Category Archives: Energy

Solar, Location-Variable Costs, and the 21st-Century Grid

California is pushing solar energy more aggressively than any other state in the union, and the debates unfolding there may presage controversies likely to occur in Virginia. One of those debates is the relative value of utility-scale versus community versus individual rooftop solar, which is intimately tied to the issue of location-variable costs.

Building so-called utility-scale solar — essentially vast solar farms — allows economies of scale in installation and generates electricity at the lowest cost per kilowatt. Power companies like them because they typically own the utility-scale production and get to generate a profit off them. One drawback is that utility-scale production consumes vast swaths of land. Another is that solar farms rely upon high-capacity transmission lines to move their electricity to distant locations, while local generation can feed into local distribution grids.

Utility-scale solar is going gangbusters in Virginia, but opportunities for communal and rooftop generation are limited by state law. A huge sticking point here, as it is in California, is how much utilities should reimburse small-scale producers for the electricity they generate. To what degree should small-scale producers share in the cost of maintaining the larger distribution and transmission grid they rely upon when the sun isn’t shining?

Steven Sexton, an associate professor of public policy and economics at Duke University, is skeptical of the numbers that California officials are using to justify a mandate requiring all new houses built in the state to be equipped with solar panels. In a Wall Street Journal column today, he introduces an element into the debate that I haven’t heard discussed here in the Old Dominion: grid congestion. He writes:

Regulators should tailor policy to reflect routine variation in the value of solar generation across the state’s congested electricity grid. Solar panels are most effective when installed where transmission constraints make supply relatively scarce — not on every roof in California.

In other words, the value of rooftop/community solar generation varies depending upon its location on the electric grid. The value is greater where grid congestion is worse and the alternative is spending tens of millions of dollars upgrading the transmission system — often adding to visual blight in the process. The value of rooftop/community solar is less where grid congestion is not an issue.

I would add a corollary to that observation: Rooftop/community solar generation has greater value in remote, hard-to-serve areas where new development would require the installation of additional sub-stations and distribution lines. Back in the days when I wrote about land use, I advocated the principle that all property owners should pay the location-variable costs of their decisions about where to build. The biggest of those location-variable costs is transportation infrastructure, but a not-insignificant one is the supply of electricity. Why should city dwellers, who require less electric infrastructure per-capita, pay extra to subsidize rural dwellers? Conversely, why shouldn’t rural dwellers who generate some or all of their own electricity, receive some benefit when they avoid some of the cost of building rural electric infrastructure?

The root of the problem is that electric utilities charge a flat rate for all customers within the same class (residential, commercial and industrial) regardless of the variations in cost of serving those customers. I haven’t heard anyone in Virginia challenge that premise, but charging location-variable rates may be a necessary step for building an electric grid for the 21st century.

Dominion Seeks Approval for Experimental Wind Turbines

Dominion Energy rendering of the experimental wind turbines.

Dominion Energy Virginia has submitted to the State Corporation Commission a proposal to build two wind-generating turbines 27 miles off the coast of Virginia Beach — arguably the most expensive research project ever funded by the Commonwealth. The experimental turbines will not produce 12 megawatts of electricity at a remotely economic cost. But they will provide data that could pave the way for a vast wind farm that would produce electricity far more economically.

The project will test new designs to anchor the turbines in seabed conditions found off the Virginia coast and to withstand hurricane-force winds. The feedback is necessary before anyone undertakes utilizes the technology in a wind farm with dozens of turbines potentially costing billions of dollars.

The power company has been trying to advance the two-turbine project for several years but refrained from filing with the SCC for fear that the Commission would reject it as too risky and expensive. What’s different this time? First, it has lined up an experienced partner, Ørsted, a Danish company that has installed more than 1,000 turbines in European waters, to manage the project. Second, it has brought down the cost to about $300 million, significantly lower than previous iterations. Third, with the enactment of the Grid Modernization and Security Act, the state has declared wind power to be in the public interest.

And fourth, Dominion says that it can build the turbines without increasing rates. The project, said CEO Thomas F. Farrell II at the announcement in Norfolk yesterday, “will not increase customer rates even a penny.”

