AG Sought Rejection of Some Solar Over Cost

Jason Miyares. Photo credit: Washington Post

by Steve Haner

On behalf of Dominion Energy Virginia’s customers, Attorney General Jason Miyares (R) asked the State Corporation Commission to reject five of the solar projects included in the statewide renewable energy development package the Commission approved last week.

The Commission, however, did not take them off the approved list and thus did not “use its authority to send a regulatory signal to the Company that excessively priced projects will not be approved,” as Miyares requested. This is just the beginning of a years-long process of many such applications, including the pending offshore wind project. Such a missed opportunity could be important.

The recommendation from the Office of Consumer Counsel was contained in a final January 19 brief filed in the case. That was the Wednesday after the Saturday Miyares took the oath as Attorney General, so there is no real way to know if it differed from what Attorney General Mark Herring (D), the man he replaced, would have asserted had he won the election.

It is a fairly assertive argument, however, pushing back on the common notion that compliance with the Virginia Clean Economy Act – which will remain state law after the 2022 General Assembly failed to change it – means doing whatever Dominion wants or means reading that complicated law in the way Dominion interprets it.

Requiring electric utilities to transition to net zero carbon emissions will involve significant costs approaching $90 billion. The General Assembly has made the policy decision that Virginia’s electric utilities will transition to net zero carbon emissions over the next three decades. As with any long-term utility planning, there are pathways forward that will be higher cost and others that will be lower cost. The Commission, as the economic regulator overseeing this transition, has the authority to ensure that the costs of the transition are reasonable and no more than necessary. (Emphasis added.)

Miyares’ Office of Consumer Counsel objected to the projects on the basis of excessive cost, having compared the levelized cost of energy (LCOE) of the various proposals (which vary widely). It also compared the projects it objected to, all of them to be built and owned directly by Dominion, to other projects in the application which were owned by third parties and merely subjects of power purchase agreements (PPAs). PPA’s are usually cheaper on consumer cost comparisons.

How much will these projects now cost ratepayers, and how much more than lower cost alternatives? The AG’s brief is peppered with blacked out portions where the hard numbers are redacted. It was accompanied by a separate addendum which was completely sealed. This is the maddening secrecy that surrounds the key financial debates that will determine the cost you pay for electricity for the next 30 years.

Rejecting those specific projects which it claimed “would result in unreasonable cost burdens for customers as compared to available PPA options” was one of three major recommendations offered by the Consumer Counsel. Of the other two, neither was firmly decided in the final order.

The second also addressed company-owned versus outside-provider generation.   As it laid out the decades of investment in solar, wind and storage facilities Dominion is to undertake, the 2020 statute also dictated that 35% of the power would come from non-utility sources. Dominion sees that as a ceiling that promises it no less than 65%, while the Consumer Counsel argued it is a floor that can be exceeded. And if it is better for the consumer, it should be exceeded, the brief argues.

The third dealt with a bit of accounting legerdemain that Dominion practiced, but which was widely called out and condemned. While still part of the PJM Interconnection regional electricity market, Dominion no longer participates in the capacity auction. It no longer puts its power plants under PJM control in exchange for major cash capacity payments.

Yet in its economic analysis of the consumer costs for this array of solar and storage projects, PJM capacity payments were included, assumed, and greatly skewed the claimed LCOE and net present benefits (which, again, you and I cannot see.) It is possible this lay reader may have missed it, but the Commission didn’t seem to clear that up in its final order. It was not the only question left pending, leading to this circular footnote:

With respect to issues raised by participants not expressly addressed by the Commission herein, the Commission finds that resolution of such issues is not necessary to the Commission’s decision in this proceeding, and the Commission hereby exercises its discretion not to address such for purposes of the instant order.

Also called out and condemned by the AG and other parties was Dominion’s claim that it could value the renewable energy credits (RECs) generated by various projects as equal to what it calls the “deficiency payment” of $45 per megawatt hour. The “deficiency payment” is in effect a fine, imposed by the VCEA (remember, written mainly by the utility) if Dominion fails to meet the rising annual targets for providing emissions-free electricity.  

When I first spotted the “deficiency payment” in the bill in 2020, my initial concern was that it would just be passed on to consumers. That was unimaginative on my part. Now it is clear that Dominion had it in mind all along as an incredibly useful accounting gimmick, subtracting it as an “avoided cost” and thus making its projects seem cheaper. Now here it is being claimed in order to inflate the REC values beyond their actual market value, often a far lower dollar amount.

It is as useful, flexible and subjective as Einstein’s cosmological constant.

Ridiculous as it is, the Commission order did not prohibit the practice. It merely ordered Dominion in the future to model its costs both ways, using the $45 “cosmological constant” and the actual market values. That seems to leave open the possibility that the higher number, which is going to be a big issue with the wind project, could stay in the formula.

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16 responses to “AG Sought Rejection of Some Solar Over Cost”

  1. Dick Hall-Sizemore Avatar
    Dick Hall-Sizemore

    It seems highly improbable that Miyares’ staff was able to put together an analysis and brief between noon on Saturday when he was sworn in and 5:00 p.m. on Wednesday, when the brief was filed.

