Author Archives: Steve Haner

Caution: These Links Will Ruin Your Sleep

Posted on October 18, 2018 | 8 comments

A campaign pitch for an incumbent member of Congress you will not hear:  You are getting $4 worth of government for every $3 you pay in taxes and fees, and the other buck is piled on as debt for your kids and grand kids to pay! You should vote me back in!

The Treasury Department’s own news release Monday, flagged by The Republican Standard,  attempted the spin that this is not the fault of President Donald Trump and the halcyon days coming thanks to his wise policies will soon begin to reverse this.  Hang with us!  Reading through the actual reports on income and spending, however, it is impossible to build up any hope.

This is another one of those cases where I indulged my own morbid curiosity and am now sharing the results.  I do not spend much time with the federal reports, compared to the state spreadsheets, but from time to time everybody should dig into the depressing details.  Stop reading my observations and dive into the actual reports – I won’t be offended.

The federal budget is broken into two big categories:  on budget and off budget.  This in no way correlates to the state’s system of splitting things into general fund and non-general fund.  The federal off-budget component is mainly Social Security pension and disability payments.   Other situations where specific taxes or fees pay for specific programs, including Medicare and the Post Office, are lumped into the on-budget categories.

When Social Security was collecting healthy receipts exceeding its annual outlays, it was producing surpluses.  These off-budget surpluses provided a nice way to hide the true size of the deficit in the on-budget category.  Well, for federal fiscal year 2018 (which ended September 30) that was a very small fig leaf indeed – about $6 billion, compared to $49 billion the year before.  Will the current fiscal year 2019 produce the first cash flow deficit for Social Security?  Will that wake up anybody?

When you back out that small off-budget surplus, the on-budget deficit was $785 billion, just under 25 percent of the $3.26 trillion in on-budget spending.  That on-budget deficit grew $70 billion, almost ten percent in a single year.  You can choose whether to blame higher spending or tax cuts.  Machts nichts.

The big federal tax cut went into effect three months into this past fiscal year and was in play for nine months, but individual income tax receipts grew 6 percent for that year.  Perhaps it’s too soon to judge the impact until people file next year.  But the impact of the corporate income tax changes did show up last year, with a $92 billion (31 percent) drop in CIT revenue.  There was a healthy boost in customs duties and that will really take off for 2019. (Is that the plan? Make tariffs the main source of federal income for the first time since President Polk?)

The federal officials quoted in the official release make much of slight decreases in a couple of social benefit programs, such as SNAP (a.k.a. food stamps), but reviewing the spending sheets really reveals the depth and breadth of income-based transfer programs, plus the political genius of sprinkling them through so many difference parts of the budget.

SNAP and other food programs are in the Agriculture Department ($91 billion).  Federal student aid ($46 billion) is in Education.  Medicaid ($389 billion), Temporary Assistance for Needy Families ($21 billion) and Children’s Health Insurance Program ($17 billion) are in Health and Human Services.

Housing gets its own programs for the economically challenged ($48 billion).  The Earned Income Tax Credit ($59 billion) is buried under the Treasury Department and the Social Security Administration handles the Supplemental Security Income payments of cash ($55 billion) that are not part of the regular disability coverage, which is (of course) off budget.  I’m sure I missed some.  I think the Veteran’s Administration still makes some pension payments based on poverty (maybe not.)

A single Department of Federal Need-Based Assistance which puts all those programs in one basket would approach $800 billion and would be larger than defense spending or the payments on the debt ($521 billion).   Which of course is why no politician of either party will ever, ever do that and make things that clear.

What is the choice on November 6?  There really is no reason to differentiate the parties on this issue any more, or to believe any candidate promising something else.  A bipartisan deal on Fiscal Year 2019 explodes spending and the projected deficit this year approaches $1 trillion. We are in this condition in a strong economy and looking at the deficits run coming out of the last recession indicates the deficits in the next one (inevitable) will approach $2 trillion.

 

 

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Posted in Entitlements, Federal

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Global Climate Catastrophe (in 1501?)

Posted on October 17, 2018 | 34 comments

Low water creates islands in the Danube at Budapest last week. The normal waterline is visible on the bridge above their heads and the gap equals the draft of Viking’s boats.