Here’s how I understand how that works. Before enactment of the Grid Transformation Act, Dominion would have paid for a large capital project like this one through a Rate Adjustment Clause, in which capital costs would be passed along to customers. The selling point of the Grid Transformation Act is that rates remain frozen but Dominion will apply excess earnings, which normally would be returned to customers, to renewable energy, energy-efficiency and grid-upgrade projects instead. It’s a convoluted way to go about things, but it has the virtue of stability.

I’ll be interested to see how Steve Haner, Bacon’s Rebellion’s electric consumer advocate, responds to this development. 

One last point: Just because the General Assembly has declared wind energy to be in the public interest, that’s no guarantee the SCC will go along. The SCC still has to balance cost, reliability and environmental sustainability — along with risk. Three hundred millions dollars is a lot of money to spend on what amounts to a research project. In analyzing the pros and cons of the experimental wind turbines, the SCC presumably will look also at the pros and cons of the wind farm that the experimental turbines would make possible. Given the lack of an established wind-power infrastructure on the East Coast, how much would a full-fledged wind farm cost to build? How would the cost of electricity compare to other energy sources? And would such an intermittent energy source improve or diminish the reliability of Virginia’s electric power supplies?

Will Dominion Appeal Latest Loss At SCC?

Daily Press photo of Yorktown Power Station

Michael Martz has a good report in this morning’s Times-Dispatch on the State Corporation Commission’s opinion trimming Dominion Energy Virginia’s proposed transmission charge.  The SCC ordered the proposed Rider T going into effect next month reduced to reflect the lower federal income tax rates.  It also rejected the utility’s argument that a payment it was receiving from the PJM regional transmission entity was a generation cost it should be allowed to book against base rates instead of against Rider T.  Booking it against base rates would in effect make it profit.

The payments are made because PJM asked Dominion to continue operating its Yorktown plant for reliability reasons.  The SCC wrote: “Legally, these payments are part of the PJM Transmission Tariff, which explicitly states that — in this particular instance — the generator is providing a “transmission service” for which PJM is assessing “an additional transmission charge” of $12.7 million. Accordingly, the Commission finds that both (1) the charges assessed, and (2) the payments made, by PJM under the PJM Transmission Tariff for this transmission service shall be reflected in the Subsection A 4 revenue requirement.”

As the biggest beneficiary of that increased reliability, Dominion is actually providing about half of the money to PJM which is then repaid to Dominion.  How does it collect its share?  In Rider T.  These are all transmission dollars.

The adjustments ordered by the SCC will save more than $2 per month on the mythical 1,000 kwh residential customer bill.  The question now is, will Dominion appeal the decision to the friendly Supreme Court of Virginia?  In its final written arguments to the Commission it pointed to the legislative provision (which of course it wrote) that these costs are on their face “reasonable and prudent.”  Reading the SCC opinion (not yet up on its website) it is obviously laying the groundwork for its argument in any possible appeal.

If the appeal is filed it will have little to do with this issue and a great deal to do with the battles to come over Dominion’s massive grid investment plan, just getting underway.   The tax issue involved more money, but the argument over the payment from PJM for maintaining operations at the Yorktown power plant goes right to the heart of the legislative declaration of “reasonable and prudent” and the utility’s game of moving costs back and forth between base rates and rate adjustment clauses when it improves its bottom line.

Previous Bacon’s Rebellion posts on this issue can be found here and here.

Irony: Clean Money Group Donates More than Power Company


The Virginia Public Access Project has updated its list of largest campaign donors in Virginia, and the results making good reading.

My money is cleaner than yours. Perhaps the most fascinating tidbit is that Charlottesville-based Michael Bills, founder of Clean Virginia and scourge of Dominion Energy Virginia’s influence on state politics, has injected more money into the political system than Dominion has so far in 2018-2019. Bills donated $245,000 while Dominion contributed $190,940. (The Dominion number does not include personal contributions by Dominion executives. CEO Thomas Farrell, for example, has given $7,500 so far. Dominion executives Paul Koonce and William Murray chipped in $5,000 and $4,500 respectively. Still, Bills managed to give more than Dominion’s PAC and executives combined.)

Clean Virginia’s mantra: “In Virginia, corruption is legal, and it is time for that to end.” Clean Virginia’s solution: The organization out-bids its sworn enemy for the loyalty of Virginia legislators.

