Category Archives: Energy

SCC Examiner Recommends Shorter Transmission Line Towers for Augusta

Image source: Staunton News Leader

Dominion Energy wants to rebuild 17.7 miles of a 500 kV power line through Augusta County to meet the electricity load of its western Virginia customers, and as long as it’s rebuilding the line, increase the height to accommodate an additional 230 kV line should the need for it ever arise. Building a double-circuit structure would add $6.1 million to the project but save between $44 million and $55 million if the utility had to come back later to add the second transmission line.

Local landowners, distressed by the visual impact on their property, oppose the higher line, and they want Dominion to pay between $1.3 million and $2.5 million extra to add a coating that would give the bright galvanized steel a brown color.

In a ruling issued earlier this month, State Corporation Commission hearing examiner Ann Berkebile ruled that the rebuilding of the existing Dooms-Valley 500 kV line is justified by the public convenience and necessity but that spending the additional money for taller towers is not. Further, she found that the expenditure of additional money to chemically dull the towers is warranted. The case now goes to the SCC’s three judges for a final ruling. Wrote Berkebile:

The ability to address a need that could arise at some time in the future at an incremental increased cost (and at a lower cost than is likely to be incurred should a future need arise) does not outweigh the actual detrimental impacts of significantly taller towers upon the scenic and historic assets of August County. Under the circumstances, I conclude that the Commission should approve the use of less expensive, shorter lattice towers for the rebuild.

Berkebile’s findings come at a time in which Dominion and other electric utilities are investing massive sums to upgrade their electric grids. Over the next 15 years, Virginia likely will see the retirement of more coal-fired plants and the construction of more solar farms and gas combustion-turbine plants. An open question is whether Dominion will be able to re-license its four nuclear power units. The grid, designed for a traditional configuration of electric-power generation also will need to be upgraded to meet a new configuration in which intermittent solar and wind sources play a role.

Dominion consulting engineer Peter Nedwick identified three scenarios that would support the need for the additional 230 kV line through Augusta County, according to Berkebile’s summary of the testimony. In her report, however, Berkebile did not discuss the scenarios or assess how likely any one of them was to occur. SCC staff, she stated, was “unable to verify” a need for taller towers to accommodate a 230 kV line.

In his testimony, Nedwick also cited three instances in which single-circuit structures proved inadequate and Dominion was required to come back and rebuild transmission lines within a double-circuit structure. Given the relatively low cost of preserving the flexibility, summarized Berkebile, “he continued to support the double circuit option as a means of maximizing the use of existing [Right of Way] while maintaining flexibility to meet future demands and changes in [North American Electric Reliability Corporation] Reliability Standards.

The SCC staff supported the chemical dulling option to reduce the visual impact of the pipelines on the Augusta County landscape. A relatively new product, Natina, gives galvanized steel a brown color. According to a Dominion engineer, testing shows that the coating will not maintain a uniform appearance over time. Also, it will increase rust, be difficult to paint over, and hinder the natural development of a patina on the steel girders. Alternatives include COR-TEN weathering steel, hot-dipped galvanized steel, a chemically dulled (pre-dulled) steel.

Updates: Money, Power and Politics (Oh, My)

The following are updates on earlier Bacon’s Rebellion stories of mine.

Clean Virginia Files First Report

Clean Virginia Fund, the political action committee that is trying to buy legislators’ loyalty away from regulated utilities, has filed its first report with the State Board of Elections.  Charlottesville financier and hedge fund magnate Michael D. Bills is the only donor, putting in $50,000.  Two senators and nine delegates, all Democrats, accepted a total of $32,500.  Dominion Energy and Appalachian Power donated a combined $175,000 during the same period so if this is really a bidding war, Clean Virginia has some catching up to do.

Hunton Andrews Kurth, the Richmond law and lobbying firm, is off to a slow start, giving only $23,000 on this report.  The firm drew notice for saying it would not support legislators who refused donations from its utility client.  Its largest check was to the Democratic Commonwealth Victory Fund, which supports both House and Senate candidates in that party.  (Dominion Energy gave to that, too.)

Somehow I don’t think any of the legislators who are refusing corporate or utility dollars will refuse help from that party committee. The check was probably to attend the Democrat’s annual event at the Homestead, where I’m sure all had a nice chin wag over the bar or on the golf course.

