By Steve Haner,

There is some irony in how Virginia will reenter the Regional Greenhouse Gas Initiative (RGGI) carbon tax scheme on Wednesday just as a long and deep heatwave begins.  It is safe to predict that every RGGI-covered coal and natural gas generation plant in the state will be running full tilt until next weekend or longer to meet electricity demand.  

The energy cost to the utilities and ultimately to consumers in multiple states will be greatly inflated by the mandate that the Virginia generation units must add the cost of RGGI to every megawatt hour they sell starting Wednesday.  At $35 per ton of carbon dioxide emitted, the wholesale price of natural gas power may rise about $15-18 per megawatt hour, depending on the efficiency of the plant. 

Advocates for wind, solar and battery power often tout its lower cost to produce.  But within the PJM Interconnection regional transmission organization, the price you pay is not what the power costs.  The price you pay is the price charged by the most expensive generation needed to meet the last portion of daily demand. This is why RGGI is a profit bonanza for solar power. 

The $35 per ton of carbon emissions Virginia’s natural gas plants must add to their prices starting Wednesday will also raise the price of every solar, wind, nuclear or hydropower megawatt generated.  If a battery discharges, the price paid by PJM for that power will be higher because of RGGI.  The generators (often independent companies) will collect the same amount per megawatt hour as the utility-owned coal or gas plant.

When Virginia load serving entities call on generation from out of state to meet their demand, those out of state suppliers will also get the inflated PJM marginal price.  RGGI also means that West Virginia and Pennsylvania coal and gas plants will be selling more power into Virginia and selling it a higher price.

Within the Dominion Zone of PJM in the next few days, that price will be set by the most expensive natural gas generation (maybe a coal plant), and that price will be higher than it would have been on Tuesday before the RGGI tax was added.  (Somebody with more grasp of PJM’s operations should be tracking this price evolution as it happens.) 

The addition of the RGGI tax into the price of coal and natural gas power will affect the day ahead price that PJM sets as it estimates and contracts for the next day’s power demand.  It will also increase the spot price that a utility must pay if it suddenly finds itself short of supply, because it got hotter than expected or because some generation plant or power line went out of service.

As explained in this space often now, the cost of the RGGI allowances themselves is only part of the way RGGI raises everybody’s electricity price.  This other effect, the impact on the overall wholesale daily or hourly PJM price, takes just as much money or more out of your pockets, and in this case much of the excess is pure profit to providers.  

None of those excess dollars, the dollars generated by the universal wholesale price inflation, go to the various “good works” state spending programs that are also so important to RGGI’s advocates.  You’d think they wouldn’t leave all that money on the table for others to collect.

The RGGI rebate scheme just adopted by our General Assembly does not protect you.  Yes, residential users of Dominion, Appalachian Power and some (some but not all) rural cooperatives may get back the direct allowance cost.  Nobody will get back the higher prices collected by all the other generators because RGGI raises the wholesale price. 

Even the carbon tax rebate may not prove to be 100 percent.  Virginia will have 21.5 million allowances to sell, but Virginia energy producers in 2025 emitted more like 29 million tons of CO2. They may (will) need to buy more allowances from other states. If the state gives back 45 percent of the money it collects off RGGI to be rebated, that likely will not be 45 percent of what the utilities spent.  The rest of the money went to other states.   

And the RGGI rebate three card monte game does nothing for Virginia’s business energy customers, who pay the bulk of it.  They get no rebates under this and will have to absorb in full the higher energy prices.  Except, of course, just like the power companies, they will have every right to raise their own prices and make the customers pay.

There are people in the Abigail Spanberger Administration and the General Assembly who fully understand this, although it seems many do not.  Most media outlets are uniquely dense on how this works and will join the cheerleading over RGGI and the rebates. People are and will remain confused, which the RGGI advocates are counting on.

Thank you for reading this sermon, if you did, but it is way too late to stop this train wreck now.  Budget more for power, at home or at work.  The RGGI carbon tax of $35 per ton will only rise over time, as it always has.  The next auction is in September.