Once the Viking Cruise people have your mailing and email address the marketing is relentless, and the fog from 11 hours on two legs of Lufthansa had barely lifted before the email arrived with a fabulously attractive deal on a Rhine cruise in early 2019.

Ah, but I know now why the price is so low.  Drought and low water in central Europe have disrupted cruising all summer and fall.  That iconic sail past the Hungarian Parliament in Budapest so prominent in Viking ads turned into a slow roll on a motor coach.  The one Viking boat docked in Budapest hadn’t moved in weeks and was described as a ghost ship.  We stayed in a below-standard Budapest hotel far from the stunning night views (wash cloths?  Why would you want them?)

The low water on the Danube, Rhine and others is hardly Viking’s fault and they did their best.  One of the captains (we had to switch boats before reaching Vienna, where we left the second boat behind) said it was the worst sustained low water since 1947, and I heard others call it a 200-year drought.  Drought of course might not be the only problem as with low rainfall water draws for farm or human consumption also increase and have greater impact.

Meanwhile, back in the states, Evil-Human-Caused Climate Change created the opposite situation, with a nasty hurricane slamming the Florida Panhandle and matching Florence with its impact on Richmond.  Drought, storms – anything and everything can be blamed on warming temps (convenient), and the alarmists were out with another report that the end is nigh.

Flood levels recorded on Passau Rathaus (City Hall)

Then again, perhaps its all just normal variations.  Neither droughts or hurricanes are new and with a scale that goes up to five we’ve yet to see a hurricane that hits Spinal Tap’s eleven.  While the Dunube is low now, at Passau we were shown dramatic evidence of past floods, the most recent and second highest in 2013.

The fault of industrialization and fossil fuels?  Check out the year for the highest recorded, 1501, and the many others of similar impact during pre- or early-industrial times.  For North America, of course, there are at best only 200 years of records and perhaps 100 years of good ones.  Thomas Jefferson’s personal records pick up the ending of the so-called Little Ice Age.  Nasty hurricanes plagued the Jamestown settlement.

Getting off the river to drive for hours on the autobahns gave me a chance to see the extensive solar panels in Germany and the massive wind turbine installations in Hungary, visible again from the air during our departure.  Their addition to the landscape did not reduce the beauty of the scenery.

Turbines visible from a rest stop along the highway inside Hungary.

There is no question we need to move quickly away from burning filthy coal and increase the percentage of energy generated from sun and wind.  I still consider natural gas a good substitute for coal and a necessary part of the mix.   But do everything the environmentalists want and the hurricanes will continue, the floods and droughts will continue, and You Know Who provided excellent advice 2,100 years ago about building on rock, not sand, as recorded by Saint Matthew.

Viking is moving more emphasis onto its ocean cruise business, perhaps as a hedge against continued challenges on the rivers.  Odds are the rivers will be back up in a year or so and the concern will shift back to floods.  If indeed the climate is changing, and it seems to be, I just don’t buy that human activity is the single or dominant cause, or that adjustments now will make much difference down the road.

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Posted in Environment

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When and Why Can the SCC Say No?

Commentary - Posted on October 5, 2018 | 9 comments

When the General Assembly and Governor pass a law that states a source of electricity – or even a specific power project – is in “the public interest,” what is the State Corporation Commission left to do?  Does that mean the SCC must approve the project even if it turns out to be unreasonable, imprudent or not needed?

Since 2007 the Assembly has designated several aspects of generation and transmission “in the public interest,” this year adding to the list up to 5,000 megawatts of renewable generation and a small and expensive demonstration project for off-shore wind for Dominion Energy Virginia.  Before going further on that wind project, Dominion filed a petition seeking a declaratory judgement on the question of prudence.  Just because one parent said yes, best to check with the other one.

The two SCC commissioners then turned the tables and asked all participants in the matter to give their legal opinion on seven specific questions.  Lawyers for the two major electricity providers, for environmental groups and for the Office of the Attorney General all took a crack at questions such as this one:

“6. Do the statutorily-mandated public interest findings under either Subsections A or E override a factual finding that the project’s: (a) capacity or energy are not needed for the utility to serve its customers; and/or (b) costs to customers are unreasonable or excessive in relation to capacity or energy available from other sources, including but not limited to sources of a type similar to the proposed project?”