To my mind, the most fascinating untold story in Virginia politics today is the rise of Charlottesville’s landed aristocracy as a bankroller of liberal and Democratic Party causes. Virginia’s horse country gentry helped lefty Tom Periello nearly unseat moderate Ralph Northam in the 2017 Democratic Party nomination for governor. I view Bills’ Clean Virginia initiative as a continuation of that momentum.

Speaking of big money… Democratic PACs and allied groups totally dominate the list of largest donors. These include the Stronger Together PAC, which raised money for Northam’s campaign; the Laborer’s District Council, which gave heavily to the Northam campaign; and the Commonwealth Victory Fund and the Legislative Majority PAC, two Democratic Party-aligned groups.

The biggest GOP-leaning donor was William B. Holzman, a Shenandoah Valley oil and gas distributor. Collectively speaking, Virginia’s big businesses — Dominion, Comcast, Verizon, Altria, and the Realtors and Bankers associations — lean to the GOP but they spread their money between both parties. If political power in the General Assembly shifts to the Democrats, the corporate money likely will follow.

How will the media cover this story? As far as I can tell, only David Ress with the Daily Press has reported on the latest VPAP numbers. His focus, unsurprisingly, was Dominion — although he took a man-bites-dog angle on the story, noting that the utility is not the biggest campaign contributor this year. I’m waiting for the media to start showing the same level of interest in the other big-money players as it does in Dominion. And don’t get me started about all the “dark money” sloshing around the system. I’ll save that for another day.

Postscript: By the way, U.S. Senator Tim Kaine is out-raising Republican Corey Stewart by a ratio of about 17 to one. Clearly, Virginia’s moneyed class is avoiding the Trumpier-than-Trump candidate like the Ebola virus. Worse for Stewart, he’s even losing the small-donation race (less than $200) by a margin of about three-to-one. This race will be a wash-out. The Virginia GOP looks like it’s in huuuge trouble.

What a Tangled Analysis We Weave

Dominion Energy Virginia does not want state regulators to require a formal cost-benefit analysis of its plan to spend $3 billion on grid modernization over the next decade, reports the Richmond Times-Dispatch.

“I do not believe it would be appropriate to impose such a requirement for its approval,” said Edward H. Baine, senior vice president of distribution for Dominion Energy’s power delivery group. In testimony filed with the State Corporation Commission. He urged the commission to consider “the many qualitative or otherwise unquantifiable benefits” of the plan.

At first blush Baine’s remarks sound like Dominion is asking for a blank check –“Give us permission to spend a bunch of money, but don’t look too closely at how we spend it.” Predictably, Dominion’s critics of all stripes have been quick with criticisms. Some say the grid modernization sacrifices the interests of rate payers with unnecessary spending, others that the plan is insufficiently transformative of the electric grid. In today’s political environment, Dominion makes an easy target. In the T-D article, even the utility’s friends had qualms about the company’s wish to avoid a traditional cost benefit-analysis.

My intention in this post is not to defend the plan, the details of which I have yet to see. As a general rule, I am a huge proponent of conducting cost-benefit analyses for any public expenditures (or in Dominion’s case, expenditures that require public approval). Indeed, some criticism may be justified. As Steve Haner has pointed out, some of the tap-lines in the proposed undergrounding project sound absurdly expensive. And as Walton Shepherd with the National Resources Defense Council has blogged, the strategic thrust of the $3 billion spending plan, a grab bag of initiatives, could use sharpening.

So, by all means, let’s have a vigorous public debate over Dominion’s grid modernization plan. But let’s have a better debate than the one that seems to be shaping up. To start, let’s admit that some benefits to Dominion’s plan are, in fact, difficult or impossible to quantify. Then, permit me to introduce two critical concepts — (1) risk and (2) the time value of money — without which we cannot have an intelligent discussion.

Writing in the Commentary section of the Times-Dispatch today, Robert M. Blue, CEO of the Dominion Energy Power Delivery Group, discusses the benefits of the plan’s priorities — investment in renewable energy and energy-efficiency; resilience in the face of sabotage, cyber threats and natural disasters; more assistance to lower-income Virginians — without offering a cost-benefit justification.

In his SCC testimony, Baine has said the plan will save the company more than $2 billion over 20 years. In other words, $3 billion invested over 10 years will save only $2 billion over 20 years. On its face, that seems like an indefensible assault on the rate payers. But, as he made clear, the numbers exclude “unquantifiable benefits.”

