Conserving Energy, Helping the Poor

Marjorie Wilson

by James A. Bacon

Marjorie Wilson has lived in the same 1,000-square-foot bungalow on Texas Street in the City of Richmond since 1953. Two sons and a grand-daughter share the residence with her but it isn’t easy keeping up with the bills, including the electric bill, which averages about $120 per month.

“We’d talked about insulating the attic years ago,” says daughter Diane Campbell, who helps look after her mother. But they never found the money to get the job done.

Project:HOMES volunteers pump insulation into the walls of the Wilsons’ house.

The family hit an energy conservation bonanza this year, though, when it qualified for improvements by Project:HOMES, a non-profit enterprise that makes home improvements for the poor, elderly and disabled throughout Central Virginia. Combining federal weatherization money, Dominion Virginia Power EnergyShare funds and volunteer labor, Project:HOMES was able to insulate the attic and walls, plug air-infiltration gaps, wrap the hot water heater and pipes and install LED lights for about $4,000, says CEO Lee Householder.

The goal is to shave 30% off the Wilsons’ electric bill. If the project meets expectations, that will amount to savings of about $40 per month on average or $480 per year. That’s a pretty good return on a $4,000 investment.

The Wilsons’ house was featured yesterday in one of three events held around the state marking the re-launch of Dominion’s EnergyShare program. The Richmond event was attended by Dominion Virginia Power President Paul Koonce and Richmond Mayor Dwight Jones. Governor Terry McAuliffe was the headliner at the Northern Virginia event, while Lieutenant Governor Ralph Northam led off in Hampton Roads. The McAuliffe administration had pushed hard for an expansion of EnergyShare this spring when lawmakers crafted legislation in response to the Environmental Protection Agency’s crackdown on CO2 emissions from electric power plants.

Dominion has committed to spend $57 million on the program over the next five years, including $15 million that will be recouped from rate payers and $42 million to be contributed by the company itself. The $42 million, in effect, will come from shareholders of parent company Dominion Resources, said Katharine M. Bond, director of public policy. Those sums do not include additional funds contributed by Dominion customers, employees and others.

The program, said Koonce in remarks at the Richmond event, is the result of “a bipartisan effort to expand energy efficiency.” There is a broad political consensus that Virginia will have to aggressively pursue energy conservation in order to meet the strict CO2 emission goals of the Clean Power Plan.

There has been considerable debate about the merits of weatherization programs since the Obama administration’s 2009 economic stimulus plan. Government auditors found the $5 billion lavished on weatherization was riddled with waste and fraud. And in Dominion’s own analysis of alternatives for CO2 reduction, the “Income and and Age Qualifying Home Improvement Program” was judged to have the second highest cost per megawatt hour, exceeded only by off-shore wind energy. The cost of $236 per megawatt hour compares to the voltage conservation program, costing $38 per megawatt hour, or the residential appliance recycling program, costing $55 per megawatt hour, according to Dominion’s 2015 Integrated Resource Plan.

However, EnergyShare is more than a conservation program. It is designed to help the poor, elderly and disabled pay their electric bills, which explains its broad political appeal.

In its earlier incarnation, EnergyShare helped Virginians keep the lights on and also paid for weatherization. The big design change in the program is linking financial assistance with weatherization. If a customer faces a choice between paying an electric bill or a medical bill, the problem likely is not a one-time event; it is probably a chronic one. Weatherization creates a permanent reduction in a poor family’s electric bill. “That linkage has not been part of the equation before,” says Bond.

Another difference is that the revamped EnergyShare program has an educational/outreach component. Neighbors are invited to observe the improvements and learn how they might benefit.

Finally, Dominion has partnered with reputable organizations like Project:HOMES, which are in business for the long haul, not like the fly-by-night operations that sprang up in 2009 to take advantage of the federal stimulus money. Project:HOMES made improvements to about 1,000 homes last year. It also acquired, upgraded and sold 17 houses on its own account, using the profit to balance its budget and build working capital, says Householder, the president.

In the case of the Wilsons, says Householder, the family approached Project:HOMES for a wheelchair ramp. An inspection revealed that their house would be a good prospect for weatherization. The home make-over also added some new floors, as well as safety features such as a smoke and carbon monoxide detector. Cobbling together funds from different sources allowed Project:HOMES to make multiple improvements in a single job, which drives down costs.

When redesigning the EnergyShare program, Dominion consulted with more than 30 government agencies and non-profits to solicit input on how to make it better, says Bond. The end result, she says, is what the company hopes will be “a best in class program.”

