Category Archives: Regulation

IRP Rejection Part of a Pattern of Trouble

The State Corporation Commission’s decision Friday to reject the Dominion Energy Virginia integrated resource plan is just the latest sign the energy package sold by the utility to a compliant General Assembly in early 2018 still has an uncertain future.

Two headline elements of the legislation – the promised massive renewable projects and a rebuild of the grid — are in limbo as the 2019 General Assembly looms.  Another headline element, the ability of the utility to use excess profits it is holding to pay for both and thus eliminate risk of rate cuts or refunds, won’t even be tested in front of the SCC until at the earliest 2021, when the utility might (might) undergo its next rate review. Continue reading

“Incomplete!” SCC Sends Back Dominion IRP

SCC Offices on Richmond’s Main Street

The State Corporation Commission today rejected the 2018 integrated resource plan (IRP) filed by Dominion Energy Virginia, stamping it “incomplete” and asking the utility for additional information in a supplemental submission.

The IRP is only a planning document, and the one for 2017 was just approved by the Commission a few months ago.  But in response to the 2017 plan and the massive revision to utility laws by the 2018 General Assembly, several specific directives were imposed for this next plan, which is supposed to have a longer shelf life.  The SCC asserts Dominion failed to comply with some of those directives.

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Altria rumored to be in talks to buy Canadian cannabis company Cronos Group

High in Henrico.  Henrico County based Altria, makers of Marlboro cigarettes among other products, is rumored to be interested in buying Canadian cannabis company Cronos Group.  Altria is refusing comment while Cronos said it “confirmed that it is engaged in discussions concerning a potential investment by Altria Group … in Cronos Group.”  Cronos went on to say that no agreement had been reached and there is no assurance that the discussions will lead to a deal.

Is that really a maple leaf on the flag?  Canada legalized possession of marijuana nationally effective October 17, 2018.  Under the national law provinces have some latitude regarding specific cannabis regulation.   In Quebec and Alberta, the legal age is 18; it’s 19 in the remainder of the country for example.  However, unlike the United States, there is no dichotomy between national and provincial (state) law.  There can be no doubt that this legal clarity is encouraging companies like Altria to consider entering the Canadian marijuana market while sitting on the sidelines of American states which have legalized grass.

Implications for Virginia.  Pot legislation and the business of selling pot is moving quickly in North America.  In November Michigan became the tenth US state to legalize possession of marijuana.  There is legislation pending for the 2019 General Assembly session to decriminalize marijuana in the Old Dominion.  Now an iconic and politically connected Virginia-based company apparently sees no moral or ethical issue with participating in Canada’s legal marijuana market.  Given that Altria’s board includes Virginia luminaries such as Thomas F Farrell, CEO of Dominion and John T Casteen, former President of UVA one wonders if Altria’s plans might lend respectability to marijuana reform in Virginia.

I smell refund.  In 2018 a bill to decriminalize possession of small amounts of marijuana (SB 111) was defeated along party lines in the Courts of Justice.  Nine Republican state senators voted against the bill.  Over the years all nine have received campaign contributions from Altria.  Given that these nine politicians see marijuana possession as a serious crime one would hope they will return these campaign contributions given that Altria is trying to engage in marijuana production, distribution and sale.  After all, is it moral to keep money contributed by a company engaging in practices you think should be illegal?  Here are the amounts (per VPAP):

Obenshain – $44,250
Norment – $128,433
McDougle – $58,000
Stuart – $8,500
Stanley – $9,500
Reeves – $28,265
Chafin – $1,500
Sturtevant – $8,000
Peake – $500

— Don Rippert

The Uncertain Economics of Offshore Wind

Source: “Lazard’s Levelized Cost of Energy Analysis.” Click graphic for more legible image.

As Virginia hurtles towards a renewable energy future with lots of solar and wind power, ratepayers and taxpayers should acquaint themselves with the complexities of Levelized Cost of Energy (LCOE) analysis. LCOE incorporates the costs associated with electricity generation — up-front capital costs, fuel costs, ongoing operations and maintenance costs — to compare the economic viability of conventional and renewable energy sources with very different characteristics.

In almost anybody’s analysis, the cost of utility-scale solar power in Virginia is highly favorable. The up-front capital costs are modest, fuel costs are zero, and ongoing operations and maintenance costs low. A heavy reliance on solar, an intermittent energy source that varies with the level of sunlight, does raise issues of system reliability. But as an energy source, it’s the cheapest around. However, the same cannot be said of smaller-scale solar projects or wind power.