Let’s take the undergrounding program as an example. In March Dominion filed to recover $284 million to bury 660 miles of its most outage-prone tap lines. Those lines accounted for 9,368 outages over the past 10 years. Dominion should be able to quantify the estimated cost of continuing to repair these tap lines over the next 10 years. I don’t know what the cost is, but it’s certainly in the tens of millions of dollars, perhaps in the hundreds of millions of dollars. What Dominion cannot quantify is the value to customers of having their electric service restore more quickly. When your power goes out, how much is it worth to get it back on? The loss of an hour or two is a minimal hardship. But the loss of electricity for three, four, or five days — I’ve had mine go out for 10 days — spikes as food spoils, working at home is impossible, or as extreme cold or heat makes houses uninhabitable.

Alternatively, let us consider investments in hardening infrastructure against the sabotage of physical facilities or corruption of IT systems. These may be investments for which we never see a benefit. Dominion can spend tens of millions of dollars upgrading its IT computers and communications and never come under cyber attack. Without making the investment, however, there is an increased risk of system-wide collapse. How much will Dominion decrease the risk of catastrophe by making those investments? That’s impossible to measure. What would the cost be if the grid experienced an extended blackout? Also impossible to measure.

While the risk of sabotage on an electric sub-station, a cyber-attack on grid IT systems, or a Category 3 hurricane overwhelming coastal infrastructure may be remote, it would be irresponsible not to guard against them. How much should Dominion spend to protect against them? There is no measure. The decision requires a judgment call.

Next, let’s address the time value of money.

In his T-D article Michael Martz makes the following statement:

The company plans to spend $2 billion on the Strategic Undergrounding Project, which the SCC estimates will cost $6 billion over the life of the buried lines, including the financing expense and utility profit.

I am seeing this total-cost number — initial cost + profit + financing costs — quite often. The purpose, of course, is to make the cost to rate payers look as large and frightening as possible. We never see this with other types of infrastructure expenditure, as in, to make up an example, “The Virginia Department of Transportation plans to spend $2 billion to build Superhighway X, which will cost $6 billion after operations, maintenance and interest expense on bonds are taken into account.”

When a private-sector company examines its capital-expenditure alternatives, it looks not only at the up-front cost, it looks at the time value of money. The basic principle is that a dollar spent today has greater economic value than a dollar spent twenty years from now. Why? Because a dollar put to work today will have twenty years of compounded returns compared to a dollar invested two decades from now. In simplified terms, a dollar spent today is worth two dollars spent twenty years from now.

To compare the value of projects with long expected finance costs and financial payback, financial people calculate what they call net present value. To include the financing expense of the Strategic Undergrounding Project (or any other project) without taking into account the time value of money is highly deceptive.

Do these qualifiers mean that Dominion’s proposed $3 billion grid-modernization investment is totally justified? Not at all. The SCC needs to give each component a good, hard look. But it is fair to say that any analysis of costs and benefits is meaningless without taking into account unquantifiable benefits, risk and the time value of money.

The Underground Saga Continues: I-66

October 2017: Legislators and Prince William County supervisors announce support for an underground transmission line paid for almost in full by other people’s constituents. U.S. Senate nominee Corey Stewart is second from left, Hugo fourth from left.

The saga of expensive underground transmission continues:  Now comes the Dominion Energy Virginia 230-KV line along I-66 which is needed for an Amazon facility and the growing data center industry. The State Corporation Commission has signed off and reports in the order a cost of $170 million or more to build it.

Every step in this process has been heralded by press releases from Delegate Tim Hugo, R-Centreville, who sponsored legislation to order the SCC to approve the underground approach, which then became a major chip in the poker game behind the 2018 Dominion Energy legislation. The power line to serve the data center was first opposed outright, and then the push was to bury it. The parties reached an agreement on this route a few months ago.

“Now that the State Corporation Commission has accepted Dominion’s application, western Prince William County residents can be assured that the Haymarket power lines will be buried,” said Del. Tim Hugo, R-Centreville, in  a release Friday. “This community-led effort, which I was proud to contribute to, will ensure the quality of life in western Prince William County is maintained. Last year, I promised to pass legislation to bury the power lines, and working together, we did.”

