Category Archives: Regulation

Marijuana Decriminalization in Virginia: Issues and Recommendations for Regulators

Photo credit: Snopes

By Don Rippert

Ready, fire, aim. In Virginia, it seems likely that the Democratic Party’s control of the General Assembly and Governorship will result in decriminalizing possession of small amounts of marijuana. This legislation will likely be passed in the 2020 session and go into law next summer. But what are the details of decriminalization? What specific policy decisions should our lawmakers consider when drafting the decriminalization legislation? Failing to consider these issues in advance of the legislative session could usher in a repeat of the shambolic attempt to legalize casino gambling in Virginia

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Virginia marijuana reform: Outlook for 2020

By Don Rippert

Cannabis certitude. The seemingly inexorable march toward legalized marijuana in the United States continues unabated. A poll of 9,900 American adults conducted by the Pew Research Center from September 3 – 15, 2019 found that 67% of the respondents thought cannabis should be legalized. That’s five percentage points higher than Pew’s last poll on the subject conducted in 2018. Many state legislatures are acting on behalf of their constituents. Legal weed sales began last Sunday in Michigan and will commence on New Year’s Day in Illinois. At the federal level the House Judiciary Committee approved a bill legalizing marijuana at the federal level. As of today 33 states have legalized medical marijuana and 11 states have approved the sale of recreational marijuana to adults. Six more states seem very likely to make decisions on legalizing recreational marijuana in 2020 – Arizona, Arkansas, Florida, Missouri, New Jersey and South Dakota. As legal marijuana becomes big business pundits are predicting the future of legal weed. Arcview Market Research and BDS Analytics believe that medical marijuana will be legalized in every state by 2024 and recreational marijuana will be legal in 20 states by that date. Virginia is not among the 20.

Weed in the Old Ancient Pre-historic Dominion. Virginia is one of 15 states where marijuana is fully illegal. (Note: I do not count CBD oil sales as partial legalization). The first step on the long road to legalization is usually decriminalization. In 2018 Virginia’s General Assembly considered a bill to decriminalize possession of small amounts of marijuana. It was killed along a purely party line vote in the Senate Courts of Justice Committee.  In 2019 another decriminalization bill was considered. Virginia’s Republican leadership in the General Assembly couldn’t muster the minimal courage to take the 2019 bill to the full committee and killed it in sub-committee. Later that year the Republicans got their heads handed to them in the General Assembly election. What a surprise.  Now Democrats hold a trifecta in Virginia with control of the House, Senate and Governorship.  Once again, Sen. Adam Ebbin (D-Alexandria) is the patron for proposed legislation to decriminalize possession of small amounts of marijuana. However, this year unlike the past, Ebbin’s party is in control.

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Ignore the ROE Decision. Dominion Gets It All.

Crying All The Way To The Bank

By Steve Haner

After a long, expensive and contentious legal battle producing a huge case record, the State Corporation Commission left Dominion Energy Virginia’s authorized profit margin unchanged Thursday.  The return on equity figure did not go higher, as the utility demanded, and did not go lower, as just about everybody else involved in case demanded.

The SCC order is here.

You will see report after report in news media now that the authorized return is 9.2%, such as this one. This is wrong. The authorized return, because of Virginia’s uniquely pro-stockholder state law, is really 9.9%. The law allows the utility to keep 100 percent of the first 70 basis points of excess profit above the stated allowed profit.  With the large amounts involved over multiple years, that extra 70 basis points is real money out of your pockets.  Continue reading

Northam Appointee Opposes DEV’s Green Tariff

Virginia City Hybrid Energy Center in St. Paul, which burns both coal and wood biomass. It is the centerpiece of Dominion’s proposed 100% renewable service, infuriating environmental opponents. Dominion photo.

By Steve Haner

Is Governor Ralph Northam now on both sides of the electricity retail choice issue? Having sent a strong signal weeks ago that he would oppose 2020 legislation creating competition for all customers, his administration has now intervened in a regulatory dispute asking to protect competitive choice for 100% renewable electricity. You are only free to choose if you choose green?