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  1. Passing any of these costs along to ratepayers is the equivalent of a tax. In fact, it is the equivalent of a very regressive tax. Only elected politicians should be able to tax the citizens of Virginia (and the United States), not for profit privately held companies like Dominion and not unelected university presidents like Teresa Sullivan. This concept was so fundamental to the framers of the US Constitution that the origination clause required all bill for raising federal revenue to originate in the US House of Representatives. The entirety of the house was elected every two years and the framers felt that those who imposed taxes and tariffs should have to withstand the voters.

    This energy conservation program may be quite well intended and beneficial. However, a monopoly electricity provider should have no right to charge some people more than they should so they can give away the rate payers’ money to those it sees as “in need”.

    The fact that the appointed SCC judges approve this passing to the rate payers is irrelevant. If the state wants to take money from one group of citizens and give that money to another group of citizens then that law should be passed by public vote in the Virginia General Assembly.

    Once again we have been let down by our state government.

    1. I agree that the $15 million piece of the program is the functional equivalent of tax. The $42 million contributed by Dominion is not a tax.

      Regarding the $15 million… I’ll have to go back and check Senate Bill 1349 to see if that rate rider was part of the legislative package… in which case, it would be entirely appropriate to label the rate rider a tax.

    2. Reed Fawell 3rd Avatar
      Reed Fawell 3rd

      You are right. I agree Don

      1. I completely agree with Don, to the extent this weatherization program doesn’t actually save Dominion money. But that’s not as far fetched as it sounds.

        Weatherization not only saves this customer on her bills but also lowers demand on the Dominion system. It is a legitimate use of ratepayer funds to “buy” lowered demand for electricity from its customers, particularly if it’s a winter-peaking utility (as is Dominion) and the reduced demand would have occured in the winter on peak. To use a more familiar example, utilities all across the country used to have programs to give away CFL light bulbs to replace incandescents because the payback (through reduced need for on-peak generation) was larger than the cost, due to the utility’s ability either to delay the construction of new generation or to avoid paying somebody else (e.g. the PJM marketplace) the electric capacity and energy charges. The good publicity in this case — reducing a needy customer’s bills — is a big bonus for Dominion (and perhaps for the VSCC). It may be that the allocation in this case ($15 M to ratepayers, $42M to Dominion) reflects the proportion of this weatherization cost that is savings versus subsidy.

        In addition such programs are very popular with regulators — like building windmills — even if they don’t quite pass the cost-benefit test. Sure, the cost in excess of savings is a subsidy, or hidden tax if you will. Neither Dominion nor the VSCC generally goes along with generation subsidies at an extra cost to ratepayers and I applaud that — but given the public infatuation with renewables these days there’s a lot of popular support for rate subsidies for that purpose even if it doesn’t make economic sense (like, for windmills). Of course the green folks argue that you have to subsidize the first such installations in order to drive the unit cost of ‘renewables’ power generation down to levels that eventually will make sense. Let me hasten to add, solar power in commercial-sized installations is different because it’s already there now, competitive with other kinds of generation without any subsidy — although solar power generation does require that the utility build or buy other power sources for nights and dark days.

    3. Rowinguy Avatar

      The General Assembly approved this program when it enacted SB1349; this did not come before the VSCC at any point prior to DVP announcing it today.

      1. Rowinguy Avatar

        The General Assembly approved this program when it enacted SB1349; this did not come before the VSCC at any point prior to DVP announcing it today.

        According to other news accounts, Dominion is footing the entire $57 million tab:

        “Ken Barker, Dominion vice president of technical solutions, said the $57 million will come from shareholders’ pockets – not ratepayers.”

        1. Thanks, Rowinguy – I do not know the specific GA or Dominion background here. But I understand the principle DonR raised, and it’s important that there’s an exception to it: it CAN make economic sense for utility ratepayers to underwrite the cost of another customer’s weatherization, at least in part, and there ARE responsible utility regulators who have come to that conclusion.

          1. Rowinguy Avatar

            Yes, I agree with that also.

          2. TooManyTaxes Avatar

            This is nothing new. Interest groups have argued for years that reducing demand for energy should be a part of a regulatory scheme. To the extent demand reduction is less expensive than adding capacity, it is in the ratepayer’s best interests.

            Insulating old houses does reduce consumption and, if done in sufficient number, produce a measurable reduction in demand, the costs of which should be passed along to ratepayers, just as they pay costs for adding capacity. Whether this actually works should be the subject of proof in a hearing before the VSCC. And what is the payback period? Given the multiple factors involved with utility demand and operating costs, the actual truth might remain unknown. However, there should be at least one reasonable way to model the results. If this is less expensive for ratepayers, they should be required to bear the costs. If not, the shareowners should eat them. What I fear is the results will not be subject to a strong review.