    1. Stephen Haner Avatar
      Stephen Haner

      Agreed, but knowing the office I suspect the staff did go to the new boss and run through the key issues with him. Or at least the new Civil Division deputy (double Tribe lawyer, I hear.) And the new team could have toughened it up.

  2. David Wojick Avatar
    David Wojick

    Are these RPS event just once a year or more often? I see in the Order that mere mortals could have testified but none did. Perhaps some of us can do that next time.

    1. Stephen Haner Avatar
      Stephen Haner

      Next installment to be filed Sept ’22, I think I read.

      1. David Wojick Avatar
        David Wojick

        That is a year after this one so annual. But the OSW request is apparently special so separate.

  3. Stephen Haner Avatar
    Stephen Haner

    Two observations I might have included, but both are kind of on the fringe. The SCC final order shows signs of a divided Commission, with the departure of Angela Navarro. She was the former Northam aide who was a VCEA author and enthusiast, but was not elected to a full term by the 2022 GA. So there is a vacancy on the 3-member panel. Also, since it was reported elsewhere that Miyares made many changes in the staff, it is worth noting he did NOT make any changes in the Office of Consumer Counsel.

    1. David Wojick Avatar
      David Wojick

      Divided along what lines?

    2. Dick Hall-Sizemore Avatar
      Dick Hall-Sizemore

      His not making any changes in the Office of Consumer Counsel explains how Miyares was able to file the brief so quickly. It had already largely been written. So, credit needs to be given both to Herring and Miyares.

  4. LarrytheG Avatar

    The “staff” sounds like it had info already…. hit the ground running as they say………

    WRT the SCC, I do wonder since they were kneecapped by the GA, that they really have returned to being a functional agency.

    If Youngkin and his AG are really serious, putting the SCC back in the role they should be – would be a plus for Virginians.

    It’s becoming more clear that Youngkin and company are not a “get along as you go along” group which is good and bad. He’s not afraid to question/challenge the status quo but politics has a way of reining in those who stray too far off the ranch but perhaps he’s following the orange-man method!


  5. Nancy Naive Avatar
    Nancy Naive

    Woohoo! Just read the company acconting for FY 2021, and a fully forgiven PPP just added $11/share to my holdings! Who says government don’t work for the little guy?

    Now, about Virginia taxing the forgiven loans as income, who was it that thought it should be tax-free? Well, you’ve convinced me!

    1. LarrytheG Avatar

      Well, folks who receive forgiven loans for credit cards or mortgages – owe taxes on it – it’s treated as income.

    2. Stephen Haner Avatar
      Stephen Haner

      Waiting for my thank you note from Blue. Waiting. Waiting.

      Think about that a sec. How much PPP would that company actually need? Remember the hundreds of millions in COVID bucks that was also paying bills in arrears at taxpayer expense. What a vacuum cleaner.

      1. Nancy Naive Avatar
        Nancy Naive

        Can’t and won’t argue. It was a huge giveaway to companies that either didn’t need it or didn’t use it, including mine. We would have seen a two year 10% rise in share value without it, and our company was largely able to work from home prior to 2020. I was told only 4 people showed to a 30 office complex on a daily basis and scheduled use of the skiff kept everybody happy.

        But still, I’m sooooo ashamed 🤣

        1. Stephen Haner Avatar
          Stephen Haner

          The bulk of the tax benefit cited in the shareholder report was probably federal, to have that kind of impact.

  6. Steve Haner, thanks for an important bit of sleuthing, here.

    Your catalog: of costs claimed that aren’t incurred, of income that isn’t claimed, of monopoly projects claimed to be “in the public interest” that are underbid on cost by every competing project, of statutory floors construed as ceilings, of the cost data (sealed from disclosure to protect competitive trade secrets) regarding units which if built will not compete — all add up to a scam that only those well versed in the arcane art of utility ratemaking can penetrate.

    In most States and at the FERC, there is full, transparent disclosure of all cost data associated with any utility facility that is ‘rate-based’ (and thus afforded a regulated return on investment). And there is a strong, independent utility regulatory Commission, allowed to do its job without legislated blinders on. And there is a strong, independent, fully funded, office of consumer counsel that participates in all significant utility regulatory and consumer complaint proceedings. Virginia is not one of those jurisdictions.

    The MSM is supposed to backstop the components of good utility regulation with the reporting experience and time to dig into utility regulation and educate the public accordingly. Perhaps a little of that spirit of inquiry persists in Virginia, but far too little capability to substitute for the regulatory shortfalls.

    The GA is obliged to disclose fully those donations and other sources of conflict of interest which might cast doubt when it substitutes its own judgment for that of the regulator, the consumer counsel, the media. This blog has seen that obligation disparaged, the result even called “the imperial clown show.”

    So where are we? Good luck, Steve — Virginia needs you.

  7. […] the “shall be deemed prudent” language.  In the most recent review of solar projects both the Attorney General and various environmental groups filing under the umbrella of Appalachian Voices urged the SCC to […]

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