Before Dominion dictated a new regulatory approach in 2007,and before Virginia legislators developed a taste for micromanaging the state’s energy economy, such questions never came up.  The SCC had unlimited authority to decide what was needed, prudent or reasonable, subject to appeal.

The briefs are all buried in this pile of documents and they were supplemented with oral arguments on Thursday, drawing a packed house.  There was agreement that a finding of public interest is distinct and does not override questions of prudence or reasonable cost, and the SCC can reject a project for those reasons.  But picking up a phrase used before, Joseph Reid III of McGuireWoods said Dominion views the legislative blessing as “a thumb on the scale” and that phrase in the law “strongly encourages a result.”

The petition dealing with the wind project is filed under a new process for testing prudency. “It would be illogical for the General Assembly to first declare solar or wind generation facilities to be in the public interest and provide for a prudency determination if the General Assembly meant for the terms to be treated synonymously. There would be no need for a prudency determination if such was the case,” wrote Assistant Attorney General Mitch Burton of the Consumer Counsel’s staff.

Burton also pointed to the part of the new bill dealing with putting residential power lines underground.  The General Assembly years ago deemed that underground program in the public interest, and directed the SCC to interpret the law liberally, yet the SCC scaled back the project based on cost.  This year the Assembly added a hard mandate that those costs had to be deemed reasonable,  but that implies SCC discretion remains in other areas.

At times the argument focused on the general issues, but at other times it focused on the project at hand – the 12 megawatt, two-turbine wind project planned for 27 miles off Virginia Beach and projected to cost $300 million.  Supporters of the project argued that the SCC should not reject it just because the tiny energy output is not needed.  Given this has been billed all along as a small demonstration project, not a major source of electricity, the question of need may not apply in its case.

But need will be a question in other cases, and projected demand growth is a major dispute in the pending Dominion integrated resource plan.  The rapid move to renewable sources may be accompanied by the early (and costly) retirement of existing fossil fuel generation. This part of the discussion produced the strongest disagreement among the parties.  They had different answers to part (a) of the question set out above.

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Posted in Commentary, Energy, General Assembly, Regulation

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Virginia Should Double Its Standard Deduction

Posted on October 4, 2018 | 16 comments

In 1987, as part of its response to the conformity issues created by President Reagan’s tax cut, the Virginia General Assembly increased the standard deduction available to Virginia taxpayers to $3,000 for an individual and $5,000 for a couple. At some point since the joint filing amount went up to $6,000 to eliminate any marriage penalty.

Faced with a similar problem in 2019, that’s what the Virginia General Assembly should do as a start:  Increase the state standard deduction.  Double the amount of income a Virginia couple can shield from tax under that method, with no itemized deductions necessary.

Virginia also allows personal exemptions to provide a bit more tax-free income.  The personal exemption is now $930 each.  A couple with one child gets $6,000 in standard deductions and $2,790 in personal exemptions for a total of $8,790 pre-tax income.  Compare that to where surrounding states are on that score and to the new federal standard deduction of $24,000.  Even if Virginia doubles the standard deduction, its only a step in the right direction, as you can see below.

Taxable Income Threshold
Couple Plus One Child
Virginia Current $8,790
Virginia Proposed $14,790
Maryland $13,600
District of Columbia $24,000
North Carolina $17,500
South Carolina $24,000
West Virginia $6,000
Tennessee No Income Tax
Federal Taxes $24,000

I’ve been drawn to this idea from the start but when I saw that surrounding states (except West Virginia) were already there, this suddenly struck me as imperative.

It would be only a good first step toward preventing the personal income tax increases which will result when Virginia conforms to the new federal tax rules and definitions.  The idea is further explored in a briefing paper published today by the Thomas Jefferson Institute for Public Policy.  It is neither creative nor comprehensive tax reform, but creative and comprehensive make people nervous and will take time so let’s start with something simple and familiar we can do quickly.

It is better than doing nothing, which is what the Virginia Society of Certified Public Accountants is recommending.  It wants to adopt conformity and let the revenue accumulate, hoping later next year some consensus on reform will emerge.  Hope is no substitute for cash.  This is a very attractive idea that might get consensus now and could be adopted in the same bill that accepts conformity.

It is also a better approach than breaking conformity and allowing Virginia taxpayers to itemize on their state taxes while taking the standard deduction at the federal level.  The whole idea behind federal tax reform – and many surrounding states clearly agree – is to move people away from deductions driving their economic behavior.

