. But for now, let’s take a look at the two omnibus bills that have energized so many activists. Both have their strong points; both would benefit from strengthening amendments. And both are guaranteed to be better than anything Dominion will put forward in the coming days, if rumors of such a bill prove correct.

The Clean Economy Act

HB1526 (Del. Rip Sullivan, D-Fairfax) and SB851(Sen. Jennifer McClellan, D-Richmond) are the Clean Economy Act put forward by a coalition of renewable energy industry and environmental groups. This is a massive bill, running to 37 pages and covering diverse aspects of the electric sector, and yet it is also surprisingly restrained in its ambitions.

The CEA’s goal is a zero-carbon electricity supply by 2050, a goal that allows nuclear energy to keep its role in the mix, and also one that, after an initial kick, requires a ramp-up of renewable energy of only 3% per year from 2021 to 2050. Utilities also must achieve energy efficiency savings that start slow and creep upwards to a top rate of 2% per year in 2027; utilities generally can’t build new generation unless they first meet the efficiency targets.

The very modest pace of the required investments in renewable energy and efficiency leaves no room for utilities to argue that the targets cannot be met or will cause economic pain. On the contrary, critics can justly complain they are too easy. On the other hand, the bill has lots of elements utilities still won’t like, including an energy storage mandate, community solar, net metering reforms and a limited moratorium on new fossil fuel generation.

The bill includes provisions for joining the Regional Greenhouse Gas Initiative to reduce statewide electric sector carbon emissions 30% by 2030, in accordance with DEQ’s regulations finalized last year. The state would auction carbon allowances, with 50% of proceeds funding energy efficiency programs for low-income, disability, veteran and elderly residents; 16% going to energy efficiency measures on state and local property; 30% for coastal resilience; and 4% for administrative costs.

The renewable portfolio standard provisions look more complicated than they are, but even so, understanding what’s going on is not a job for the meek. First off, note that the RPS only applies to “total electric energy,” which does not mean, you know, total electric energy. The code defines the term to mean total electric energy minus electricity produced by nuclear power. Since nuclear provides about 30% of Virginia’s electric generation, that means the RPS percentages look 30% bigger than they really are. (This is a neat trick Dominion devised years ago to make our voluntary RPS sound more meaningful. People fell for it, which is why our voluntary RPS is widely described as targeting 15% renewable energy by 2025 instead of about 10%.)

Thus, the nominal RPS goal of 41% by 2030 does not mean that Virginia would get 41% of its electricity from renewable energy by 2030. The true percentage would be 41% of 70%, or — oh Lord, now I have to do math — somewhat under 30%.

Not incidentally, 30% by 2030 is the renewable energy target Governor Ralph Northam set in his Executive Order 43 back in September, and that squares pretty well with Dominion’s building plans. (The CEA, however, strives mightily to ensure that less expensive independent developers get a good share of the business.)

The drafters of the Clean Economy Act also chose not to change the code’s existing kitchen-sink definition of renewable energy, foregoing an opportunity to fix the mischief Dominion has got up to lately with what I call its Green Power for Suckers program and the Great Thermal REC Boondoggle. Instead, the RPS provisions exclude biomass and sometimes waste, then limit which specific technologies qualify for each tier of the RPS. The result is that even without changing the definition of renewable energy, biomass and thermal RECs have no place in the CEA mix, municipal waste incineration is limited to existing facilities and old hydro dams will cease to qualify when their contracts run out.

The system of tiers also allows the CEA to prioritize among technologies and project sizes.