The SCC estimated the cost of the 5-mile overhead project, which includes a new substation, at $51 million. So, that’s our cost to deliver reliable power in that region to Amazon and others, and $120 million extra is charged to maintain the lustrous beauty of I-66 through three miles of the  route. Much of the route east of Haymarket is lined by subdivisions and 100-foot towers would be hard to miss.

Again, as with the previously-discussed plan to place 4,000 miles of small residential tap lines underground, the cost is paid by all company ratepayers,  it is paid off over a very long period with a comfortable profit margin, thus the final all-in cost is more than twice the initial window sticker. As seems to be the rule now and not the exception, the General Assembly and Governor overruled the decision made by the commission to go with a lower-cost option. What the SCC “accepted,” to use Hugo’s word, is its reduced circumstances.

Utility transmission improvements should be paid for by ratepayers across the system, but the trade-off is that the regulator should be zealous about demonstrated need and reasonable cost. The idea is to prevent the raw political horsetrading on display here.

The neighborhood underground program is paid for with a special rider on everybody’s bills, Rider U, but this Haymarket transmission project will eventually be incorporated in the larger Rider T. The enactment clause in the 2018 bill that ordered the SCC to approve the underground approach also authorized a second “pilot project,” yet unnamed (a card still face down on the table.)

A powerful precedent has been set and those two projects may be followed by more. Large overhead power lines are very unpopular and the path to force them underground has been found. The added cost also adds profit for the utility. This is just another skirmish in the overall battle plan to leave the SCC and anybody else putting consumers first dying in a ditch.

Want more evidence? I commend to your reading a report in the Times-Dispatch that, buried in the recent 200-plus application by Dominion Energy Virginia on its grid enhancement plan, is a request to avoid any cost-benefit analysis of that at all.

Virginia Has Hired Its Own Offshore Wind Guru

Andy Geissbuehler

Getting serious about making a Virginia a major player in the offshore wind energy, the Northam administration has engaged international energy consulting firm BVG Associates. BVG Advisory Director Andy Geissbuehler made his first public appearance in a public listening session in Newport News yesterday on the topic of wind development.

“Everyone knows the U.S. will be a massive offshore wind market, and the U.S. will be very fast in picking up and catching up with some of the current market leaders, and will probably develop to one of the No. 1 markets globally,” said Giessbuehler, as reported by the Daily Press.

The idea of making Virginia an East Coast leader in offshore wind and a center of the supply chain supporting an offshore wind sector, has been a prominent goal of Virginia governors since at least the time of Bob McDonnell. But what was once a lofty aspiration for the distant future is becoming an urgent priority. Other East Coast states are promoting offshore wind, and they, too, want to exploit a first-mover advantage to become the operations center for the offshore wind industry. As the Wall Street Journal reported earlier this week:

In Fall River, a former textile hub on the Massachusetts coast, Bristol County economic development director Kenneth Fiola touts waterfront land and a workforce rooted in manufacturing as reasons the city would make a perfect base for the American offshore wind industry.

In Providence, R.I., officials are promoting their port’s experience helping build the country’s first offshore wind farm off Block Island. In Virginia, representatives are selling the advantages of a waterway with no bridges that would ease the transportation of enormous pieces of the building-size wind turbines.

All along the East Coast, politicians and economic development officials are beginning to pitch their communities as potential hubs for the burgeoning U.S. offshore wind industry. Offshore wind developers, which have largely focused on coastal Europe thus far, have plans to build a dozen utility-scale farms off the U.S. side of the Atlantic in coming years, spurring billions in investment and thousands of jobs.

The competition has ratcheted up this year, with leaders in some states, including New York and New Jersey, pushing aggressive wind-energy procurement goals and pledging financial support to develop the necessary infrastructure and workforce.

In Virginia, the big hold-up has been a need to design wind turbines suited to the geological conditions of the seabed off the Virginia coast and capable of withstanding hurricane-force winds. Dominion Energy has proposed building two test turbines offshore as a demonstration project that, hopefully, would prove the viability of a coastal Virginia location. That project has been stalled due to the astronomically high cost per turbine, which the State Corporation Commission could never justify on a cost-per-kilowatt basis alone. But political winds have shifted with the enactment of the Grid Modernization and Security Act of 2018, which declared offshore wind to be in the public interest.