The Lazard Levelized Cost of Energy Analysis is widely regarded as one of the most authoritative comparisons of LCOE. The chart above shows Lazard’s calculation of LCOE for the major categories of conventional and renewable energy. Utility-scale solar is the least expensive. Community solar and commercial & industrial rooftop solar are considerably more expensive but potentially competitive, and residential rooftop are not remotely competitive on cost. Nearly all of Virginia’s solar is utility-scale. Although environmentalist and activist groups are fighting for more community and residential solar, those categories are likely to remain marginal contributors to Virginia’s energy mix — options for those whose environmental consciences weigh heavier than their pocketbooks.

Wind power is a trickier issue. Lazard shows the LCOE ranging from $30 to $60 per megawatt/hour (or 3 to 6 cents per kilowatt/hour). Even the higher-cost wind is cheaper than all conventional sources excepting combined-cycle natural gas (large gas plants that burn gas with jet-like turbines and recycle the waste heat to run steam generators).

However, LCOE analysis depends upon various assumptions that may or may not pan out. Lazard’s “wind” numbers are based primarily upon the cost of generating wind on land, not establishing an offshore wind sector on the Atlantic Coast from scratch. The only thing we know for certain is that early adopters of offshore wind, who build before a supporting infrastructure is fully established, will pay more.

Another critical question is how many years wind turbines last before they must be retired. Coal, gas, and nuclear power sources are assumed to last 30 to 40 years, although some have lasted longer. The National Energy Energy Laboratory, accused by some of having a fossil fuel bias, says solar has a 25-year to 40-year economic life, but wind turbines only a 20-year life. I don’t know what life span Lazard assumes for wind, but I did find a LCOE analysis for wind power in Iceland that assumes a 25-year life.

Writing in the Center of the American Experiment, Isaac Orr notes, however, that 14 turbines in an industrial wind facility in Kewaunee County, Wisconsin, “has been decommissioned after just 20 years of service because the turbines are no longer cost effective to maintain and operate” — confirming the NREL assessment.

If the NREL numbers are accurate, the implications for Virginia’s energy future are significant. The Grid Modernization and Security Act of 2018 enshrined the goal of increased wind power as in the “public interest.” The State Corporation Commission has protested the cost of electricity generated from two proposed experimental wind turbines would be astonishingly high but approved the project anyway because the General Assembly, without conducting any of its own analysis, had declared it to be necessary.

The two experimental turbines are mere prelude to development of a much larger, 2-gigawatt offshore wind farm at cost of billions of dollars. Thanks to economies of scale in erecting offshore turbines, the levelized cost of the larger wind project will be a fraction of that of the experimental project. But if the 20-year life span of the Wisconsin turbines is any guide, wind turbines may not last as long as assumed, and may cost more. Moreover, we still don’t have any data on how well wind turbines will hold up in East Coast conditions — especially when buffeted by hurricane winds and waves.

Complicating the analysis, a kilowatt of electricity generated by a conventional fuel source upon command is worth more for maintaining grid reliability than a kilowatt generated by a renewable energy source delivered only when the sun is shining and the wind is blowing.

Not that it matters. In its wisdom, the General Assembly has mandated wind generation with no clear idea of what it will cost.

2019 General Assembly Session – Sports Betting Legislation Prefiled

Republican General Assembly Member

I’ll take the Giants by 2.  Sports betting was made illegal in the United States through the federal Professional and Amateur Sports Protection Act of 1992 (PASPA). The legislation was signed into law by George H.W. Bush.

I’ll bet the Supreme Court overturns PASPA. Had you made that bet you would have won. In May, 2018 the US Supreme Court ruled PASPA unconstitutional. The high court decided that individual states should be able to decide for themselves whether to allow sports betting.

What’s the line on the Virginia game? Del Mark Sickles, D-Fairfax County, has pre-filed HB1638 to make sports betting legal in Virginia. However, the line on Virginia would not be applicable since all Virginia collegiate and professional teams would excluded from legalized sports betting. Sickles legislation would only authorize online betting and would allow for a maximum of five licensees with a revenue tax of 15%.

Party Boy Petersen. On the Senate side Chap Petersen, D-Fairfax, has publicly stated that he will also introduce legislation making sports betting legal in Virginia. Petersen’s promised 2019 sports betting legislation would add public places as legal betting sites in addition to Sickle’s online venues.  As Petersen told the Virginia Mercury, “I’m not interested in people sitting in their parents’ basement with their pajamas on betting on a ‘Monday Night Football’ game, I want this to be part of a social entertainment package where people get out and spend money.” Party on, Chap!