Dominion Energy Doubles Down on T1 Rider Taxes

Responding to an adverse recommendation from a State Corporation Commission hearing examiner, Dominion Energy has filed comments asking the full commission to ignore her opinion and make the customers pay too much.

Its first and most important argument is that the commission doesn’t have the authority to exercise discretion over the future transmission charges under rate adjustment clause T1.  It points to language in the 2007 statute that created this RAC and the whole system of RACs.  In the case of transmission costs under T1 the language says that any bill from regional transmission entity PJM is presumed to be reasonable and prudent.

This isn’t about the taxes, it’s about that language.  That “reasonable and prudent” presumption is even more frequent in the statute now, thanks to the 2018 legislation.  This is once again proof that Dominion inserts that phrase (and it writes these bills, no legislator does) to override the judgement of the SCC.  Those of us who worked on that 2007 statute never contemplated that Dominion would take advantage of that presumption to self-calculate its charge based on false information – in this case an erroneous tax rate.

If the SCC stands with its hearing examiner, expect the utility to take the battle back to the Virginia Supreme Court or back to its friendly legislators.  Once again, as it has been for more than a decade, the only real issue is will the legislature listen to the SCC or let the utility make it own laws and rules.

The AG Giveth, the AG Taketh Away

Attorney General Mark Herring has notably been a bit less predictable than many previous AG’s on the question of who his client is, if the state law or regulatory position he would normally defend was highly unpopular with various interest groups.

He earned praise in many circles recently for deciding to have his staff defend certain abortion-related regulations, but now has decided to not let his staff join in the appeal of a recent decision on legislative districts and the Voting Rights Act.  The Republican legislators seeking a delay on drawing a new map pending that appeal will need to fund their own legal efforts.

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AP’s Latest Hit Piece: Journalism or Polemic?

Here we go again. The Associated Press’ Alan Suderman has popped out another context-free article making an issue of Dominion Energy’s tenfold increase in lobbying expenses over the past year to more than $1 million. That spending, writes Suderman, “came during a period when the company successfully pushed through legislation that could lead to substantial increases to electric bills.”

It is a legitimate exercise in journalism to report the lobbying expenditures of the state’s largest investor-owned utility, especially when it is as politically influential as Dominion and when the utility backed controversial and far-reaching legislation. But it’s not legitimate to strip the story of highly relevant context such as… oh, I don’t know… maybe, how much other stakeholders spent on lobbying, advertising, education and outreach.

If Dominion were alone in increasing its investment in influencing legislators, that would be one story. If, given the magnitude of the stakes involved, the utility’s spending was matched by the spending of other interest groups, that would be a very different story. Suderman did not raise the latter possibility in his article, thus creating a highly negative impression of Dominion — an impression he reinforced by quoting Clean Virginia, a group formed to counter Dominion’s political influence:

“It’s unfortunate that at a time when refusing monopoly money has become a hallmark of good governance, Dominion is doubling down on its political spending in an attempt to rig the rules in Richmond and mislead Virginians about the cost of their corruption,” said Brennan Gilmore, executive director of Clean Virginia.

Suderman notes in passing that Clean Virginia is a “newly formed group.” Ironically, Clean Virginia does not yet appear in the Virginia Public Access Project (VPAP) database as a campaign donor, even though the organization has pledged to back General Assembly candidates who refuse Dominion money, nor as a registered lobbyist, even though the group is actively involved in influencing public opinion. Come to think of it, the Clean Virginia website does not say where its money comes from either. One guess is that some, if not all, of its funding comes from its founder and chairman, Michael Bills, a wealthy investment manager (founder of Bluestem Asset Management) from the Charlottesville area. But there is no way for members of the public to find out — Clean Virginia’s 990 filings have yet to show up in the ProPublica database of nonprofit companies.

While Clean Virginia is a cipher, Dominion details precisely how much money it contributes to political campaigns, whom it has hired as a lobbyist, how much it has contributed in gifts and entertainment, and (through other reports) how much, and to whom, its nonprofit foundation donates money.

There’s a real asymmetry at work: Dominion scrupulously documents its lobbying activities but other players in the burgeoning renewable-energy and energy-efficiency fields, not to mention some of the company’s most relentless critics, do not. Suderman calls out Dominion for its spike in lobbying-related activity but cares not a whit what others are spending or their refusal, for whatever reason, to be fully transparent about their activity.