Finally, this is a better idea than giving low income workers grants through the Earned Income Tax Credit system.  The grants come once a year and you must apply.  They reduce to nothing on a sliding scale.   This is a clear-cut tax reduction of $345 ($6,000 x 5.75%) for almost every family taking the standard deduction.  With withholding tables adjusted, the money shows up in every paycheck.

Many in the political class remains focused on spending the windfall money.  This takes away about $440 million of that possible spending, according to the Department of Taxation’s modeling.  This is an accidental tax increase, a windfall not approved by the General Assembly or (despite some of the rhetoric) caused by the Governor.  Any tax increase has economic consequences as people lose spendable income, so if you can reduce that impact there is economic benefit.

People with a pile of itemized deductions, which would usually be people who also have high incomes, taxes, interest payments and charitable giving, didn’t take the standard deduction before and will not do so going forward. This idea does nothing for them.  This also does nothing to address the corporate income tax increases which are coming.

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Posted in Taxes

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Rural Virginia Does Not Need A Marshall Plan

Posted on October 3, 2018 | 11 comments

Gov. Gerald L. Baliles

In devastated post-war Europe, millions of people were qualified and eager for jobs or desperate for capital to get their farms planted and harvested.  In demographically-diminishing rural Virginia, farms are mechanized. If you build a huge factory today qualified workers may not come in sufficient numbers.

A scaled-down 21st Century Marshall Plan is a nice rhetorical image, and former Governor Gerald Baliles captured the headlines by using it in a recent speech, but the analogy simply doesn’t fit.  Rural Virginia’s problems cannot be fixed with an infusion of cash.

When Baliles has something serious to say, serious Virginians should read or listen.  After successful turns as legislator, attorney general and governor (pestered but never tripped by the loyal opposition) he returned to private life and never again appeared on the ballot.  That alone sets him apart from today’s career politicians.  He has had a long-standing focus on his native rural Virginia, but his legal career was Main Street Richmond.

“If you were to take the “rural horseshoe” and hold it up against the Golden Crescent, the contrasts are stunning. Two Virginias!  Moreover, according to our community college system officials, if the “rural horseshoe” region were considered a separate state, it would be tied for dead last with Mississippi and West Virginia for educational attainment levels—dead last for citizens with high school diplomas; dead last for citizens with college degrees. Think about that.”

His emphasis on education goes back to his own life experience and that of so many others, my mother’s Southwest Virginia family included.  His critique of Virginia’s failure to hold down higher education costs and provide a high enough share from taxpayer funding is spot on.  As the brisk Bacon’s Rebellion discussions on Richmond’s challenged schools illustrate, however, there are more than two Virginia’s.

The real headline in his talk was the discussion of the Virginia Tobacco Commission’s efforts and the poor results after so many bright ideas, so many grants, and so much money.  I remember the birth of that idea in the Office of the Attorney General under Mark Earley, Randolph Beales, Jerry Kilgore and then Judith W. Jadgmann – three of them with rural roots.  I signed for the first electronic transfer of tobacco settlement funds and the number of zeros made me woozy.

“Arguably, with some exceptions, such as Danville, the rural region of Southside and Southwest Virginia is in worse shape today than 20 years ago when the Tobacco Commission had more than $2 billion to “transform” the region as the legislation required. Look at the educational attainment levels,” Baliles said in his recent speech to the State Council of Higher Education for Virginia (SCHEV). Again, spot on.

Baliles’ idea to focus remaining tobacco settlement funds on educational attainment is a good one, but he also has his eyes on the burst of higher state tax revenue that will result when Virginia conforms to recent federal tax changes.  Never has so little money been earmarked by so many people for so many pet projects:  the earned income tax credit are K-12 school construction and reconstruction top a growing list. (More on that tomorrow.)

Rural Virginia, designated by that rough U-shaped ring of relative poverty around the corridors of wealth, has educational assets.  Baliles notes that 14 of the 23 community colleges are located there, but they are the smaller ones. Their doors are not battered by more applicants then they can handle, in most cases.  Virginia Tech, Radford and Longwood are state universities in the footprint, and the powerful New River Valley economy is fueled by the first two.