          3. TMT you are exactly right, before charging ratepayers for it the concept should be subjected to rigorous modeling first.

            In an earlier life I presented the results of a few studies like this and there are lots of obvious questions from regulators. For example: you’re in business to make money selling electricity; WTH, are you telling me it will save everyone including you money if you DON’T sell as much??!! The answer has to do with the difference between average and marginal cost. Utility prices are based on average costs, including the average investment in generating facilities including those built years ago; but serving new demand means new investment in new generation at today’s costs. The utility is obliged by statute to serve that new demand and incur that higher investment cost, which is paid for by all ratepayers. So, if Mrs. Wilson’s better insulation will cut her demand for electric heat and a/c and the installed cost of her insulation per kW of reduction on peak is less than the MARGINAL cost per kW of serving new demand, then it’s better for all ratepayers to give her improved insulation in order to delay adding that new generating plant that they would otherwise all have to pay for.

            There have been quite a few utilities and regulatory agencies that have studied this so the results, at least to order of magnitude, are fairly well known. Home insulation, because of the small scale and labor costs involved, probably isn’t fully offset by ratepayer savings but the offset would almost certainly be a big portion of the cost. It’s worth studying. Obviously circumstances and financial markets can differ.

            And Mrs. Wilson could use the help. As JohnB said, “There but for the grace of God . . . .”

          4. Acbar

            You are exactly right. The lowest cost source of energy is to save it. It is cheaper than coal, nuclear, gas, wind, whatever. Effective energy efficiency improvements and demand side management programs have a $2 – $8 return for every $1 invested. It is especially important to reduce the peak. A disproportionate share of the peak demand is due to substandard housing. All ratepayers would save if these dwellings were made more energy efficient. If we treated it like building a power plant (which basically it is – saving a watt is the same as making a watt), Dominion could use local contractors, check the quality of work and be sure nothing is wasted. Dominion could then add a charge to that customer’s bill spread out over time, so the bill would be lower than before. No government handouts required. The customer’s bill is lower and so are all the other rate payer’s bills (no need to build more generation). At some point the improvement is paid off and the customer saves even more.

            There are a few complications:
            1. Many of the residents in these dwellings are renters not owners. This can be overcome but you need to do some special paperwork with the owner. They should agree since their structure is being improved at no cost to them. If someone moves out – the balance of the cost is applied to the next tenant’s bill.
            2. If Dominion is only repaid the cost of the improvement, plus interest they still might come out behind – because now they have fewer kWh’s over which to spread the repayment for facilities built in the past. This is why the SCC and Dominion need to move to a 21st century rate structure (paying for energy services) rather than the 100 year old tradition of paying for sunk costs through a volumetric rate ($.xx per kWh). Dominion needs an incentive to do what is smart and still pay off the old debts and get a reasonable rate of return to attract new capital.

            The new scheme ends up being cheaper for everyone, but it requires some work to get there. And it maintains a healthy utility. If the SCC and Dominion hang on to the old ways too long, we end up with an ailing utility, high rates, and a second tier economy in Virginia.

  2. LarrytheG Avatar

    As usual – an excellent effort by Jim.. which in my view he is far better at these subjects than discussing free markets (just KIDDING) although might be curious to know folks views about using ratepayers and investor dollars to help the poor…

    isn’t this just another repackaged wealth transfer scheme?

    and does this make McAuliffe yet another far left ideologue using govt coercion to do something better left to the free market?

    Would McDonnell or Cucinelli or Bill Howell have supoorted this?

  3. LarrytheG Avatar

    seriously – these folks likely already get TANF, SNAP and free & reduced lunches and MedicAid… and probably other assistance.


    I’m sure there are more than a few who feel this way but they usually
    won’t respond to actual examples in the same consistent hardline way.. they sort of beat around the bush…about it, rather than honestly admit they are opposed to all of it – in concept.

    they won’t go for the full monte 3rd world solution – i.e. no govt-procured money for the poor… period. go work or beg or get charity but no taking money from some who worked hard to get it and giving it to others who are poor through no fault of others better off.

    we beat around the bush on this – don’t we?

    We’ll give the family Medicaid – as long as they don’t work.. cuz if they work then they would need Medicaid Expansion and we don’t do that so don’t work.