What’s the vig? Oxford Economics estimates an annual $5.2 billion betting handle with $380 million in net revenue.  The state’s 15% would come to $60 million per year. Since the Virginia State Lottery would administer the sports betting, the lotto gang would also take a cut of the action. The rest would go to research projects at state universities under the Sickles approach but would become aid to Virginia community colleges under the Petersen plan.

The odds of passage  I’m going to go with 3-1 against passage of this legislation in 2019. I predict that the usual gang of ossified, conservative, downstate Republican legislators who wax poetic about the importance of liberty will block Virginians from having the liberty to make sports bets.

— Don Rippert.

Could Co-ops Save Money Buying Cheap Electricity from Wholesale Markets?

Service territories of Old Dominion Electric Cooperative’s member co-ops.

The Old Dominion Electric Cooperative (ODEC) provides electric power to eleven regional cooperatives in Virginia, Maryland, and Delaware. The Virginia co-ops supply electricity to about 10% of Virginia’s population. Now comes a study by the Institute for Energy Economics and Financial Analysis (IEEFA) claiming that customers of Rappahannock Electric Cooperative (REC) are paying 1.4 to 2.4 cents per kilowatt/hour more than they would had they purchased it from the PJM wholesale electricity market.

REC purchases 89% of its energy from ODEC, with which it has a contract through 2054. ODEC generates its own power through three gas-fired plants, a 50% ownership stake in the Clover coal-fired plant, and an 11% share of the North Anna nuclear plant. It supplemented that power with purchases on the wholesale market.

In 2017, ODEC reported that it purchased power (energy and capacity) at an average of $46.56 per MWh (4.6 cents per kilowatt/hour). That is consistent, states the report, with the following chart comparing ODEC power costs with the costs from outside suppliers:

Concludes IEEFA: “It appears that REC customers could enjoy significant savings in power supply costs of REC were not locked into a long-term contract with ODEC.”

The study was commissioned by Repower REC, which describes itself as “a grassroots group of concerned REC members working in partnership with Solar  United Neighbors of Virginia, a nonprofit group that helps homeowners go solar, ‘to promote a more transparent and democratic Rappahannock Electric Cooperative (REC).”

Bacon’s bottom line: The comparison is useful. It shows how purchasing electric power from PJM’s wholesale market could be cheaper than building new generating capacity… at least in the short run. But, then, short-term benefits need to be weighed against long-term prospects. There is an abundance of electricity supply in the PJM territory right now. That may not always be the case, especially if power companies continue shutting down legacy coal and nuclear power plants. The advantage of signing a long-term contract is that it guarantees cost stability for decades at a time.

A prudent compromise might be to nail down a significant percentage of capacity — say, half — in long-term contracts and let the balance float with wholesale market conditions. And that appears to be exactly what ODEC has done. As the IEEFA report itself says, ODEC purchases between 55% and 63% of its total power supply from the outside.

One other cautionary note: The lower cost of purchased power requires maintaining an adequate transmission system to wheel in the power from other states. If Virginia starts pulling in too much power from the outside, capacity constraints result in transmission congestion charges. There are limits to how much power can be imported without building more transmission lines. And as we have learned in recent years, nobody likes transmission lines.

Energy-Efficiency and Unintended Consequences

Electric vehicles are great for the environment, right? Usually, but not always. It depends on geography and when the cars are recharged.

Long ago Benjamin Franklin produced an economic analysis of Daylight Saving Time (DST). He showed how much tallow and candles would be saved if Americans arose earlier during long summer days to take greater advantage of natural sunlight. Similar energy-efficiency arguments are advanced today in support of the practice. The practice persists despite the lack of solid evidence that the troublesome time switch makes a difference.

Matthew J. Kotchen, a Yale economics professor, was able to take advantage of a “natural experiment” to find out. In 2006 Indiana switched to DST while simultaneously shifting some of its counties to a different time zone. The combination of policies allowed Kotchen and his colleague to compare differences in residential electricity consumption before and after. They found that the demand for heating and cooling differs across hours of the day and that the shift to DST increased both.

Environmentalists and public policy wonks have proposed all manner of ideas for encouraging energy-efficiency and conservation, says Kotchen, but it’s often difficult to know if they save energy or not. Some do work as advertised, but others, like Daylight Saving Time, do not.

Kotchen’s admonition should be borne in mind as Virginia plunges ahead under the Grid Transformation and Security Act and the Regional Greenhouse Gas Initiative to invest hundreds of millions of dollars in energy-efficiency and conservation. Not all energy-efficiency programs offer the same bang for the buck. Indeed, we cannot assume that all energy-efficiency programs even conserve energy!