Actually, there’s an even bigger asymmetry at work. While Dominion exercises its influence largely through campaign donations and lobbying, the company’s critics make their power felt by devoting resources P.R., education and outreach to influence public opinion — expenditures that aren’t captured in any database.

If it were possible to compile all the information needed to make a valid comparison, perhaps we would find that Dominion’s bolstered its spending by many times more than others did — although that would raise a different set of issues. (Dominion spokesman David Botkins argues that the spending surge was necessary to “break through the fake news and propaganda perpetuated by anti-energy groups like Clean Virginia and their ilk.”) Alternatively, perhaps we would find that Dominion’s spending increase was matched by others. We don’t know what we’d find until someone does the digging. But it is patently unreasonable to skewer Dominion for its spending surge without (a) comparing the increase to that of other stakeholders, and (b) acknowledging that Dominion is being more transparent than many of its critics.

Biased journalism such as Suderman’s is what causes many Virginians to mentally discount whatever they read. “What is this reporter not telling me?” readers wonder. “Is this just a hit piece?”

State Solicits Input from Solar, Wind Stakeholders

A nonprofit company specializing in addressing complex public policy issues has begun holding a series of meetings to solicit input from solar and wind energy stakeholders that will be used to formulate the Northam administration’s update to the Virginia Energy Plan.

Discussion topics will address community solar, corporate procurement of clean energy, state/local barriers to the deployment of renewable energy projects, and net metering (connecting rooftop solar panels to the electric grid).

The nonprofit, Washington, D.C.-based Meridian Institute is organizing the sessions under contract with Dominion Energy, as provided for under the Grid Transformation and Security Act enacted earlier this year. Meridian will publish a compilation of comments around the end of August. The feedback from this and other stakeholder groups addressing energy efficiency, electric vehicles and battery storage will provide input into the Northam administration’s development of the state’s energy plan. The previous plan, written by the McAuliffe administration, was published in 2014.

The inaugural session was not organized to collect input on the designated topics but to discuss the way Meridian had organized and framed the issues. Stakeholders will have a chance to make specific comments in hearings scheduled in July and August.

Given the preliminary nature of discussions, no strong points of contention emerged at the meeting, which was held at Virginia Commonwealth University in Richmond earlier today.

A few members of the roughly 60 people in attendance did wonder if Meridian might suffer from a conflict of interest due to its engagement by Dominion. Tim Mealey, a Meridian managing director, responded that his group is committed to openness, transparency, and reflecting the voices of all stakeholders. Meridian will not be issuing a report or making policy recommendations — its work product will be a summary of the participants’ views. Dominion will not review or approve the summary.

Several others questioned the way Meridian framed issues relating to the siting of solar and wind projects: What is Virginia doing right regarding the siting of renewable energy projects, and do stakeholders believe there are impediments to siting renewable energy projects in the Commonwealth?

Adam Gillenwater with the American Battlefield Trust said members of his group do not see the preservation of battlefields as an “impediment” to solar farms but rather as a competing good to be taken into consideration in siting decisions.

Others noted that the problems encountered by utility-scale solar and wind projects are different from the obstacles experienced by small power producers generating electricity at the rooftop level. Perhaps Meridian would consider conducting separate discussions for utility-scale and rooftop-scale issues, suggested Katharine Bond, Dominion senior policy adviser.

Mealey did not indicate what changes he might make to the discussion format. It is a “very unusual arrangement” to have an electric utility pay and contract for policy discussions mandated by a piece of legislation, he said. But he did not see that as a problem. His charge is to address the topics enumerated in the Grid Transformation and Security Act without being “unduly constrained” by the wording of the act.

SCC Examiner Rejects Dominion Tax Argument

A State Corporation Commission hearing examiner has rejected Dominion Energy Virginia’s arguments that it was correct to ignore a lower federal income tax rate in calculating transmission costs for 2018 and is recommending that the full commission give ratepayers the benefit of the lower tax rate immediately.

Chief Hearing Examiner Deborah V. Ellenberg’s ruling was issued July 9, following a June 29 hearing where Dominion employees said it had to use the 35 percent tax rate in calculating bills running into 2019, even though the federal corporate income tax rate had dropped to 21 percent effective January 1 of this year.  This was the subject of an earlier Bacon’s Rebellion post.