    Dad should not be having kids if he’s eventually going to go to prison because then we have to blame mom for not helping to educate her kids. Right.

    and again.. we can’t pay for childcare so mom can work.. and pay for her electricity and heat – nope… we got this nifty new help program from the Govt…

    I’m being sarcastic -yes

    because I’m frustrated with the disingenuous and convoluted/dysfunctional ways – we go about NOT dealing with the issue.

    we can’t decide as a society if we really want to help or not or to what degree – and as time goes by – more and more – nifty new do-gooder programs, not integrated holistically with other existing programs – just get added to the heap of Heinz 57 programs – each with their own administrative chain.

    The one thing we could agree on – is to go to a one-stop shopping system that ties all these programs together under one administrative umbrella.


  4. John B Avatar

    This one’s a toughie.

    How about a slightly different tack? Would it be so outlandish (use your own adjective here) if it could be accomplished with normal private business economies of scale rather than on a one-house-by-one-house basis?

    Since it obviously cannot, should it be abandoned?

    I, as a staunch conservative surely hope not. “There but for the grace of God …………….”.

  5. Darrell Avatar

    I don’t know about now, but up in Rust Belt Land they had a different plan for this type of situation. They would send out a city inspector to cite the homeowner for thousands of dollars in violations. Then when the owner tried to get assistance to fix the issues, they were given a choice between condemnation or being bought out at the assessed lot price only. The city then sold the parcel to a developer for a buck. The developer tore down the house and built a new energy efficient house in it’s place. The new house was then bought by a savvy (city employee subsidized loan program) investor who got a 15 year tax free clause in the title. The old homeowner usually ended up in the maze of taxpayer paid social agencies, where they should have been to begin with, which created new FTEs and increased taxes on the next victim.

    Virginia just isn’t forward looking enough.

  6. LarrytheG Avatar

    If we really wanted to be serious about this – we’d integrate the services holistically AND we’d link it up with folks who need jobs – who need skills so that kids out of school with no jobs, people on the street selling drugs and coming back to the streets from prison would all have the opportunity to become carpenters, electricians, plumbers, uber-like drivers, food bank workers, day care workers, etc..

    not all .. some are too far gone and some are just plain no good no matter what (just like some rich kids) but there is no better builder of self-esteem than having a job and knowing what it takes to do a good job. Every kid out of high school – needs a job …

    If we’re going to have to pay for entitlements anyway – why not incorporate cost-effectiveness, bang for the buck as goals also?

  7. Darrell Avatar

    Wait! Are you suggesting that employers teach employees how to do a job? That sounds like old geezer thinking. 😉

  8. LarrytheG Avatar

    If the choice is to teach them how to do a job verses paying them entitlements then I don’t care what you call it but common sense ought to be one of the descriptions!

    we got this kabuki theater mindset that if you are one of the unfortunates – then you must suffer – even if we have to pay more for you to do so.

    Yes.. Detroit, Newport News Shipping, and Textile and Furniture plants in Southside Va used to take folks with minimal high school educations and train them how to do a job in a factory or shipbuilding operation.

    that’s an ongoing issue for more than just the bottom poor…

    but when I hear that non-poor are helping to staff food banks or urban gardens or building/repairing homes for the poor – I end up wondering why the unemployed poor can’t also get in that game.. and in the process get some useful job skills… since we gonna pay their entitlements anyhow. what do we have to lose?

    I’m sure I’ve gone totally wrong somewhere in my thinking but I thought I’d throw it out there anyhow for giggle and grins..

    somewhere between do-gooder / feel good folks and others who actually need jobs and an opportunity to learn a skill.. we ought to find some common ground , eh?

    1. Darrell Avatar

      You would think there would be common ground. But then there would be an outcry that illegals are being forced out of the workplace because Americans are willing to learn jobs they wouldn’t do before. The newly trained unemployed poor can’t keep working for charity, you know.

      The employment paradigm has changed. Company supplied training is an after thought. Employers today have employees fill out a thousand questions for a personal skills database that is supposed to be used to fill jobs in house. They can get very testy if you don’t keep it up to date. I think this database is maybe just a legal requirement somewhere because that valuable information can sit for a generation and never be accessed to fill an in house job. A promotion is what they call moving to another company to fill a position. Moving from your current company without a new job is how you get to be poor and unemployed.

  9. LarrytheG Avatar

    Not buying the “get trained and take illegals jobs” idea … though!

    illegals are untrained… and doing jobs that our entitlement-receiving folks don’t want to do.

    that’s sort of a separate issue in my mind from the second thing about
    what employers want in jobs that actually require more than basic labor.

    Yes employers want people who are Infinitely flexible in their willingness to do different work – and to figure out how to do the different work. Much better to have an employee who has those qualities than to go looking for new employees whom you can’t really judge to have those qualities until after hired.. that’s why they like part time and interns for “try outs”.

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