Dominion says that offshore wind could generate as much as 2,000 megawatts of electricity, roughly equivalent in capacity to one-and-a-half modern combined-cycle natural gas plants. Virginia touts its mid-Atlantic location and the presence of an existing ship repair industry as reasons for the wind construction and repair industry to locate in Hampton Roads.

Presumably, Geissbuehler has been hired as an advocate for Virginia’s offshore wind ambitions, although it is not clear from the Daily Press article whether he will be spending most of his time as an economic developer seeking to entice offshore-wind companies to Virginia, as a wind champion to build political and regulatory support within Virginia, or something else entirely.

Dominion Files 10-Year Grid Modernization Plan

Dominion Energy today filed a plan with the State Corporation Commission outlining how it intends to comply with the Grid Modernization and Security Act of 2018. The filing asks the SCC to approve the programs and investments included in the first three years of a 10-year grid modernization initiative. The filing can be viewed here.

Features of the plan highlighted in a Dominion press release include:

  • $200 million in bill credits to customers, and $125 million in annual rate cuts due to tax relief;
  • Modernizing the energy grid to improve reliability, resiliency and the ability to integrate more renewable energy and emerging technology;
  • Significantly expanding the company’s renewable energy fleet in Virginia;
  • Future testing of wind turbines off the coast of Virginia Beach.

Dominion emphasizes that the improvements will not require any rate increases. Rather, the upgrades will be paid for through earnings over and above its normally allowed Return on Equity, which will be retained for the purposes of reinvestment in grid modernization. This particular provision, the most controversial aspect of the 2018 legislation, was criticized as a form of “double dipping” that allowed Dominion to earn money on its original investment and then to earn more money on the profits that otherwise would have been returned to rate payers. The legislation was said to have fixed the double-dipping issue, but it is not clear how that will work out in practice.

In the meantime, Virginians can look forward to aggressive investment in solar power, wind power, and energy efficiency. Dominion is committing to having 3,000 megawatts of wind and solar in operation by 2022, adding to what the company touts as the sixth largest solar fleet in the nation. (It’s not clear from the press release if that includes solar resources outside of Virginia.)

The plan asks the SCC to include the Coastal Virginia Offshore Wind (CVOC) project: two experimental turbines generating 12 megawatts of power in a federal lease area about 27 miles off the Virginia Beach coast. Experience and data gained from operating those turbines could pave the way for widespread deployment of wind turbines in the future.

Dominion also is asking to install 2.1 million smart meters at a cost of $450 million. These meters, in conjunction with a new customer information system, will enable customers to better manage their energy bills. Additionally, the utility is proposing to spend $870 million in energy efficiency programs over the next decade. The programs are “designed to help customers save energy and manage the demand on Virginia’s electric system.” At least 5% of these programs must benefit low-income, elderly or disabled individuals, “most likely through weatherization upgrades.”

Proposed new construction and material standards will improve grid resiliency by hardening infrastructure and protecting against cyber-attacks. The burial of outage-prone distribution lines and the deployment of intelligence devices and control systems will are meant to speed the re-establishment of electric service.

There is no mention in the Dominion press release of a much talked-about pumped-storage facility in Southwest Virginia, which previous legislation had declared to be in the public interest. The pumped-storage facility would use electricity in off-peak hours to pump water from a lower-elevation containment lake to an upper-elevation lake, and then generate electric power during peak hours.

The State Corporation Commission has been skeptical of some of these investments in the past, but the Grid Modernization Act declares them to be in the public interest. It’s not clear exactly how that assertion of General Assembly priorities will play out in the SCC decision-making process. The next few months should tell the tale.

Ratepayers Cover $760,000 Line for One Customer?

Highest cost projects from DEV underground line program phase three,with lifetime revenue requirement from ratepayers. Source: SCC pre-filed testimony.

The State Corporation Commission staff audit of Dominion Energy’s ongoing effort to place residential and small business electric service tap lines underground has turned up some expensive examples.  A handful of lines will cost ratepayers hundreds of thousands of dollars over time to serve a single residence.

The average cost for the first 18,000 customers getting new lines is about $50,000 each based on my own calculation.