At issue is the rate adjustment clause (RAC) known at Rider T1, which passes along to customers the utility’s cost for transmission services.  It is one of several elements on monthly bills and the utility was seeking a substantial increase.  Dominion had put the higher monthly cost for a residential customer using 1,000 kilowatt hours at more than $4, with higher amounts hitting larger customers.

At the hearing Dominion argued that the T1 rate is driven by a formula approved by the Federal Energy Regulatory Commission (FERC) that includes as a factor the base federal rate, and it had to plug in the higher previous tax rate because it hadn’t consulted with stakeholders since the tax rate had changed.   Consumer advocates at the hearing said there was no prohibition on correcting the rates based on the new tax rate.   The hearing officer agreed.

“I find it disappointing that the Company has taken the position that the revenue requirement should include a 35% federal income tax rate that is no longer in effect rather than incorporate the significantly lower tax rate made effective even before the Company made its informational filing with the FERC in January 2018, and well before it filed this Application in May 2018,” she wrote. “It could, and should have, like other utilities, revised its annual filing to include the known and certain tax rate change. I recommend the Commission direct the Company to file a corrected annual filing with FERC effective January 1, 2018.”

The RAC tariff in question is due to be adjusted September 1 and stay in place 12 months.   Ellenberg suggested that the full commission adjust the new rate to reflect the lower taxes, saving consumers $71 million during the period.  She also suggested an additional reduction of $46 million to reflect the lower tax liability during the first eight months of 2018.  Dominion was arguing that consumers would have to wait until the true-up process in future cases to see rates adjusted to reflect the lower tax rates.

Ellenberg ruled against Dominion on a second point, involving a $13 million credit being paid to Dominion by the regional transmission organization PJM.  Dominion argued that payment was for generation services at its Yorktown plant, which is staying open longer than planned.  Ellenberg agreed with the SCC staff, the Attorney General and other consumer advocates that the payment was for transmission services and should reduce the revenue requirement for Rider T1.  The cost of operating Yorktown is fully recovered in base rates and the fuel charge.

If the full commission adopts her recommendations, Dominion’s request for $755 million for Rider T1 over the next 12 months will be reduced to $625 million, which is about the same as was approved a year ago.  That wipes out the 20 percent increase requested by the utility, with any increase in transmission costs being balanced by the lower taxes.

An Argument Straight From Wonderland

Step One: Reassure the oysters all is well.

In late December of last year, after a long debate pushed forward by President Donald Trump and covered on an almost hourly basis by the nation’s media, the Congress of the United States adopted a new tax code.  On December 22 it was signed into law, to be effective January 1, 2018.   On the business side the centerpiece was reducing the federal corporate income tax rate from 35 to 21 percent.

Almost two weeks after the law went into effect, on January 12, Dominion Energy Virginia filed paperwork with a federal agency and stated that it’s federal income tax rate for 2018 remained at 35 percent.  This (let’s use a nice word) incorrect statement would result in the company being able to knowingly overcharge customers for 12 months by an estimated $71 million, and to keep that money for an additional 12 months before making a rate adjustment to compensate in late 2020.

If you or I make a known-to-be-false statement to a federal agency to obtain money to which we are not otherwise entitled, and which we know we will have to give back, the word for that is not nice at all.  The FBI might show up on our doorstep.  We might get to see how Martha Stewart decorated her former cell.

That two-digit tax rate was a key point of discussion Friday in a hearing at the State Corporation Commission on Dominion’s request for the higher rate adjustment clause, Rider T1, for transmission costs.  The new transmission charge is the largest of many increases coming in several elements of your bills, as outlined in a story last week.

Dominion employees and lawyers argued that it was correct for them to use the old tax rate when plugging factors into a formula used to determine what customers pay for transmission.  Dominion pointed to a stakeholder process it uses to reach out to customers about changes to elements of that complicated formula.  It holds those meetings in September and has a self-imposed deadline of December 18 to settle on all the elements before making the January filing.

“Any changes should have been agreed upon by December 18” said a Dominion witness.  “There was not enough time.”

There was not enough time to strike out the number 35 and insert the number 21 and recalculate the formula, which was not used to make a rate application with the SCC until May?  For a decision not due until July or August?  Dominion’s legal position Friday was the formula did not ask for its actual tax rate, but for the tax rate which it had discussed with stakeholders four months earlier.  Any change to it in the meantime could not be corrected for another entire year.

One lawyer for consumers asked:  Did the witness think any of the customers would object to a formula change that would lower their future cost?  “I would not want to speculate as to what position customers might or might not have taken.”  That produced some laughter in the room.