The Yale economist found a natural experiment in Florida, which increased the stringency of its code in 2002. He compared the residential characteristics of electricity and natural gas consumption before and after the change. Initially, as expected, he found that stricter building codes reduced consumption of energy sources. But subsequent research based on California data raised questions whether the effect persisted over the long run. Kotchen revisited his Florida case study and found that electricity savings were no longer evident after five or six years, although natural gas savings did persist.

Another object of inquiry is electric vehicles (EVs). EVs run on electricity,thus reducing CO2 emissions from gasoline combustion. But charging EVs draws from the electric grid, and electricity is generated by a wide range of power sources, some green and some not. Kotchen’s research shows that the CO2 emissions attributable to EVs varies by geography — some regional transmission organizations have more renewable energy than others — and by time of day. If EVs are charged during daylight hours when solar output is at a peak, the CO2 emissions are lower than if the vehicles are charged at night when utilities rely more upon fossil fuels. In the Upper Midwest states, Kotchen found, EVs could generate more CO2 emissions than a car with an internal combustion engine.

(You can read Kotchen’s article, “Environment, Energy, and Unintended Consequences,” in the NBER Reporter.)

Human behavior is complex and often ill understood. Public policies often have unintended consequences — and energy conservation is no exception. As Dominion Energy proposes a raft of energy-saving measures in the years ahead and the State Corporation Reviews those proposals, they should adopt an attitude of humility regarding their efficacy. Virginia should not set up and run conservation programs on auto-pilot assuming that they will work as billed. Benchmarks should be established, resulted monitored, and programs periodically reassessed.

Virginia’s 2018 Marijuana Decriminalization Bill: What Happened and What’s Next?

Up in smoke.  During the 2018 General Assembly session a bill to decriminalize marijuana was killed in committee.  The Senate Courts of Justice Committee voted along party lines on that bill, SB 111. All nine Republican Senators on the Committee voted to keep marijuana possession (in any amount) a criminal act in Virginia while all six Democratic Senators voted to decriminalize pot.  To be clear – the vote was to decriminalize possession of small amounts of marijuana, it was not a bill that proposed legalizing marijuana.

Here today, here tomorrow.  Decriminalization foes won the SB111 battle in 2018 but the war goes on.  The lines are drawn for the next skirmish.  As Sen Mark Obenshain (R-Rockingham), who voted against decriminalization, said … “It’s an issue that isn’t going away.  We’re going to be talking about it for a long time.”  That’s an interesting comment from a prohibitionist.  One can only hope that Sen Obenshain knows that time and further dialog are both working against him and his fellow pot prosecutors.  If he doesn’t understand that I’d really like to ask him what he’s been smoking.

Abby Hoffman vs Barney Fife.  The main support for decriminalization comes from the ACLU with a supporting cast of politicians including U.S. Senator Tim Kaine (federal decriminalization), Governor Ralph Northam (a medical doctor) and Adam Ebbin  (D-Alexandria).  Opposition is led by the Virginia Association of Commonwealth’s Attorneys with political support from the aforementioned Sen. Mark Obenshain (R-Rockingham).

Arrested development.  Subsequent to the committee vote on decriminalization, statistics were released that revealed arrests for marijuana possession in Virginia shot up in 2017, increasing by 20% over 2016.  Apparently, prosecuting Virginians for possession of a plant is a large and fast growing business in the Commonwealth.  One can only guess how much criminalizing marijuana costs Virginia or how many Commonwealth’s Attorneys have jobs based on pot possession being a crime.

Oh wow … what’s a voter … man?  A poll on the question of decriminalizing possession of small amounts of marijuana in Virginia was published in the midst of the 2018 General Assembly session.  Conducted by the Watson Center for Public Policy and Christopher Newport University, the poll found that 76% of Virginians favored decriminalization.  And the Republican politicians in Virginia keep wondering why they are continually losing their power and influence in Virginia.  Perhaps they would be well advised to just roll that number around in their heads for a while … seventy-six percent.

Heroes.  Senators voting for decriminalization of small amounts of marijuana: Creigh Deeds, D-Bath; John Edwards, D-Roanoke; Janet Howell, D-Fairfax; Louise Lucas, D-Portsmouth; Chap Petersen, D-Fairfax City; and Dick Saslaw, D-Fairfax.

Zeroes.  Senators voting against decriminalization: Ben Chafin, R-Russell; Ryan McDougle, R-Hanover; Tommy Norment, R-Mars; Mark Obenshain, R-Rockingham; Mark Peake, R-Lynchburg; Bryce Reeves, R-Spotsylvania; Bill Stanley, R-Franklin County; Richard Stuart, R-Stafford; and Glen Sturtevant, R-Richmond.