The problem is that young people get what education they do and then leave for the bright lights and the land of Uber.  Or they leave to get that next level of education.  For any number of reasons, once they have the opportunity they simply do not  stay in sufficient numbers to become a magnet for high tech or advanced manufacturing jobs in great numbers.  Many who stay lack that educational attainment and the opportunity it brings.

I cannot think of any policy, any economic development strategy, any spending plan coming out of the General Assembly that will change this pattern.

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Posted in Demographics, Economic development, Education (higher ed)

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Transparency? No, Alignment Drives PAC Decisions

Posted on October 1, 2018 | 11 comments

Money In Politics

Abigail Spanberger won’t take money from corporate political action committees but will from ideological political action committees because the issue PACs have their position statements on their web pages.

Spanberger said that Friday to a business organization that donates no political money, Virginia FREE, but there were plenty of big donors or their representatives in the room.  Jeff Schapiro of the Richmond Times-Dispatch was there but didn’t really cover her remarks, other than to note she didn’t mention President Donald Trump (so he kindly did that for her.)

Continuing an argument I have made before, Spanberger’s careful tiptoe through this minefield is additional evidence of the powerful corrupting nature of our campaign finance system.  She tried to put a nice spin on her position that business money is too tainted to accept, blaming that in large part on voter perception.  When “face to face with voters” she hears that in Virginia corporate money has too much influence.

Here is what she says on her campaign web page:  “As we’ve increasingly dealt with the effects of special interests in campaign finance, it’s important that all elected officials take a stand against letting a small group of funders influence our elections. And because my commitment to campaign finance reform starts now, with my campaign, I will not accept any corporate PAC donations.”

Abigail Spanberger

Federal election rules have caps on donations that reformers at the Virginia state level can only dream about.  Corporations cannot write checks directly but must set up political action committees collecting funds from employees using the same strict limits.  She is probably correct however that the average voter has no clue about that.

In response to a line of questions from Virginia FREE director Chris Saxman she said hers was really a “a pro-business stance” because it allows her to meet with business leaders and lobbyists with no talk of money.  It’s “taken off the table.”

But then Saxman asked her about all the groups she does take money from.  Business PACs are only a subset of the giving world.  Special interests abound on all sides.  That’s when she said a big difference is those groups have their agendas on full and open display, but with a company “I can’t go to their website and see what those priorities are.”

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Posted in Elections, Money in politics, Politics

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This Certainly Demonstrates Something (Don’t Ask)

Posted on September 28, 2018 | 24 comments

Under normal circumstances, building two wind turbines 27 miles off the coast of Virginia at a cost of $300 million would  be neither reasonable nor prudent.  They may produce the most expensive 12 megawatts of electricity in Virginia history. The only rational reason to go forward is to test technology which is becoming more common around the world but is still untested in hurricane territory.

On that basis the proposed Dominion Energy Virginia project now pending approval at the State Corporation Commission received a lukewarm blessing from the SCC’s staff, mainly because Dominion continues to talk about quickly following up with a far more extensive turbine project in the same location.  Before building the big project, perhaps 2,000 MW, some testing is a good idea.

But the staff commentary also noted it would make sense to give the test project (known as Coastal Virginia Offshore Wind or CVOW) time to prove itself before building a multi-billion-dollar expansion.

“Should the Company decide to move forward with a larger scale offshore wind project before the CVOW Project is in service and the demonstration is complete, or before the CVOW Project has demonstrated that it can survive a hurricane type storm, the Commission may want to consider requiring the risk of such a decision be borne or shared by shareholders,” wrote Gregory L. Abbott of the Division of Public Utility Regulation in pre-filed testimony.  He also suggested the SCC put a hard cap on the cost.

He added: “…it appears unlikely that the CVOW Project will demonstrate that large-scale offshore wind will be economic compared to either the least-cost traditional generation option or to the least-cost carbon-free renewable generation option.”

The staff filed several sets of testimony, parts which are kept confidential at the request of Dominion.  There will be two hearings, the first and perhaps most important next week dealing with questions about the SCC’s authority when the General Assembly has deemed that a project is “in the public interest” based on lobbyist assurances.

The General Assembly used that phrase in connection with CVOW.  Does that reduce or even eliminate the Commission’s authority to reject things based on outrageous cost or imprudence?  Of all the many things to win that valued legislative endorsement, this is by far the worst use of your money.