In response to another set of questions the witness could not point to anything in the guiding documents preventing an amendment to the formula.  The witness did stress that the protocol called for an “annual” adjustment, and if the calculation was adjusted more than once it would no longer be annual.

The witness and Dominion lawyers kept pointing to language in state law that allows it to fully recover from customers whatever is charged to it by the Federal Energy Regulatory Commission (FERC) or by the PJM regional transmission organization.  In fact, the legislators explicitly stated that those charges are deemed to be reasonable and prudent and cannot be challenged by the SCC. But Dominion determined those rates itself by plugging in the false tax figure.  FERC approves the formula, not the rate – Dominion calculates the rates using the formula – and the formula asks for the current tax rate.

Don’t worry, the Dominion folks assured the hearing officer.  Yes, customers will be charged too much from this September until September 2019 (unless the Commission says no), but the excess dollars will be tracked and will become a credit on the account when the “true-up” process for that 12-month period becomes part of the discussion in the summer of 2020.  FERC directs an interest payment of 3.5 percent or so on over payments.

(If somebody is struggling to pay their bill in the first place, and puts it on a credit card or takes a consumer loan, is 3.5 percent the rate they will pay?  If a large customer didn’t give Dominion those dollars, might it do a little better with it than 3.5 percent?  What will Dominion earn on in over two years?)

It also came out in this hearing that the figure in question is almost $120 million, not $71 million, since the current Rider T1 rate also reflects the old tax rate.  The $46 million excess recovery for taxes for the first eight months of 2018 (January to August) will also be held by the company for another year, to become part of the calculation for next summer’s case.  The $71 million covers the subsequent 12 months until August 2019.

The state’s other major utility, Appalachian Power, made no complaints about too little time and is adjusting its transmission rider to correspond to the lower taxes, with FERC’s blessing.  Adjustments to account for the lower tax rate have been made in other 2018 Dominion rider cases and will be made to its base rates. One 2017 Dominion case that was closing down as Congress acted was re-opened by the SCC so an adjustment could be made.  Yet in this instance DEV stands firm – using the defunct tax rate was mandatory.

Perhaps somebody just thought up this clever argument and decided to try it.  Perhaps a favorable ruling on this opens a door for some other plan.  Don’t be surprised if an adverse SCC ruling on this point has DEV back before the General Assembly in 2019 tweaking the statute.  When Dominion  and the General Assembly get together, a favorite Lewis Carroll poem comes to mind:

A loaf of bread,’ the Walrus said,

Is what we chiefly need

Pepper and vinegar besides

Are very good indeed —

Now if you’re ready, Oysters dear,

We can begin to feed.’

Virginia’s Competitive Advantage in Green Power

Solar power is looking better and better by comparison to wind power, and that’s a good thing for Virginia.

In Germany, a global pioneer of wind power, hundreds of wind turbines are experiencing metal fatigue and other issues as they pass their 20- to 25-year design lives — and they are literally falling apart. Turbines are falling to the ground. Blades are snapping off and flying hundreds of feet. Razor-sharp glass fiber splinters have been documented to have flown 800 meters away. So far, no one has been hurt, but one expert speaks of a “ticking time bomb.” (Die Welt has the story here.)

Problems with an energy-production source often don’t become evident for decades. That certainly was the case with coal and oil. Now, a couple of decades after the widespread deployment of wind turbines, we’re learning about a downside of wind. Compared to Deepwater Horizon-scale oil spills and mountaintop-removal coal mining, flying turbine debris may be small potatoes. But as we think about our energy future, the comparison isn’t between wind and coal or oil — no one is building new coal or oil plants — it’s between wind and solar. The great virtue of solar panels is that they just sit there… except when hurricanes tear them off their mountings. But, then, high winds are a problem for wind turbines, too.

Assuming we can design and test turbines to withstand hurricane-force winds, there will be a place for wind in Virginia’s long-term energy future. Wind turbines work at night, which solar panels do not, so they can partially offset the daily drop-off in solar production. Furthermore, if Virginia taps large-scale wind resources, most turbines will be located offshore. Flying turbine blades are less of a problem when people are 20 miles away. But solar power poses none of these issues, and solar is being rolled out on a large scale today. Right now.