  1. Offshore wind has its own tier beginning in 2027, as well as detailed instructions for how it will be developed.
  2. Tier II covers distributed (under 3 MW) Virginia-based wind, solar and anaerobic digestion (presumably meaning biogas from things like pig manure, reflecting Dominion’s deal with Smithfield Foods). This tier is divided into sub-tiers that ensure smaller projects are represented, and 10% of each tier is supposed to be sourced from projects serving low-to-moderate income persons. This tier begins at 3% of the RPS total in 2021, increasing to 9% in 2028, and then bouncing around strangely between 7 and 9% thereafter.
  3. Tier III can be met with Virginia wind, solar, wave, tidal, geothermal or energy from waste (poorly defined, but with a limit on the number of eligible RECs that, I’m told, just covers the output of existing waste incinerators in Virginia), or landfill gas (also from existing landfills and with a limit). These projects don’t have a size limit. Utilities are instructed to issue annual requests for proposals to acquire Tier III resources. Tier III begins at 30% of the RPS, gets as high as 43% in 2030, and then declines as offshore wind in Tier I takes a greater share.
  4. Tier IV can be met with renewable energy certificates from wind, solar and some hydro sources inside or outside Virginia, but within the PJM, the regional transmission organization that coordinates the electric grid in all or parts of 13 states, including Virginia, and the District of Columbia. Tier IV starts at 38% of the RPS total, goes as high as 51% in 2023, and then declines by fits and starts until it is less than 20% in the out years.
  5. The fifth tier consists of the old hydro RECs from PJM with existing purchase contracts. These begin at a whopping 29% of the total but decline rapidly to 6% in 2023 and even less thereafter.

Solar installers who focus on Virginia may be dismayed by the modesty of the in-state requirements. Only Tier II serves distributed generation, and all its sub-tiers and low-income provisions don’t make up for the fact that distributed generation must account for less than 0.3% of total statewide demand in 2021 (3% of the initial 14% goal, adjusted downward for nuclear). This may well be less than the amount of net-metered solar we will have then anyway, with or without the CEA. By 2030, distributed renewables would still account for less than 2.5% of total generation in Virginia, a far cry from the 25% or more that studies have shown is possible.

Meanwhile, Tiers IV and V allow RECs from utility-scale facilities located anywhere within PJM, accounting for more than half the RPS total for the first several years. If utilities choose to buy these out-of-state RECs instead of building new renewable energy in Virginia for this tier, ratepayers will be paying for economic development and jobs in other states, rather than supporting clean energy jobs at home.

(As I’ll describe below, this is an even bigger drawback of the Green New Deal Act.)

Defenders of the PJM RECs approach cite market efficiency and cost; RECs from states that don’t have RPS laws tend to be cheap, and allowing them to qualify for our RPS means projects will get built wherever it is cheapest to do it. That justifies allowing a small percentage of PJM RECs, but not making those RECs the centerpiece.

The CEA already has another, and better, cost-containment measure. If prices of RECs go too high, utilities have an option of paying into a fund administered by the state Department of Mines, Minerals and Energy instead. The money will be used for energy efficiency and renewable energy projects in Virginia benefiting mainly low-income residents. This “deficiency payment” alternative is a standard feature of other states’ RPS laws; it provides a critical cost cap while not letting utilities off the hook.

The CEA also includes community solar provisions and removal of certain barriers to net metering. It raises the net metering cap to 10%, raises the commercial size cap to 3 MW, removes all caps on third-party power purchase agreements, eliminates standby charges on residential and agricultural customers, and allows customers to install facilities large enough to meet 150% of their previous year’s demand. (These net-metering provisions intentionally duplicate five of the eight provisions of the Solar Freedom legislation, HB572, SB710 and others.)

In addition to all of this, the CEA includes a mandate for 2,400 megawatts of energy storage by 2035, with interim targets beginning with 100 MW by the end of 2021.

And just in case Dominion thinks that somehow all this still leaves room for any new fossil fuel plants, the CEA ends with a one-year moratorium on the permitting of any new carbon-emitting generating units that an investor-owned utility might want to build, until the government produces a report with recommendations for achieving a carbon-free electric sector by 2050 at least cost to ratepayers.

If I’d been writing this bill, I would have accelerated the timeline and focused the RPS more on Virginia projects, including rooftop solar. But as a framework this is still a strong bill, and it’s possibly the best we can do this year.

The Green New Deal

HB77 (Del. Sam Rasoul, D-Roanoke) is the Green New Deal Act. Its major features include a moratorium on any new fossil fuel infrastructure; a very aggressive timetable for 100% renewable energy by 2036; energy efficiency standards and a mandate for buildings to decrease energy use; low-income weatherization; job training; a requirement that companies hire workers from environmental justice communities; and assistance for workforce transition for fossil fuel workers.