Those are the all-in costs for planning and constructing the lines, then adding the interest cost or profit margin depending on how the utility financed it. The projection uses the current 9.2 percent return on equity. The money is collected over the estimated useful life of the new lines, about 40 years.  For phases one, two and three the total cost with financing is about $921 million, according to the SCC staff analysis.

The SCC staff compared the full capitalized cost of installing the highest-cost lines to home values.  “This means it is possible in some instances that the company could have purchased the customer’s homes at a lower cost than undergrounding their tap lines,” testified David J. Dalton of the SCC staff.

This program to expand underground lines is something else paid for with a specific monthly charge on everyone’s bill, a rate adjustment clause known as Rider U.  It is also something else that the General Assembly has deemed to be in the public interest and virtually off-limits to SCC challenge.

Photo: Dominion

The annual review of the program to adjust the billing charge is underway now and was the subject of a hearing at the SCC Tuesday. With big questions settled by the legislature, the discussion is focused on minor issues such as accounting changes or how the costs are allocated between various classes of customer.

The largest industrial customers are exempt but everybody else under the SCC’s jurisdiction pays, including the 600,000 customers who already have underground service (and paid for it themselves) and the unknown number who will never get underground service.  For that mythical average residential customer using 1,000 kwh per month, the current charge is 55 cents per month and Dominion is asking to raise it to $1.98 as of next February.

The legislature has authorized this to go until at least 2028, and Dominion expects to place 4,000 miles of lines underground in 12 phases at a direct cost of $2 billion and a fully-capitalized cost of almost $6 billion.  At that point the residential charge will be more like $5 per month.  The charge for commercial or small industrial customers was not reported.

Spending other people’s money is very popular.  The record on this case includes favorable comments from Senator Glen Sturtevant (R-Richmond), Delegate Vivian Watts (D-Fairfax) and several local officials where the program is active.  A spokesman for the American Red Cross attended Tuesday’s hearing in person to testify about that organization’s support, noting how wonderful it is not to have your power go out.  At the end he said his own house has already been upgraded under the program.

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The Cyber Threat to Utilities Just Got Scarier

Russian hackers have broken into the control rooms of U.S. utilities where they could cause blackouts, federal officials have told the Wall Street Journal.

The Russian hackers, who worked for a shadowy state-sponsored group previously identified as Dragonfly or Energetic Bear, broke into supposedly secure “air gapped” or isolated networks owned by utilities with relative ease by first penetrating the networks of key vendors who had trusted relationships with the power companies., said officials at the Department of Homeland Security.

“They got to the point where they could have thrown switches” and disrupted power flows, said Jonathan Homer, chief of industrial-control-system analysis for DHS.

Federal authorities did not identify which utilities had been compromised.

Needless to say, all manner of groups — from the North American Electric Reliability Council, the federal agency that regulates electric reliability, to PJM Interconnection, which oversees the regional grid of which Virginia is a part, to the electric utilities themselves — are paying very close attention to this issue.  The obvious question for Virginians is this: What can state legislators and regulators do… if anything?

One of the aims of the Grid Modernization and Security Act of 2018, enacted this year, is to upgrade the electric transmission and distribution systems maintained by Dominion Energy, Appalachian Power Co., and the electric cooperatives. Priorities include protecting the grid against terrorist attacks and cyber attacks, although it is not clear yet what additional resources will be allocated to those efforts. Whatever conversation occurs, much of it will be behind closed doors on the not-unreasonable grounds that we don’t want to tip off the bad guys to what we’re doing.

But public involvement would helpful in some areas. What grid configuration would be the most secure? One could make the argument that a centralized grid operated by a handful of players would be easier to protect from cyber-intrusion than a grid with many players that is only as secure as the most vulnerable among them.

Conversely, one could argue that a distributed grid would be preferable. It would be easier for the Russkies (or Chinese, or Iranians, or North Koreans) to take out, say, a nuclear power plant or to overload a critical transmission line than it would be to take out thousands of small rooftop generators connected by a micro-grid.

The answers to such questions would shape the kind of electric grid that will best serve the interests of all Virginians.

Bacon’s Rebellion is in the process of organizing a roundtable on the Future Grid to discuss issues just like this. Right now, we are looking for a neutral venue (not tied to any particular faction or interest group) to host the first meeting. If you would like to participate or can suggest a meeting location, please contact me.