The biggest barrier to solar power in Virginia isn’t technology, it isn’t grid reliability (not at this stage of development) and it isn’t obstruction in Richmond. State law now proclaims large volumes of renewable energy to be in the public interest, and Virginia’s largest utility, Dominion Energy Virginia, is forecasting the deployment of more than 5,000 megawatts of solar in its service territory alone. The biggest barrier is local zoning codes, as we are reminded by a story today in The News Virginian.

The Augusta County Board of Supervisors adopted an ordinance yesterday by a narrow 4-3 vote that allows for the leasing of county land for solar energy use. However, critics said the requirement for a 1,000-foot setback from other residences will discourage solar development. The ordinance also does not allow for solar projects on land zoned industrial.

Roger Willetts, who owns the 44 acres in Stuarts Draft, said his property is taxed $6,000 a year by the county. But he said if a solar farm is allowed, he could generate $60,000 in revenue a year. “I think it is an appropriate use. It won’t employ anybody and it won’t have any bathrooms,” Willett told supervisors.

But under the ordinance approved Wednesday, Willetts’ property would be excluded because solar energy on industrial land is not allowed.

Augusta County, situated in a once-beautiful stretch of the Shenandoah Valley, is not a “rural” county with pristine viewsheds of farms and forests. It is characterized by what I call “rural sprawl” — scattered, low-density residential, commercial and industrial development smeared across the countryside. The viewsheds are despoiled already. Sad to say, solar farms aren’t any uglier than what’s already there.

Everywhere a developer proposes to build a solar farm — arguably the most benign form of energy production known to man — the NIMBYs come out and call for restrictions. NIMBYs don’t want gas pipelines. They don’t want electric transmission lines. They don’t want wind turbines. They don’t even want solar farms.

Ironically, solar power could be a boon to the sluggish economies of Virginia’s non-metropolitan cities and counties. Not only do Virginia’s electric utilities envision more solar, the potential exists for Virginia, long a net importer of energy from other states, to export solar power. Virginia is the southern-most state (excluding the northeast corner of North Carolina) in the PJM electric transmission region. For both political and business reasons, there is an insatiable demand for more renewable power within that 13-state region, which stretches from Virginia north to New Jersey and Illinois. Much of that demand comes from Virginia itself, the nation’s leading location for data centers, because West Coast cloud providers insist upon renewable energy sources. PJM creates a  wholesale market for that region, which makes it easier for energy producers located within it to sell into the wholesale market than it is for energy producers on the outside.

While wind-swept Midwestern states in the PJM region are better situated for wind, Virginia is the best situated for solar. As the southern-most state, the Old Dominion has greater solar energy potential — more sunny days and a latitude closer to the equator — than its northern neighbors. As seen in the table above, Virginia has the highest percentage of sun — defined as the percentage of time between sunrise and sunset that sunshine reaches the ground — as well as the largest number of annual hours of sunlight of any PJM state.

Local government officials in Virginia should think of solar power as an economic development tool. Solar farms provide a royalty-income stream to landowners, and they augment the local tax base. While they create few long-term jobs, they do deliver a burst of short-term construction work. As utilities invest in grid modernization, Virginia can provide solar energy for its own needs — up to 30% of the electricity supply, some say, without diminishing grid reliability — and it can export green power to states to the north. This looks like a once-in-a-generation economic opportunity for rural Virginia. Let’s not blow it!

Changes to Electric Bills Add Up To Increase

Net impact of pending Dominion rate adjustments on a residential bill for 1000 kwh. Source: SCC Staff

A recently-filed estimate by the State Corporation Commission staff projects that a typical residential bill for a Dominion Energy Virginia customer will rise more than $7, or more than 6 percent, by next April, despite expected adjustments in the customers’ favor due to the Tax Cuts and Jobs Act (TCJA) of 2017.

The utility is seeking to retain a $71 million portion of that tax reduction windfall until at least September 1, 2019 – a full 20 months after Congress cut the taxes and almost 18 months after the General Assembly confirmed that the tax cuts should flow through to customers.

A chart filed with testimony by David J. Dalton of the SCC staff, reproduced above, tracks 13 specific adjustments to the complicated billing process either approved by the SCC or pending.  Each of the riders listed is for a specific generation facility or cost, such as the separate charge for fuel which is adjusted annually and this year is expected to rise.  You can find a brief explanation of each here.