2019.  2019 is an election year for Virginia’s state legislature.  Democrats will push another marijuana decriminalization bill in the 2019 General Assembly session.  Then they will beat the Republicans who opposed the bill over the head with those votes in November.

— Don Rippert.

Dominion Grid Plan Panned For Lacking Detail

The specific phrase is not used, but the general theme in testimony filed with the State Corporation Commission as it considers Dominion Energy’s massive grid modernization proposal is this plan is not ready for prime time.

That thread runs through pre-filed testimony from the Office of the Attorney General, the staff of the State Corporation Commission, and an expert hired by environmental groups.  They recommend acceptance of pieces and parts of the plan, but none support it all and all complain about the lack of detail on cost and benefits.  The SCC will hold a public hearing November 14.

About a year ago, with the 2018 General Assembly visible over the horizon, Dominion Energy started its public drumbeat for a major investment in its distribution and delivery system to improve reliability and efficiency.  Only later it became clear the plan was, at least in part, also a way for it to keep and invest substantial excess profits, preventing any effort to return those funds to its customers as rebates or lower prices.

Dominion in July filed its petition with the SCC seeking a decision on the prudence and reasonableness of its proposed Phase 1, a three-year program with a cost of $917 million, most of it for 1.4 million new internet-connected electric meters.  The SCC staff estimated the all-in lifetime cost (with financing and profit) of the first phase at $1.5 billion and the cost of the full 10-year build out at $6 billion.

“Based on my analysis, I conclude that the GT Plan is not cost-effective and will result in an economic loss for all customers,” wrote Caroline Golin, a Ph.D. engineer hired by environmental respondents.

“The Company has failed to produce the needed analysis to justify these expenditures, including those related to the supposed need for reliability improvements, integration of distributed energy resources (“DERs”), and improved situational awareness. The Company’s approach also fails to recognize how rate optionality, energy efficiency, demand response, and the utilization of DERs can improve reliability and provide cost-effective grid services. Finally, the GT Plan does not reflect any of the best practices emerging in other jurisdictions.”

Golin compared the estimated $2 billion to be spent on ways to reduce outages with the economic benefits of the small improvements to be expected.  The average customer will see 295 fewer minutes of lost power over 20 years, she said, and the entire state’s gross domestic product works out to $830,000 per minute.   “Following the Company’s logic, the Company is claiming that the value of avoiding of one minute (of) lost power is eight times greater than the entire economic activity of the Commonwealth in that minute,” she wrote.

The SCC staff spends its year evaluating utility investment plans and analyzing costs, but their complaint here is there are few firm plans or costs to analyze. “Many of the Company’s cost estimates are based on industry research, bench marking, and data from peer utilities, rather than firm Dominion-specific projections resulting from requests for proposals, competitive bidding, and formal bids from vendors,” wrote Carol B. Myers of the utility accounting division.

The SCC staff also complains that Dominion didn’t really ask its customers their opinions on how the modernized grid should be structured.  “With respect to the Customer Information Platform, any approval should require the Company to perform a formal outreach to Virginia customers to solicit and incorporate their feedback on their desired features, including self-service options, prior to rollout,” wrote the SCC’s David N. Essah.

Golan, hired by Appalachian Voices and the Southern Environmental Law Center, pointed to an existing customer interface called Green Button as the benchmark Dominion ignored.  The complaint that this plan serves the company but not the customers and could impede the spread of customer-owned generation resources was also central to a published critique which is not part of the SCC’s case record.

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Update: SCC Hearing on Off-Shore Wind

Wind turbines off the Danish coast.

If the State Corporation Commission holds a hearing and Bacon’s Rebellion is not there to cover it, does it make news?  Well it turns out there is a transcript.

Having first held a hearing to debate whether it had the authority to reject a two-turbine, $300 million off-shore wind “demonstration” facility blessed by the General Assembly, the SCC turned to the project details in three days of hearings October 9-11.  A flurry of additional written testimony and exhibits have also been added to the record, even though no participant in the discussion is arguing the SCC should say no.

With the remnants of Hurricane Michael bearing down on Virginia, but not from the direction of the Atlantic Coast, Dominion Virginia Energy bolstered its arguments that what it will learn from this project is worth the cost of the electricity to ratepayers – about 77 cents per kilowatt hour — which on its face is more than 10 times the cost of power from the Vineyard Wind project going forward off Massachusetts.  Some new information on cost comparisons is now on the record.

SCC Chairman Mark Christie directly challenged a witness brought by the Office of the Attorney General, who outlined the enormous cost of this project in comparison to others, yet still said it might still be worth doing.  “I’m just asking you from your standpoint, is the delta here say versus Vineyard which is six and a half cents a kilowatt-hour came in, offshore wind — not comparing it to gas, comparing it to offshore wind, not even comparing it to solar or onshore wind — is the delta value in the research?”