In order to stop other companies from selling so-called 100% renewable electricity in the Dominion Energy Virginia territory, the utility needs its own version of this shell game approved by the State Corporation Commission. The next hurdle in that long road is a hearing at the SCC Thursday.

When we visited this saga in August, Dominion’s application for what it calls Rider TRG had been filed but few of the likely opponents had responded. A long list of complaints about the idea is now part of the case record, including objections from the Northam Administration filed Friday in the name of the Department of Mines, Minerals and Energy.

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Getting Serious about Flooding

Click image to enlarge. Source: Governor’s Office

by James A. Bacon

Everybody talks about the weather, as the old saying goes, but nobody does anything about it. Well, here in Virginia, people are getting serious about one aspect of the weather — flooding.

Last week Governor Ralph Northam issued an executive order, the Virginia Flood Risk Management Standard, to encourage the “smart and resilient construction of state buildings.” Based on sea-level rise projections developed by the National Oceanic and Atmospheric Administration, the new standard requires state-owned buildings constructed after 2021 to be built at elevations that will protect them from flooding.

“Flooding remains the most common and costliest natural disaster in Virginia and in the United States, and our state government is getting prepared. These standards will protect taxpayers by establishing critical protections for new state-owned property,” Northam said in a press release.

Meanwhile, the City of Virginia Beach is grappling with the reality that it needs an extra $20 million a year to improve its stormwater infrastructure. Continue reading

Omega Protein Exceeds ASMFC Catch Limit of Menhaden

Photo credit: Stephan Lowy

by Don Rippert

What, me worry? Omega Protein has admitted exceeding its menhaden catch limit for 2019 in the Chesapeake Bay. Omega Protein, a Houston-based company and wholly owned subsidiary of Cooke, Inc, a Canadian firm, operates a fishing fleet based in Reedville, Va. Employing about 300 Virginians, Omega Protein has been mired in controversy over the years regarding its heavy catch of menhaden.  Since this topic has been repeatedly covered on Bacon’s Rebellion, I won’t provide detailed background. However, the environmental group Menhaden Defenders operates an informative website describing the situation.

Menhaden Defenders writes, “The commercial menhaden fishery is made up of two sectors, a reduction fishery, which grinds billions of bunker up for fish meal and oil, and the bait fishery which supplies menhaden for lobster and crab traps. Reduction fishing is an antiquated practice that has been banned in every east coast state, except Virginia.” Virginia is the only east coast state that allows reduction fishing and is also the only east coast state that allows unlimited contributions to state politicians. Over the last 26 years Omega Protein has donated just under $600,000 to Virginia politicians, political committees and PACs with the majority going to Republicans.

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Orsted Drops Projected OSW Capacity Factors

Orsted’s Hornsea 1 wind farm off the coast of England. Source: Orsted

By Steve Haner

The company that will partner with Dominion Energy Virginia to build a massive offshore wind farm off our coast has just cut the energy production forecasts for its own facilities, sufficient to lower its profit margins and drop its stock values.

“Our models weren’t sophisticated enough,” Orsted’s chief financial officer is quoted in one energy industry outletBloomberg’s article, one of many based on the company’s open discussion of the issue yesterday, described the problem this way:

The tests show that the company’s current production forecasts underestimate the negative impact from the so-called blockage effect, which arises when the wind slows down as it approaches turbines. It also underestimated the negative effect of the so-called wake effect, in which wind speeds drop between wind parks, it said.

The change will drop what’s called the lifetime load factor to 48%, down from a range of 48%-50%. That figure represents an estimate of how much electricity the machines produce divided by the potential capacity of the turbines. Since the wind doesn’t always blow strongly enough to turn the wind turbine blades, the load factor is always lower than capacity.

The number seems small, but for a giant windfarm like Orsted’s Hornsea One off the east coast of England, a change could shift income by 10s of millions of dollars every year, according to an analysis by BloombergNEF.

“2% is a big deal,” said Tom Edwards, an analyst at Cornwall Insight. “Over the lifetime that’s a lot of energy.”

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Northam Opposes Coming Retail Choice Bill?