The testimony dealt with one of the larger upward adjustments, a separate rider charge for regional transmission services designated as Rider T1.  Arguments over that rider are set for Friday morning in front of an SCC hearing examiner.  As proposed it would add more than $4 a month to that 1000 kwh bill.

As part of the regional transmission organization PJM Dominion pays that entity for transmission services and then passes the costs directly to customers.  For 2018 Dominion is seeking to recover $755.5 million from customers, which is more than 20 percent higher than the amount approved in the 2017 annual review.

Like most of the matters before the SCC, a large record has already been built and in general the SCC staff agrees with the utility’s accounting and request.  There are two major points of disagreement, the largest of which involves the taxes.  Dominion made no reduction to its request even though it includes about $71 million more for 2018 taxes than may be paid, claiming Congress acted too late in 2017 to change it.

One element of a complicated 2018 state law on electricity regulation directed the state’s major electric utilities to quickly adjust their bills to reflect the lower federal taxes, which are included in base rates as a pass-through cost.  You can also see the impact of that coming change on the SCC chart above, which includes a $2.52 reduction for the lower taxes.

The legislation directed the return of taxes included in rates for “generation and distribution” but did not mention transmission.  It made no specific mention of taxes paid by PJM and then charged to the utility and passed on to its customers.  The state’s other major utility, Appalachian Power Company, has made the tax adjustment in its request for the 2018 transmission rider approval.

Making that adjustment would cut Dominion’s request for additional Rider T1 revenue – and the resulting monthly increase to customers – by more than half.  The $71 million in question would increase the tax cut’s benefit to customers another 57 percent over the $125 million reduction in the legislation.

In company testimony Dominion pushed back and argues that there will ultimately be no harm to consumers as it will all come out in the wash in the 2019 Rider T1 review.  The SCC’s Patrick W. Carr writes that fixing it now will “minimize future over-recoveries that will result from a revenue requirement in this case that ignores the TCJA’s effects.”

The other dispute involves less than $13 million.  Because Dominion is being forced by PJM to keep its Yorktown generation facility open longer than planned, awaiting construction of a delayed power line, PJM is paying Dominion $13 million to cover the cost of operating the plant.

The SCC staff is arguing that money should be a credit on the Rider T1 transmission revenue requirement because PJM collects it as a transmission cost before paying Dominion.  If fact, Dominion is paying about $5 million to PJM toward that $13 million cost and collecting it under this rider. (The rest is coming from other load-serving entities on PJM).  Dominion is arguing the revenue belongs to its generation unit and should not reduce its need for T1 revenue.

Whether the money belongs in the rider or base rates matters because Dominion’s base rates remain frozen until at least 2022 so if the additional revenue is profit the company will keep it.  This illustrates the benefit to the utility of having its base rates protected from adjustment, while at the same time having near certainty that costs in other areas can and will be passed on to customers.  Expect similar skirmishes in coming years over the murky border between riders and base rates.

Hurricanes, Solar Panels and Construction Standards

The 2017 hurricane season wrought immense destruction to the electricity grid across the West Indies, most visibly in Puerto Rico, the U.S. Virgin Islands and Barbuda. Not only did high winds knock down power lines, they tore away solar panels that otherwise could have provided power after the storm clouds parted. In contrast, finds the Rocky Mountain Institute (RMI), solar facilities in the British Virgin Islands, the Turks & Caicos, and St. Eustatius, survived winds reaching 180 miles per hour.

What was the difference? Installation standards.

RMI sent structural engineering teams to the Caribbean to find out why some solar structures survived nearly unscathed while others disintegrated.

The teams noted similarities between the failed systems, including module clamp failures, undersized racks, undersized and under-torqued bolts, a lack of bolt locking solutions, and a lack of lateral racking support. On the flip side, the systems that survived had the modules through bolted (no clamps), bolts with locking solutions, and lateral racking supports.

Making solar arrays more resilient in the face of natural disaster in the Caribbean would add only 5% in engineering, procurement, and construction, PMI estimates.

The Caribbean is far more exposed to hurricanes than Virginia is, but the questions PMI raises are certainly relevant here as the Commonwealth embarks upon an unprecedented build-up of solar capacity. Virginia could be getting as much as a quarter of its electric power from solar within 20 or 30 years. We want to make sure that power comes back on after a natural disaster.