“I mean, I wouldn’t spend my money if that’s what you’re asking. I would not,” replied Scott Norwood, who testifies often and is usually a watchdog on behalf of consumers.

It was as a demonstration project that the 2018 General Assembly deemed the project as being in the public interest, a tiny piece of its giant regulation package.  The 12-megawatt project is a precursor to a larger wind field, perhaps as vast as 2,000 megawatts, planned for the same location.  An exhibit cited the utility’s current integrated resource plan estimate that power coming from the big project will cost about 13 cents per kilowatt hour.

“Staff’s concerns set out in the prefiled testimony and in my opening statement have not been diminished during the hearing,” said SCC staff attorney Kiva Pierce in closing. “This is a risky project made riskier by a design change, and ratepayers bear almost all of the risk.  And as has been noted now multiple times, prudency is all about risk. While there is a warranty, it is a limited warranty, and it does not cover waves or category three hurricane conditions.

“If the Company does not wait and gather data from the project before making a decision on a larger-scale generation project, then in Staff’s mind it is questionable if this is a demonstration project,” Pierce said.  Given the maturity of offshore wind technology world wide, there isn’t much more to demonstrate beyond seeing what happens when a hurricane shows up, which may never happen.

The SCC staff and the Attorney General’s Office are arguing for some restraints on the project, including a cap on the cost.  But they are not asking the Commission to spike it entirely.   Even so, a Dominion Energy lawyer tried to impeach Attorney General’s witness Norwood by introducing a news article from 2015 in which Attorney General Mark Herring heaped praise on an earlier and more expensive version of this project.

“I’ll object,” said Assistant Attorney General Meade Browder. “Your Honor. This statement is from sometime in 2015. We’re here now in 2018. Mr. Burton and I are not here doing our own thing solo. We’re here on behalf of the office who is led by Attorney General Mark Herring. I don’t believe it’s an appropriate question.”  The objection was sustained, but the point was made – the politicians including their boss bought into this early with no thought to the consumer cost.

Details of the cost remain murky, because at Dominion’s request much information remains confidential.  The full cost of the 27-mile transmission line is not being shared, for example.  The record is replete with redaction.

“So we’ve communicated what the total project cost is, but the details of the project cost, you know, it’s an extremely competitive business both overseas and especially as it comes into the US,” said Dominion vice president of generation construction Mark Mitchell.   “There are many RFPs such as the one that was recently conducted in Massachusetts, so vendors are very, very protective of disclosing exactly what their numbers are because of the competitive nature that’s going on in the US.”

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The case for legalizing recreational marijuana use in Virginia

Caveat.  While I have no moral objection to the possession of marijuana I do not espouse breaking the laws of the Commonwealth of Virginia.  I believe the marijuana laws in Virginia should be changed but, until they are changed, I encourage everybody to obey the laws as they are presently written.

Strive for five.  I believe the five key reasons for legalizing recreational marijuana use in Virginia for adults are liberty, the failure of the current approach, costs of enforcement – both financially and in terms of racial bias, the economic benefits to the state and the inevitability of legalization.  Each will be discussed in turn.

Democracy, liberty and freedom.  The first and most important reason to legalize recreational marijuana use in Virginia is philosophical.  Our political leaders in Richmond speak in hushed, reverential voices about “Mister Jefferson”.  They then turn around and ignore the fact that a significant majority of Virginians favor legalizing marijuana.  Somehow, our political leaders seem to think that banning a plant against the wishes of a majority of the electorate is commensurate with Thomas Jefferson’s ideals of democracy, liberty and freedom.  Perhaps our General Assembly should start referring to Thomas Jefferson as “ole what’s his name” until they can demonstrate some willingness to adhere to Jefferson’s actual views on liberty, etc.

Pot prohibition has failed.  Federal, state and local efforts to make and keep marijuana use illegal have not curtailed its use.  Our government has been busily trying to ban marijuana since 1937 and raised the stakes considerably with the Controlled Substances Act (which became effective in 1971).   Nearly 50 years after the federal government made marijuana a Schedule 1 “narcotic” its use continues to rise.