By Steve Haner

Governor Ralph Northam is quoted in a Standard and Poor’s Market Intelligence news article Friday as opposing any efforts to change Virginia’s electricity regulations, which presumably would include the 2020 retail choice proposal gathering steam in the background.

Reporter Michael Copley wrote about Friday’s state solar and wind power purchase agreements and added this near the bottom, under the heading “No changes seen to Va. utility regulation”:

To advance its clean energy initiatives, the Northam administration is partnering with a utility company (Dominion Energy Virginia) that is facing a backlash over perceptions that it uses political donations to wield outsized influence in Virginia. In August, Virginia utility regulators said Dominion Energy Virginia earned $277.3 million above its authorized return on equity in 2018.

Some lawmakers in the Southeast U.S. have called for breaking up monopoly utility businesses such as Dominion’s, arguing that customers would benefit from more competition.

Northam said he does not plan to overhaul utility regulation in Virginia. “I think right now as we move forward, we’re going to work with the system that we have,” he told S&P Global Market Intelligence. “That doesn’t mean it’s a perfect system, but it is a system that we can work with.”

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Dominion Refinances Capital Structure, and What It Means to Virginia

by James A. Bacon

Dominion Energy Inc. will sell a 25% interest in its Cove Point  liquid natural gas-exporting facility to Brookfield Super-Core Infrastructure Partners, an infrastructure fund, for $2 billion, the company announced this morning. Said Dominion CEO Thomas F. Farrell II: “The agreement highlights the compelling intrinsic value of Cove Point and allows us to efficiently redeploy capital toward our robust regulated growth capital programs.”

That raises an interesting question: What does Farrell mean by “regulated growth capital”? Does this mean Dominion is redeploying capital from competitive, lightly regulated business enterprises such as natural gas exports toward heavily regulated enterprises such as electric utilities, as evidenced by its acquisition of SCANA in South Carolina?

In a word, the answer is, “yes.”

An article in S&P Global Marketing Intelligence sheds light on Dominion’s strategic thinking and capital spending plans. In March 2019 the company unveiled a $26 billion “growth capital plan” for 2019 through 2023. The first three years will be financed by $7 billion in operating cash flow, the issuance of debt, and the cobbling together of capital from other sources. Continue reading

What? More Solar Means More NOx? No One Saw that Coming!

Duke Energy solar farm

by James A. Bacon

The surge in solar power production in North Carolina has caused an increase in nitrogen oxide (NOx), a serious air pollutant, North Carolina’s Duke Energy has concluded. Without changes to state regulatory policy, according to a report by North State Journal, carbon dioxide (CO2) emissions also could increase.

These counter-intuitive findings stem from the fact that solar power is an intermittent source of power, which must be offset by on-again, off-again generation from fossil fuel sources, primarily natural gas. The on-and-off cycling of power stations leads to inefficient combustion and higher NOx emissions. The effect on CO2 emissions is less clear, although utility officials raised the prospect of a “slight increase” in CO2 at the plant level under certain conditions.

I have no idea if Duke’s conclusions will stand up to close scrutiny. For sure, they will be attacked by those who are committed to intermittent renewable energy sources at any cost. But the debate in North Carolina is highly relevant to Virginia. North Carolina has the largest installed base of solar power of any state outside of California. But Virginia is adding solar capacity rapidly, and the Northam administration has set a goal of attaining a zero-carbon electric grid by 2050.

Let me be very clear. I am not advocating a dial-back in Virginia’s commitment to solar. But I do say, if we are going to aggressively expand our reliance upon an intermittent energy source, we need to know what we’re getting into. Continue reading

Environmental Balderdash: Exporting CO2 to EU

Source: Rachel Carson Council, cited by Cindy Elmore in RTD. Click for larger view.

by Steve Haner

In parts of Virginia, conservation groups are being paid by California to preserve forest land because trees capture the CO2 considered the culprit in global warming. In other parts of Virginia, large swaths of trees are being cut to convert into biomass fuel for European power plants, based on a claim that is a way to reduce CO2 in the atmosphere.