The GND looks almost nothing like the Clean Energy Act. Its moratorium on new fossil fuel infrastructure is far broader than that in the CEA, covering not just electric-generating plants but also pipelines, refineries, import and export terminals and fossil fuel exploration activities.

It directs DMME to develop a climate action plan that addresses mitigation, adaptation and resiliency, supports publicly-owned clean energy and incorporates environmental justice principles. Forty percent of funds spent under the plan are to be targeted to low-income communities and communities of color.

The GND’s energy efficiency mandates are tougher than the CEA’s, requiring savings of 2.4% per year beginning immediately. These savings will be achieved not just by weatherizing buildings, upgrading heating and cooling, etc., but also by dramatically improving new buildings and requiring installation of rooftop solar wherever feasible.

DMME is also required to set performance benchmarks for scholarships, low-interest loans, job training programs and renewable energy projects to serve EJ communities (“until such date that 100 percent of the energy consumed in such communities is clean energy”), as well as a mandate that 50% of the workforce for energy efficiency and clean energy programs come from EJ communities.

(We should pause here for a reality check. We’re talking about Virginia, where many excellent programs that are already on the books currently go unfunded, and underinvestment in education and social services means companies can’t find enough qualified workers as it is.)

With all its aims of putting the energy transition on steroids, the Green New Deal also has a surprisingly weak RPS. In fact, it appears utilities would not have to build renewable energy projects in Virginia at all — or for that matter, close any fossil fuel plants.

The bill doesn’t actually say so, but it appears to contemplate that the very fast ramp-up of renewable energy to 80% by 2030 can be achieved by utilities buying renewable energy certificates from other states. I’m told Delegate Rasoul has confirmed this is his intention. There is no requirement for utilities to buy from in-state producers.

There is a practical reason for this: given how far behind Virginia is in developing wind and solar, allowing utilities to buy out-of-state RECs is probably the only way to meet an 80% by 2030 target. These RECs are traded on the open market; that makes it easy for utilities to comply, and eliminates reliability concerns because utilities can continue to run their existing fossil fuel plants as usual.

But there’s the rub: the bill contains no requirement to build wind and solar in Virginia, and utilities can run their fossil fuel plants as usual. That’s not the energy transition a lot of people are looking for.

[Update January 23: Dominion did not file a separate bill, but has drafted language it proposes to shoehorn into another bill from a friendly legislator, likely Senator Lucas’ SB998. The proposal is almost comically bad. If it comes with a slogan, it will be “Leave the Driving to Us.” We’ve seen what that means. Watch your wallets.]

In a last-ditch effort to stop climate regulations, Virginia Republicans try legislating by budget amendment

Dominion Energy Virginia's Chesterfield Coal Plant

Dominion’s coal-burning power plant in Chesterfield County.

The Northam administration is finalizing regulations to reduce the carbon pollution from Virginia power plants by 30 percent between 2020 and 2030. The Department of Environmental Quality (DEQ) estimates the move will cost consumers only about a dollar per month while accelerating the transition to clean energy.

Instead of celebrating this modest progress on climate action, Virginia Republicans have been fighting it every step of the way. Their latest effort takes the form of two amendments to the state budget that would effectively prevent Virginia from joining the Regional Greenhouse Gas Initiative (RGGI), a nine-state platform for trading carbon emission allowances. It would also stop the Commonwealth from participating in a new compact focused on reducing carbon emissions in transportation.

Virginia law gives the governor a line-item veto in the budget, which requires a two-thirds majority in the legislature to override. But for reasons known only to himself, Governor Northam has instead chosen to remove the amendments by offering his own amendments, which the General Assembly can reject by a simple majority vote.

This cues up the issue for a battle on the House floor on Wednesday, when the legislature returns for the “veto session.” The governor needs the votes of all the Democrats and at least two Republicans to prevail in the House, and those of at least one Republican and the Lieutenant Governor to prevail in the Senate.