It is your money.  In effect, Dominion will pay for the project with those excess profits it is not using to pay customer refunds.  There will not be a separate (and easy to track) rate adjustment clause.  When the accounting for this project finally comes up for SCC review in 2021, assuming the General Assembly doesn’t change the rules for the umpteenth time, whatever Dominion has spent on this will reduce the amount of potential profit for refund.

SCC staff witness Carol Myers dives into that, in a document replete with redaction.  The company hotly disputes her estimate of the real cost of the project at almost $700 million over 25 years, but it will have the incentive to prove a high cost in the next review because that prevents refunds or (the thought causes them to shiver) rate reductions.

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Posted in Energy, Environment

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Decisions on a New House Plan May Start Today

Posted on September 27, 2018 | 12 comments

The most recent proposed House of Delegates plan drafted to comply with a federal court order, linked to more information on VPAP. Source: VPAP

The House of Delegates Privileges and Elections Committee meets this afternoon to consider several competing proposals for a new House of Delegates district map, all having proponents who claim they will satisfy demands from a federal court.

Setting aside the politics and hypocrisy on both sides, when I see the Virginia Public Access Project’s displays and analyses on these various proposals I just marvel at the way technology has changed this process and appreciate the way VPAP has presented it to us all.

The game was far simpler before this detailed GIS mapping technology, overlain with all the demographic and political data.  I will never forget staying up almost all night in 1991 to prepare a Senate plan with nothing but paper precinct lists and an Excel spreadsheet.

As previously noted, and this opinion won’t be shared by all, this has gotten out of hand.  The 2011 redistricting map was certainly a gerrymander, as they all are now, but it contained neither the intent nor the effect of racial discrimination.  It met the legal standard as understood at the time, passed with commendable bipartisan (and biracial) support and was cleared by the Justice Department.  Nobody stood on the floor of the General Assembly and screamed “Jim Crow!”

The people now claiming harm are seeking partisan advantage, nothing else.

If the federal courts now read the Voting Rights Act a bit differently the proper remedy is to set the rules clearly in time for the 2021 mapping process and election.   To tweak a couple of dozen districts (perhaps hundreds of precincts) for just one election cycle, and then change them again two years later, is a remedy that creates more harm than benefit.

I say this now with the added experience of working in a poll and dealing with voter confusion over where they should be.  Jumbling precinct lines causes harm.  Period.

But among the benefits to one side might be a quick change in control of the House of Delegates, so we go through this exercise.  With the publication now of two Republican-sponsored plans along with a highly-partisan Democratic plan the Democrats and Governor Northam can either accepts something that meets the new rules or reject them all and send the matter to a court-appointed special master.

Their problem is that the special master’s first step, I suspect, will be to review the plans considered by the special session, and if one of them does the trick, recommend it to the judges.  Almost 30 years ago, working for the then-minority caucus, we were drawing plans we knew would be voted down but we hoped would be attractive to a court seeking alternatives.

With this new plan sponsored by Delegate Chris Jones that outcome might be more likely.  I’m sure it has been refined with careful consideration of the court’s order, and it apparently has some Democratic endorsements.   The end of this game may be in sight.  The General Assembly should solve this, not the court.

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Posted in General Assembly

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A Thumb On The Scale for ACP?

Posted on September 26, 2018 | 18 comments

Weather normalized summer peaks for Dominion compared to earlier and current projections by the company. Source: Southern Environmental Law Center

A witness to whom Dominion Energy Virginia had vehemently objected, Gregory Lander of a company called Skipping Stone, had his time on the stand anyway at the State Corporation Commission Tuesday. His testimony might still be stricken, but the two commissioners and everybody else in the room heard it and then a lengthy cross-examination underlined it.

If he is correct the entire integrated resource plan filed by the giant utility, a process ordered by the General Assembly to plan the utility’s future, had a fundamental flaw. One single input in a model had a ripple effect in its choices for future generation, some of which it hopes to support with the controversial Atlantic Coast Pipeline.

The three-day hearing on the integrated resource plan, which will stand for two years, opened with SCC Chairman Mark Christie deferring a ruling on the motion to exclude some of Lander’s testimony. He said the decision on the ruling would be announced with the full decision.

Christie also repeated what has become a standard SCC disclaimer on IRP cases. It is just a planning document, any future plants will need a full commission review, “and just because you admit evidence does not mean it’s a finding of fact.”  He also added that before the ratepayers are billed for gas from the ACP the cost will need to be judged reasonable and prudent in its own case.