What construction standards would be required to ensure that solar panels held up to a hurricane? Would the same standards need to apply across the state, or could they be relaxed for solar capacity farther from high-speed winds along the coast? How resilient would Virginia’s electric grid be if a hurricane knocked out 10% or 20% of the state’s solar capacity? Could we import enough power from elsewhere in the PJM Interconnection grid? How much would it cost to protect against a worst-case scenario?

As Virginia moves towards a solar future, I would think that these questions are worth asking.

Things Legislators Didn’t Hear (Or Want To)

“It might have happened without this bill.”

“I think it was going to develop anyway.”

Both comments were made today about the prospect that Virginia will actually see 5,500 megawatts (MW) of new solar and wind generation installed within its borders in the next few years, the amount of new solar designated as “in the public interest” by Dominion’s Senate Bill 966.   The law takes effect July 1.

Photo credit: GreeneHurlocker. Your correspondent on the far right. Eric Hurlocker at the podium.

The comments came at a continuing legal education forum sponsored by Richmond law firm GreeneHurlocker PLC and attended by many of the key players in the legislative struggle over Senate Bill 966.  The discussion of the bill itself was a replay for most, but the follow up discussion of its likely impacts got interesting quickly.  The audience included legislative staff and several key players from the State Corporation Commission staff.

(The firm also distributed updated copies of its excellent summary of Virginia electricity regulation, reflecting the recent changes.)

That first quote above is from Francis Hodsoll, a former investment banker who is now CEO of SolUnesco based in Reston.  Hodsoll said his was one of up to 26 renewable energy companies that spent perhaps tens of thousands of hours negotiating with Dominion to bring more solar to the Commonwealth, and not just as special projects “ring fenced” for specific customers such as Microsoft or Amazon.

He noted that Virginia is the southern-most state in the renewable-hungry PJM territory, which is why several of the ring fenced projects are underway or in development.  But Virginia has only 56 MW of solar serving general customers and only those 56 MW have gone through the most rigorous SCC.  The actual legal weight of the phrase “in the public interest” on the SCC’s authority remains a source of concern for the solar developers, he said, but they are enthusiastic about the 2018 law.

Similar enthusiasm was voiced by the second person quoted above predicting that the solar developments were likely without the bill, Eric Hurlocker of the host law firm.  When asked to provide a letter grade to the legislation he gave it an A but was open about why:  the chaos and confusion it creates “will invigorate business.”  The crowd of lawyers listening joined in his laughter, but of course he wasn’t actually kidding.

Will Cleveland of the Southern Environmental Law Center, asked to provide the same letter grade, gave the bill an incomplete – or really “too soon to tell.”  He identified several “atrocious” elements in it, but clearly he hopes it does live up to all or a least some of the marketing hype about renewable energy and a modernized grid that supports further innovation and cost savings.

Matt Gooch from the Office of the Attorney General, careful to say this was his opinion and not that of Attorney General Mark Herring, said the bill earned an A from the utility and its stockholders, he gave it a C as a boost to the wind and solar industries, but added “the big losers were the customers, the people who pay for electricity.”

As everybody understood during the session and as was emphasized again today, the bill does not – does not – mandate the development of a single megawatt of renewable energy.  Nor does it force the SCC to approve any particular application.  The legislation used much stronger language elsewhere in the bill to dictate policy to the SCC on paying for underground power lines.

And nothing I heard today undermined my personal opinion that the pleasing green energy smiley face on the cover of the bill was nothing but a cover story for the violently anti-consumer elements buried in its bowels and its multiple enactment clauses.  To the extent you see more solar farms or wind turbines in Virginia, they were coming anyway.  The Northam Administration’s pending carbon regulation and the federal investment tax credits will have far more to do with that outcome.

The other big element of the bill popular with environmentalists was a requirement that the two major utilities invest about $1 billion (of ratepayer money) in various energy efficiency programs designed to reduce the demand for energy (see enactment clause 15 in the bill).  But Assistant Attorney General Gooch raised a good question about that, too.  Given that the purpose of these programs is to drive down demand, thus depriving the utility of revenue, will that lost revenue count toward the $1 billion of “cost” required?  Or will the utility be allowed to recover that lost revenue, profit margin included, meaning the programs might actually cost consumers $2 billion?

That was one wrinkle on this bill that was not noticed (or at least brought up) during the session. You can bet the chess grand masters at Dominion have gamed that out, but in the meantime Hurlocker’s expectation will be fulfilled:   chaos and confusion equals billable hours.