Earlier this year, Republicans voted almost unanimously for legislation that, like the budget amendment, would have stopped Virginia from participating in RGGI. Northam vetoed that bill, saying it was bad policy and violated the state constitution. His action probably didn’t persuade any Republicans that he was right and they were wrong.

Still, there are reasons why a Republican who voted for the anti-RGGI bill might support the governor in the budget vote.

One is that using the budget to achieve a policy outcome you couldn’t reach through the legislative process makes a lot of legislators uneasy; it feels like bad governance.

Another is that the anti-RGGI bill was for show; everyone knew the governor would veto it. Moderate Republicans who privately acknowledge the urgency of the climate crisis were able to use their vote to demonstrate party loyalty without actually interfering with the DEQ program.

They bill vote also followed surprise testimony from State Corporation Commission staff members who claimed that trading with RGGI would cost Virginia households much more than DEQ modeling showed. The staff members provided no evidence, but hard-line Republicans saw the threat of rate increases as a gift horse they weren’t going to look in the mouth.

DEQ staff did look it in the mouth, however, and found a number of bad teeth.  DEQ Chief Deputy Chris Bast lambasted the SCC staff for coming into the discussion late, using incorrect assumptions, and failing to show their work.

The SCC staff members followed up after the end of the session with a letter stating their reasoning, though still without showing their math. The late release of the letter prompted Delegate David Toscano to write an editorial in the Washington Post decrying the staff members’ overtly political tactics as well as criticizing their analysis.

In its response to comments on the proposed carbon regulations, DEQ lists several flaws in the SCC staff’s analysis, ranging from significantly overestimating program costs to assuming that Virginia coal plants are immune to the economic stressors affecting coal plants across the U.S.

With time to reflect, many legislators will conclude the evidence supports DEQ. But more to the point, some Republicans may realize that holding Virginia back is bad economics and bad policy.

An analysisreleased this month shows wind and solar could replace 74 percent of coal plants nationwide at an immediate savings to customers; by 2025, that number will be 86 percent. Major utilities like Xcel and MidAmerican have targeted 100% renewable energy, saving money for customers in the process.

Meanwhile, voters across the country—and in Virginia—support renewable energy over fossil fuels by wide margins. Even polling by conservative groups shows strong support for clean energy.

It simply makes no sense for Virginia to opt out of the clean energy future. No doubt a lot of Republicans will vote to do it anyway in hopes of denying a win to a Democratic governor. But if they do, they run the risk of their constituents holding them accountable come November.

This article originally appeared in the Virginia Mercury on April 2. It has been updated to include DEQ’s response to the SCC staff’s letter.

Update April 4: Disappointingly but not surprisingly, the Governor’s amendments were defeated along party lines yesterday. If he wants to keep the carbon regulations moving towards implementation, he will have to exercise his veto authority. There have been questions raised about his authority to do that, so stay tuned. 

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

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.

How Virginia could build 5,000 megawatts of wind and solar, and still have no wind or solar

Pie graph showing Dominion Energy Virginia energy mix 2017

No amount of new solar would enlarge the sliver of renewables in Dominion’s energy mix if it sells the RECs. Graph is from Dominion Energy Virginia’s 2018 Integrated Resource Plan.

With the passage of SB 966 earlier this year, the Virginia General Assembly declared 5,000 megawatts (MW) of utility solar and wind energy in the public interest, spreading optimism that Virginia is beginning its slow transition to a clean energy economy. All indications are that Dominion Energy Virginia, the state’s largest utility, intends to make good on that number. Yet under Virginia law, as interpreted by the State Corporation Commission, Virginia utilities could build all that wind and solar and still not be able to claim it in the energy mix serving Virginia residents.

That peculiar result is possible if Dominion and other utilities sell the renewable energy certificates (RECs) associated with the electricity generated from the wind or solar project, transferring to their buyers the legal right to call it renewable energy. The likely buyers are utilities in other states that need RECs to meet mandates for renewable energy under the laws of those states. If the RECs get sold this way, Dominion Energy can build one solar farm after another in Virginia, without ever adding solar to our electricity mix.