Enforcement and racial bias.  The enforcement costs needed to continue the ineffective prohibition of pot are very high.  In Virginia authorities have made 133,000 arrests for marijuana possession over the past 10 years.  10,000 Virginians are convicted of a first time marijuana possession offense every year. In fact, marijuana arrests in Virginia increased over the past year.  Worse yet, the arrests are heavily weighted against African-Americans.  VCU studied the data in 2015.  As NORML calls out, “That study concluded that blacks account for nearly half of all marijuana possession arrests, but comprise only 20 percent of the state population.”  Some parts of Virginia are far worse than that.  “In some counties and towns, such as in Hanover County and in Arlington, Virginia, the black arrest rate was six to eight times that of whites.”  These arrest ratios completely diverge from studies showing that marijuana use is roughly the same between backs and whites.

Economics.  The Kansas City Federal Reserve studied the economic impact of marijuana legalization on the state of Colorado … “In 2017, the state of Colorado collected more than $247 million from the marijuana industry, including state sales taxes on recreational and medical, special sales taxes on recreational, excise taxes on recreational and application and licenses fees.”  Given that Virginia’s population is 42% bigger than Colorado’s a straight line interpolation would suggest $353m in annual taxes in Virginia.  That total does not count the savings from reduced law enforcement nor does it include the potential profit generated for the state if the legal marijuana were sold through Virginia ABC stores.

Inevitability.  Nine states and DC have legalized marijuana.  Michigan and North Dakota will vote on adult use marijuana legalization this November.  This week the entire country of Canada legalized the recreational use of marijuana.  Once again Virginia is being surrounded by progress and once again Virginia is standing slack jawed and rheumy eyed as a philosophical island of obstinate resistance to inevitable change.

– Don Rippert.

Dominion Files to Extend Surry Nukes

Surry Nuclear Power Station

Dominion Energy has filed an application with the Nuclear Regulatory Commission to renew operating licenses for its Surry Power Station for an additional 20 years, the company announced today.

Like all nuclear units, the three-loop Westinghouse pressurized water reactors, capable of generating 1,676 megawatts each, were originally licensed to operate 40 years. Under its current licenses, the two nuclear units are allowed to generate electricity through 2032 and 2033. A second re-licensing would extend their lives through 2052 and 2053. The units account for about 15% of the electricity consumed by Dominion customers.

Dominion also has applied to re-license its two units at the South Anna power station. Between the four units, the utility estimates that it could spend as much as $4 billion on the re-licensing program.

Critics are certain to attack the proposal on the grounds that the power company should not make a long-term commitment to an expensive electric generating source even as the cost of solar power, wind power, and battery-powered backup continue to decline. Dominion argues that the nuclear units will provide a reliable, CO2-free source of base-load electric power. In essence, the critics are advocating a zero-nuclear, renewables-intensive energy policy similar to Germany’s energiewende, which has resulted in high electricity rates and burns CO2-intensive coal to replace the lost nuclear power.

It will make a fascinating debate.

JLARC Report on Licensing: Useful, But a Missed Opportunity

As the old saying goes, you find what you look for. And in its examination of occupational licensing in Virginia the Joint Legislative Audit and Review Commission (JLARC) largely found what it was looking for — inefficiencies and overcharges. Conducting the review was worthwhile, but the exercise was small ball — it missed the opportunity to examine much bigger issues.

In 2017, JLARC instructed its staff to study the Department of Professional and Occupational Regulation (DPOR) staffing and organization, its processing of occupational licenses, and its enforcement of occupational rules. Staff also assessed the affordability of fees and the processes for adjusting fees.

Here’s what JLARC did not study: To what extent does licensing create barriers to entry into the regulated occupations and professions? To what extent do regulated professions use regulations to protect their occupational turf and boost their earnings? To what extent does the public suffer from these legalized labor monopolies?

To its credit, given the limited scope of its inquiry, JLARC did come up with some interesting findings in “Operations and Performance of the Department of Professional and Occupational Regulation“:

  • No legal justification for regulating 11 occupations. Eleven occupations regulated by DPOR appear not to meet the criteria for regulation established in the state code. These include community managers, opticians, residential energy analysts, soil scientists, landscape architects, waste management facility operators and others. Regulation of these occupations does nothing to advance the public health, safety and welfare of the public.
  • Excess fees. DPOR is funded by the fees it charges to applicants. DPOR’s method for calculating fees has over-projected agency expenses leading to unnecessarily high fees in the past. Fees have been reduced since, but the balance still has grown $27.2 million — up from $15 million ten years ago, and far more than needed.
  • Many complaints go unexamined. Staff closed 71% of the disciplinary cases it opened in FY17. Staff do not investigate all potential violations.
  • Poor use of IT. DPOR does review and approve licensing requests in a timely manner, but it would make the process more user friendly by making it more accessible online and by automating key processes.

These are all useful findings, and the report makes some 36 recommendations on how to improve the system. While the goal of improving administrative productivity is laudatory, however, making a flawed system work more efficiently doesn’t do much to build a more prosperous, equitable Commonwealth.