A little background: Dominion uses a modeling system called Plexos that uses information such as the expected new demand, generating units which might need to retire, various types of generation and their costs and environmental expectations to design its future system. As engineers say, and it was said again this week at the SCC, all models are wrong but some of them are useful.

The five future generation configurations included in the integrated resource plan used the model with different inputs, many of the variations dealing with future carbon regulation. According to Lander, and this was apparently confirmed in interrogatories, the cost of transporting natural gas through the ACP to Dominion generators was simply left out. SCC staff witnesses pointed to the same omission.

The commodity cost for gas was plugged in, but the cost of getting that gas to the plant was not. This omission made the choice of natural gas more cost-competitive and perhaps skewed the model in favor of gas. It put a huge thumb on the scale.

It is the transportation charge for the gas which will include the cost recovery, plus profit, for the construction of the project. Lander claims that will add up to $3 billion to ratepayer costs over 20 years. Opponents claim gas from the ACP will be more expensive than from existing pipelines. Lander was an expert witness hired by Appalachian Voices, an anti-pipeline group.

The IRP cannot be found reasonable and prudent, Lander told the judges, if an important cost like fuel logistics is set at zero. “The model is making choices that are not reflective of total costs.” He said that instead of building new gas combustion turbine units, included in the plan to complement all the intermittent solar also planned, the company should just keep some of the other fossil fuel units it plans to retire early and run them less often.

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Posted in Energy, Environment

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Dominion Objects to Testimony on Pipeline Cost

News - Posted on September 22, 2018 | 32 comments

One of the first decisions the State Corporation Commission may need to make in Monday’s hearing on the Dominion Energy Integrated Resource Plan (IRP) is whether to allow and consider testimony about the cost of the Atlantic Coast Pipeline.

Dominion filed a September 7 motion asking that testimony from a witness brought by Appalachian Voices “be stricken as irrelevant and improper,” which the environmental group answered with its own brief filed Friday.  Dominion argues the cost of the pipeline is not part of the IRP and is not properly before the commission in this case.  It will seek to recover the pipeline capital costs when gas from the pipeline is subject to a future fuel cost review.

Gregory Lander of energy consulting firm Skipping Stone states in his disputed testimony that the costs are already built in.  “The Company’s 2018 IRP embeds the costs of the Atlantic Coast Pipeline into each of the generation scenarios it presents…. (but) has not properly costed-out the all-in cost of increasing, beyond its current pipeline capacity portfolio, the costs associated with the level of pipeline capacity it intends to obtain on the Atlantic Coast Pipeline.”

He claims that acceptance of the IRP by the Commission in effect accepts that up to $3 billion of the cost of building and operating it will be passed on to ratepayers over 20 years.  Those are in addition to the cost of the gas.  Opponents of the pipeline argue it is not necessary to bring natural gas via the ACP to Dominion’s generators, and if it does so it will be supplanting lower-cost alternatives.

“In reality, the Company’s goal is not to avoid scrutiny of the ACP costs in this proceeding, the Company’s goal is to avoid scrutiny of the ACP costs in every proceeding,” states the brief in support of retaining Lander’s testimony.  It noted a similar effort to keep the data out was made successfully in 2017’s IRP case and during the certificate of need case for the new natural gas generation plant in Greensville County.

This is just one of the disputes expected when the SCC takes live testimony for two days on the plan, which outlines several scenarios for meeting future demand in Dominion’s territory while meeting current and future environmental rules. The amount of demand growth over the period is itself the main point of contention, with opponents claiming the utility has inflated its needs to justify excessive new plant construction.

In rebuttal testimony Dominion pushed back on claims by the SCC staff and others that it won’t need additional generation. It says the others ignored recent winter peak demands and claimed that an economic slow period responsible for flat demand is coming to an end.  “The lack of economic growth in Virginia has been a key driver to the forecast being higher than what has actually occurred” wrote Dominion’s director of energy market analysis Robert Thomas.

One of the reasons cited for expected growth is the explosion of data centers in Virginia, but representatives of that industry filed their own written comments disputing they will cause higher demand.  The letter was signed by eBay and Adobe among others.

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Posted in Energy, News, Regulation

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