That’s right: if you sell the RECs from a solar facility, you can’t say you are using electricity from solar.

This scenario is not just possible, but likely, based on earlier State Corporation Commission (SCC) rulings. The first time Dominion received permission to develop solar, based on a 2013 law enabling the utility to build up to 33 MW of distributed solar (dubbed the Solar Partnership Program), the SCC insisted that Dominion sell the RECs to reduce the cost of the program to ratepayers.

What about Virginia’s voluntary renewable portfolio standard (RPS), which requires participating utilities to get a portion of their electricity from renewable energy sources, including solar? Dominion continues to meet its annual targets, which gradually rise to 15% of non-nuclear electricity by 2025, measured against 2007 demand.

But here, too, the SCC does not want ratepayers to have to spend a dime more than necessary on meeting the RPS. It requires utilities to sell higher-value RECs and replace them with the cheapest RECs available that still meet the Virginia definition of renewable energy. This practice, known as REC “optimization” or arbitrage (selling high, buying low), is common in states with loose RPS laws, and is sometimes used in the private sector as well.

The use of REC optimization, paired with Virginia’s kitchen-sink approach to what qualifies as renewable energy, renders Virginia’s RPS meaningless. Making it mandatory wouldn’t make it meaningful.

chart showing fuel types used to show RPS compliance by Dominion Energy Virginia

Fuel types used to meet compliance with Virginia RPS. From Dominion’s Annual Report to the SCC on Renewable Energy, November 2017. (MSW=municipal solid waste incineration.)

Dominion’s 2017 Annual Report to the State Corporation Commission on Renewable Energy records the company’s progress on meeting the RPS as well as describing its other renewable energy investments. The report confirms both Dominion’s ongoing use of REC optimization for the RPS and its practice of selling RECs from solar projects to reduce ratepayer costs.

Nothing in the 2018 legislation speaks to RECs generated by the 5,000 MW of utility wind and solar that are now declared to be in the public interest. One might suppose the General Assembly intends for utilities to build those projects for ratepayers, not to sell off the legal right to claim we have wind and solar in our mix. But then again, it is entirely possible most legislators never gave the topic a moment’s thought.

If one were to raise it with them now, some might even prove quite comfortable with the idea. As long as we get the jobs and economic development associated with new energy projects, and we use the clean energy to reduce the burning of fossil fuels, they might say heck yeah, let Maryland or New Jersey buy the bragging rights for their state RPS requirements and subsidize our energy costs.

If taking advantage of the flaws in other state’s laws feels like the wrong way to make progress, there is an alternative. We could reform Virginia’s RPS to make it less like corporate welfare for producers of the least valuable forms of renewable energy, and more like a transition plan to a clean energy economy. Put that together with a plan for true grid transformation, and we will have something to brag about ourselves.

After losing a vote on the double dip, is Dominion losing Power?

An earthquake shook Richmond, Virginia on the afternoon of Monday, February 12, rocking the House of Delegates just as it was supposed to be passing HB 1558, Dominion Energy’s Ratepayer Rip-Off Act of 2018. The bill was intended to help the utility lock in stupendous unearned profits for its parent company, courtesy of the monopoly’s captive customers, under the guise of supporting clean energy and grid investments.

And the bill did pass the House, but only after delegates adopted an amendment offered by Minority Leader David Toscano stripping away a lucrative provision that Dominion both desperately wanted and swore didn’t exist: the infamous “double dip” that the SCC has said would allow Dominion to charge customers more than twice over for a large portfolio of infrastructure projects. With billions of dollars worth of projects on the drawing board, the double dip meant serious money.

Anyone who didn’t believe the double dip was real only needed to listen to Dominion lobbyist Jack Rust respond to repeated questions about it during a Senate Commerce and Labor Committee hearing two weeks earlier. It was a “yes or no” question that Rust wouldn’t answer with a yes or a no.