It would be so much easier to accept the climate crisis doomsday scenario if the proponents were not so contradictory and hypocritical. In both cases, the Californians and Europeans are doing this so they can keep pumping CO2-rich emissions into their atmosphere. They obviously don’t really fear CO2.  Continue reading

Dueling Crises: Unaffordable Housing vs. Flammable Housing

by James A. Bacon

Citing housing affordability as the key issue, the Virginia Board of Housing and Community Development has voted down an update to the state building code that would have mandated the installation of sprinklers in all new single-family homes and townhouses.

Virginia home builders have said that the sprinkler requirement would add between $15,000 and $25,000 to the construction cost of a new residence, according to reporting by WAMU, American University Radio. Keith Brower, a former Loudoun County fire chief has countered that the cost would be significantly less, about $5,000 for a 2,000-square-foot house. Whatever the case, there is no debate that the mandate would have added thousands of dollars to the cost of a dwelling unit.

WAMU summarized the home builders’ arguments this way:

Home-builders hailed the 10-4 vote taken Monday, saying that requiring sprinklers would only throw another obstacle in the way of the new housing construction that is needed to help close what officials say is a 75,000-home gap between what’s currently expected to be built across the region and what’s actually needed to keep pace with estimated job growth.

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Dominion Has Lost the Dems. What’s Next?

Susan Swecker, chair of the Democratic Party of Virginia. Photo credit: Richmond Times-Dispatch

Dominion Energy is fast losing the Democratic Party. Following the lead of dozens of Democratic candidates and elected officials, the Democratic Party of Virginia has declared that it will no long accept political contributions from the electric utility. Reports the Richmond Times-Dispatch:

Party Chairwoman Susan Swecker said Dominion’s contributions are a “very contentious issue with a lot of folks all across the commonwealth, and we thought it was time for us to just step up and say this is where we are,” according to an interview published on the left-leaning blog Blue Virginia.

Party spokesman Jake Rubenstein confirmed the decision but would not comment further. DPVA’s pledge also includes Appalachian Power, the state’s other electric monopoly.

The House Democratic Caucus and Gov. Ralph Northam’s political arm The Way Ahead are still accepting Dominion money, but it’s clear which way the party is heading. Virginia Democrats increasingly embrace a progressive/left ideology along with an apocalyptic view of climate change and a thorough-going hostility toward fossil fuels. Although Dominion is moving aggressively toward renewable energy, including a just-announced $7.8 billion offshore wind project as well as billions of dollars in solar projects, the utility still remains committed to natural gas, as highlighted by its Atlantic Coast Pipeline project, and nuclear power, which is also unpopular with the Left, as supplementary energy sources. Continue reading

Dominion’s Move Against Green Competitors Fails

by Steve Haner

The verdict is in and green energy virtue in Virginia’s electricity market remains available in monthly increments. You do not need to be green twenty-four hours a day, seven days a week, tracking every change of demand.

That was the requirement demanded by Dominion Energy Virginia in its recent effort to block competitive service providers who are taking away customers who want 100% renewable power. In a 22-page opinion issued today (here), the State Corporation Commission rejected every Dominion assertion across the board. It said the two companies, Calpine Energy Solutions and Direct Energy Business, are operating within Virginia law.  Continue reading

GOP Also Concerned About Electricity Consumers

The RGGI states, with New Jersey, which rejoined in June.

by Steve Haner

With an eye on November 5, Virginia’s Republican legislators are expressing their concern for Virginia’s electricity customers and warning that their Democratic competitors will support a new energy carbon tax if they gain the majority. The carbon tax is a key element of the Regional Greenhouse Gas Initiative (RGGI).

In media releases and, of course, Tweets, the simple message is “Higher Taxes on Energy. Democrats Say Yes.  Republicans Say No.” The key evidence provided is State Corporation Commission staff testimony (here), first made generally available on Bacon’s Rebellion, and a recent summary on the issue I wrote for the Thomas Jefferson Institute for Public Policy (here). We took a stand against joining RGGI.

That RGGI white paper has been in process all summer, and it was pure coincidence that it surfaced just as many Democrats were showing their concern for consumers by opposing a higher profit margin for Dominion Energy Virginia.  Continue reading