Conservatives have long targeted occupational licensing for creating barriers to upward mobility. Do the state’s 73,000 barbers and cosmetologists really need regulating? Do they really need formal education and credentialing? Is the public health and safety truly harmed if someone gets a bad haircut or cracked fingernail? The crafts of hair cutting, cosmetology and hair-braiding, which provide an avenue of occupational mobility for lower-income Virginians, could be taught perfectly adequately in informal apprenticeships. Why burden people with educational costs and licensing fees?

Of greater concern is the regulation of the medical professions. In theory, the system is designed to protect the public from frauds, charlatans and malpractice. The system does do that, so some form of licensing is necessary. But the system also carves out occupational turf, protecting doctors from competition from nurse practitioners, and nurse practitioners from registered nurses, and registered nurses from licensed practical nurses, and so on down the line. That may not be a big problem in major metro areas, but it is a huge problem in large swathes of rural Virginia that have trouble recruiting medical professionals.

Indeed, it is fair to say that the crisis of access and affordability in rural health care is largely the result of rigid occupational licensing rules that prevent nurses from performing a high percentage of the routine procedures, and dental hygienists from cleaning teeth and filling simple cavities. No health care, it appears, is better than health care not delivered by doctors and dentists.

I would love to think that the General Assembly might get serious about tackling these issues. But I don’t see it ever happening. As the Richmond Times-Dispatch editorial page observes today, only one in twenty jobs required government certification a half century ago. Today, one in four does. It should come as no surprise that highly compensated professions, intent upon maintaining their occupational monopolies, have become major campaign contributors. According to the Virginia Public Access Project, physicians have donated $347,000 to political campaigns so far in 2018-19, dentists $223,000, optometrists $114,000. Nurses? Only $33,000. Don’t expect rural healthcare reform unless it involves paying doctors and dentists more money.

Pulling Teeth: Admitting Errors in Dental Care Post

In a column posted last month, “The Political Economy of Dental Care,” I suggested that one way to improve the affordability of and access to dentistry services in Virginia might be to reduce the cost of educating dentists. I highlighted the high cost of completing a dental degree at the Virginia Commonwealth University, Virginia’s only school of dentistry. While I still maintain that the cost of attendance is so high that graduates feel compelled to set up shop into metropolitan markets where they can earn enough to pay off their student loans, I got some of my facts wrong.

In the post, I stated that the cost of attending the VCU School of Dentistry runs about $133,000 to $140,000 per year over four years. In fact, according to data published on the school’s website, the cost for in-state students runs between $85,000 and $89,000 a year and for out-of-state students between $114,000 and $119,000 — high, to be sure, but considerably lower that what I stated. (The four-year cost is estimated to be $344,000 for in-state students and $461,000 for out-of-state residents.

Compounding my initial misperception, I also stated that the cost of attendance at VCU was significantly higher than the national average. To the contrary, the School of Dentistry cites American Dental Association (ADA) data to the effect that VCU’s cost of annual D.D.S. education was lower than the national average for in-state students in 2017-18 —  $59,569 compared to $64,305. However, the cost for out-of-state students was somewhat higher — $88,073 compared to $81,939. (I’m not sure how the ADA data is reconciled with the cost-of-attendance figures on the School of Dentistry’s website.)

Thirdly, ADA data contradicts my speculation that Virginia dentists might graduate with higher debt than their peers outside the state. In 2017, the average debt was $162,384 for a VCU in-state student, $207,924 for a VCU out-of-state student, and $239,895 for students at public dental colleges nationally.

I also argued that “dental technicians” should be given freer rein in under-served rural areas to provide dental-related services. Nan Johnson, director of communications for the School of Dentistry, informs me I was using improper nomenclature. The term “dental technician” is not used in the profession. Rather, the classifications of those who work with dentists are referred to as dental assistants, dental hygienists, or dental laboratory technicians.

Finally, I referred to the Virginia Oral Health Coalition as “an alliance representing the dental profession.” In point of fact, says Johnson, it is an alliance “to ensure that all Virginians can access affordable, comprehensive health care that includes oral health.” The Coalition includes not just dental professionals but educators, health care providers, and community members.

I am duly chastened. I think the larger points of my piece still stands — the high cost of dental school aggravates the shortage of dental services in rural areas, and the dental profession’s solution is to increase federal and state spending rather than address the cost side. But it helps no one to employ inaccurate facts. Further, I had no basis for singling out the VCU School of Dentistry as being especially expensive. The high cost of dental education appears to be a national problem.

When and Why Can the SCC Say No?

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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