Obfuscation, however, was good enough for the Senate, which passed SB 966 last week by a bi-partisan vote of 26-13. It was good enough for Governor Northam, too, who had already pledged to sign the bill. A few environmental groups broke ranks to support the bill, too, cheering the provisions for energy efficiency and the promise of more renewables.

Admittedly, the Attorney General’s Office of Consumer Counsel remained opposed. So did other environmental and consumer groups, complaining not just about the double dip, but about ceding control over the future of Virginia’s electric grid to a profit-driven monopoly. But when has the General Assembly ever cared what environmental and consumer groups thought? So passing the bill through the House should have been easy.

And then Toscano called Dominion’s bluff. If the double dip is real, said Toscano, his amendment would fix it. If the bill doesn’t already allow for double-dipping, then making doubly sure of that does no harm.

The logic was unassailable, though bill patron and Friend of Dominion Terry Kilgore assailed it anyway. As the Associated Press reported, Kilgore tried to persuade legislators to reject Toscano’s amendment. Yet even some fellow Republicans deserted him on the vote, helping Democrats pass it 55-41. A quick-thinking Delegate Habeeb, apparently recognizing bad optics for the Republicans, called for a second vote, and this time the amendment passed 96-1, with even Kilgore supporting it.

By all accounts, the vote was unprecedented. Dominion does not lose floor votes. The vote rocked the House.

In hindsight, perhaps Dominion should have known a fault line had formed. Grassroots groups were agitating against the power of monopoly. A new group called Clean Virginia was agitating against the bill. Almost all the freshmen Democrats had pledged not to accept Dominion money—and there were a lot of them, thanks to last fall’s “blue wave” election. But the Republicans had already scuttled most of their bills; surely they had learned humility? They had not. They all supported Toscano’s amendment, and all but one followed him in opposing final passage of the bill, which passed 63-35.

The earthquake could be felt over at Dominion headquarters, where reporters could be seen inspecting the foundation for damage. CEO Tom Farrell called in his damage control specialists, heavy-hitting lobbyists Eva Teig Hardy and Bill Thomas, to persuade legislators to support the Senate version of the bill over the House version—or failing that, to lard it up with new favors to the utilities.

According to the AP, Kilgore continued to maintain after the vote that the double dip was “more perception than reality.” But he also said, “Toscano’s amendment takes ‘a lot of stuff out that needs to stay in’ the legislation. ‘I’m going to have to fix it.’”

One might think Dominion and its allies would be embarrassed to defend a provision they say doesn’t exist. Reportedly they have pivoted to a different argument, that the company would have no incentive to invest in renewable energy if it isn’t allowed to rip off ratepayers in the process. Accordingly, they are holding solar investments hostage, knowing how much Democrats want them.

Dominion’s new argument is simply posturing. Its 2017 Integrated Resource Plan declared solar to be the cheapest form of energy in Virginia, and it had signaled via the Rubin Group its plan to build at least 3,000 MW of solar in the coming years. Saying now that it might take its ball and go home is a sign its lobbyists are out of good arguments.

In the past, good arguments were not a requirement for Dominion to get what it wants; political power has always been enough. It will be interesting to see now whether Dominion emerges with some semblance of its omnipotence intact, or whether this earthquake presages new shocks that could crack the fortress.

 

General Assembly chews on, spits out healthy legislation, while still trying to digest a huge hunk of pork

They just keep getting fatter.

If you were bewildered by the sheer volume of bills addressing solar, efficiency, storage, and other energy topics that I outlined last month, take heart: clean energy advocates don’t have nearly as many bills to keep track of now. So few bills survived the Finance and Commerce and Labor Committees that it will be easier to talk about what is left than what got killed.

The bigger story, of course, is the Dominion Ratepayer Rip-Off Act of 2018, which the utility would dearly love you to think of as the “grid modernization bill,” but which might be better imagined as an oozing pork barrel. Recent amendments do make it less obnoxious than it was last week (begging the question of why it wasn’t introduced that way in the first place). The Governor now says he supports the bill, the Attorney General continues to oppose it, and the SCC keeps issuing poisonous analyses.

But right now let’s just run down the fate of the other bills we’ve been following. For explanations of these bills, see previous posts on solar; efficiency, storage and EVs; and energy choice, carbon and coal.

Of the bills affecting customer-sited solar, only a handful remain:

  • HB 1252 (Kilgore), expanding the pilot program for third-party PPAs in APCo territory to cover all nonprofits and local government: amendment ensures current Dominion pilot is unchanged, passes the House, goes to the Senate
  • HB 1451 (Sullivan), allowing a school district to attribute surplus electricity from a solar array on one school to other schools in the district: amendment turns it into a pilot program, passes House C&L
  • SB 191 (Favola), allowing customers to install solar arrays large enough to meet 125% of previous demand (up from 100% today): amended to exclude customers in coop territory*, passes Senate C&L

Delegate Toscano’s bills promoting energy storage remain alive. HB 1018, offering a tax credit for energy storage devices, passed a House Finance subcommittee last week with an amendment to delay its start date to 2020. HJ 101, calling for a study, passed Rules but then was sent to Appropriations, where it was to be heard yesterday. (The Legislative Information Service does not yet show its fate.)

HB 922 (Bulova), allowing localities to install EV charging stations, has been reported from General Laws with amendments. The companion bill, SB 908 (McClellan) passed the Senate.

The Rubin Group’s land use bills passed their respective houses with amendments. The bills are SB 429 (Stanley), its companion bill HB 508 (Hodges), SB 179 (Stanley) and companion bill HB 509 (Hodges).

All other customer-focused solar bills died. So did energy efficiency goals, the mandatory renewable portfolio standard, LED light bulb requirements, and tax credits for EVs and renewable energy. Direct Energy’s energy choice legislation died in both House and Senate in the face of Dominion’s opposition, in spite of an astonishingly diverse array of business supporters; even the support of Conservatives for Clean Energy was not enough to garner any Republican votes in the House C&L subcommittee.

Republicans also killed the Governor’s RGGI bills while passing Delegate Poindexter’s anti-RGGI bill, HB 1270, in the House. Delegate Yancey’s anti-regulation HB 1082, appears to be alive in a subcommittee, though Delegate Freitas’ anti-regulation bill died, and Senator Vogel’s effort to change the constitution to allow legislative vetoes of regulations died in committee.

Delegate Kilgore’s HB 665, restoring tax subsidies to coal companies to facilitate destroying Virginia mountains, passed House Finance on a party-line vote. Shockingly, Senator Chafin’s similar bill, SB 378, passed the Senate with support from Democrats Marsden, Petersen, Edwards, Dance, Lewis, Mason and Saslaw.

So once again, in spite of a remarkable election that swept progressive Democrats into the House and nearly upended Republican rule, clean energy advocates have done poorly this year. Some of their priorities are now part of the Dominion pork barrel legislation, to be sure. But that legislation enables utility solar and utility spending; it does nothing for customer-owned renewable energy, market competition, climate action, or consumer choice.

Dominion still rules the General Assembly, though the legislators who voted in line with the utility’s wishes won’t admit it—or give any other explanation. The Republican members of the House Commerce and Labor subcommittee slashed their way through the pro-consumer bills with ruthless efficiency, and did not bother explaining their votes. (A special shout-out goes to Democratic delegates Kory, Ward, Heretick and Bourne for just as stubbornly voting in support of the good bills.)

But over in Senate C&L, chairman Frank Wagner tried to maintain the pretense that he was merely “referring” his colleagues’ bills to the Rubin Group instead of actually killing them.

The closed-door, private, invitation-only, utility-centric Rubin Group has no legislators among its members and proposes only changes to the law that all its members like, so “sending” a bill there that the utilities oppose is pure farce. Yet that was the fate of Senator Edwards’ bills on third party PPAs, agricultural net metering, and community solar, and Senator Wexton’s community solar bill. Wagner instructed these Senators to “work with” the Rubin Group on their bills. None of the other committee members objected.

But it’s not like the Rubin Group achieved much, either. Its hallmark legislation putting 4,000 MW of utility solar in the public interest got thrown into the Dominion pork barrel (and was later upped to 5,000 MW), along with energy efficiency bills designed to eliminate the SCC’s over-reliance on the RIM test, requirements for utility spending on energy efficiency, and Delegate Habeeb’s nice battery storage pilot program. They all became tasty morsels designed to offset legislators’ queasiness over the ratepayer rip-off and, not incidentally, to maneuver advocates and bill patrons into supporting Dominion’s bill as the only way to get their own legislation passed into law.

 

 

Think I was being harsh about the Dominion bill? Read what the SCC had to say.

Last week I called it a pig of a bill, because calling it a dog was too nice. The SCC must agree, because they just gave us the dirt.

The State Corporation Commission just weighed in on this year’s boondoggle legislation Dominion Energy concocted with Senators Dick Saslaw and Frank Wagner, and they are not happy.

Recall that when last we looked, eleven senators had sent a letter over to the SCC asking about effects of the legislation on ratepayers. The SCC responded with the kind of alacrity we do not customarily see from them, for example when we have to wait a year to get a decision on a case, and then get an order that avoids answering the important questions. This time it appears they were just waiting for the chance to make it very, very clear, they do not like this legislation.

Here is how the SCC answered the opening question:

Q: In general, how can the likely effect of SB 966 and SB 967 on ratepayers be summarized?

A: As explained in greater detail within this document, the key impacts on ratepayers can be summarized as follows:

  1. There will be no opportunity to consider base-rate reductions or refunds to customers for at least six years, and then only if the utility over-earns for two consecutive three-year periods effectively extending the current base-rate freeze further into the future.
  2. There may be only a partial return of the reduction in federal income taxes currently being collected in base rates.
  3. The provision in current law that allows utilities to keep more than 30% of their excess earnings is continued.
  4. The legislation allows the utilities to keep future excess earnings (i.e. customer overpayments) and, rather than return them to customers, use them for capital projects chosen by the utility. In addition, the utilities can charge customers for these same projects in base rates.
  5. The legislation deems certain capital projects to be “in the public interest,” thus impacting the SCC’s authority to evaluate whether such projects are cost-effective or whether there are alternatives available at lower costs to customers. This provision could potentially result in billions of dollars of additional costs that will be charged to customers in higher rates.
  6. An amount that appears to represent the customers’ portion of prior period excess earnings is returned to customers, but the amount has not been examined in a formal proceeding to determine its accuracy.

Answers to other questions mostly reiterate what a great deal this is for the utilities and what a terrible deal it is for ratepayers. Liberal use of underlining prevails throughout. But there is one answer I just have to reproduce here because it shows how truly ingenious the rip-off is:

Q: If customers’ refund money is reduced by distribution grid transformation and renewable generation projects (“Projects”), are the Projects considered paid in full?

A: No, under the legislation if the utility has spent money on Projects, customer refunds will be reduced by that amount and base rates will recover the same amount with interest and profit margin.

For example, suppose the SCC determines after two Triennial Reviews that customers are owed a refund of $100 million. Assume further, that during the six year period of the Triennial Review, an electric utility spends $100 million on distribution grid transformation investment. As a result, customer refunds are offset by this utility spending (customers would not receive any refunds). Then, customers will pay the full $100 million for these distribution grid transformation projects, plus interest and a profit margin, through base rates. Effectively, customers are more than $200 million out of pocket ($100 million lost refund + $100 million paid through base rates + interest/profit margin) for these $100 million of new distribution grid transformation projects.

Wow, get that? Dominion can charge customers for a project in order to spend enough money that it avoids having over-earnings. Having done that, it can then charge the customers for the same project all over again, and this time add a percentage for profit and another percentage for interest.

Come on, that’s impressive. I could never have come up with anything so devious and underhanded. I can’t even follow the money. Heck, I bet there isn’t a legislator in the General Assembly who could have figured out the tricks in this legislation!

We can only assume that was exactly the point. But now that the SCC has uncovered the tricks and laid it out for all to read how extraordinarily bad this bill is for consumers, Dominion, we hear, is making some concessions. Saslaw promises a new version next week.

My advice? Read the fine print.