Consumers Be Wary When Energy Elephants Dance

By Steve Haner

First published this morning  by the Thomas Jefferson Institute for Public Policy. 

The Virginia House of Delegates is expected to vote this week to exempt certain Virginia manufacturers, which ones to be determined later, from the coming wave of energy costs created by Virginia’s rapid transition to unreliable forms of power generation.

House Bill 1430, sponsored by Delegate Lee Ware, R-Powhatan, mirrors a similar failed effort from the 2022 General Assembly.  It was approved in the House Commerce and Energy Committee Thursday on a party line 12-10 vote, with only Republicans in favor.   The likelihood of a similar partisan divide is the bill’s biggest challenge in the Virginia Senate, because Democrats hold a majority there.

Supporters are correct in noting that the higher energy costs on the way will stress the manufacturing sector and create a strong incentive for some of these companies to either leave Virginia or spend any expansion dollars in states – or foreign countries — with lower energy costs.

Opponents are equally correct in noting that if that many large energy users no longer have to help pay for projects such as Dominion Energy Virginia’s coming offshore wind project, with $10 billion now the low-end cost projection, it will substantially raise the costs of those who cannot evade the bill.  It simply shifts the costs.

And this is something Democrats apparently understand because they have already done exactly the same for a group they want to protect, low-income households.  That group won’t pay for the wind project either.  When Democrats passed the 2020 bill mandating the massive wind project, they included a provision to exempt those residential households which will be part of the Percentage of Income Payment Plan (PIPP).  How many that will be is yet to be determined.

The PIPP energy subsidy for low-income customers is also funded by a separate charge on electric bills.  Ware’s new legislation will save the manufacturers from having to pay for that, as well, providing a second boost in shifted costs upon homeowners and businesses who get no exemption.

This is the dominant theme of energy policy in Virginia today – everybody must look out for themselves.  Another example:  customers of Virginia’s many regional electric cooperatives were also exempted from paying for the wind project.  They won’t have to pay for the additional cost of the wind project when they buy power wholesale from Dominion.

In its promotional material for its bill, the Virginia Manufacturers Association points to cost projections from both the State Corporation Commission and the utility itself:

 According to an SCC order last year, Dominion Energy’s residential customers may pay 46% more for electricity by 2035. Dominion Resources own 2020 Integrated Resource Plan projects that between 2022-2036 their compounded retail rate will increase anywhere from 21.21% – 46.61%. This does not include the Grid Transformation & Security Act, Coal Ash, Undergrounding, RGGI, PIPP or other riders/costs the legislature has passed in the last few years that will compound cost increases.

The SCC has also stated in a recent order that the Coastal Virginia Offshore Wind project alone would cost 78 cents (per) kWh or 26 times the cost of purchasing energy from the market. In a recent SCC settlement, this project was approved to substantially exceed its original cost estimate.

It addressed the issue of cost shifting by arguing that will still happen if the factories in question close or leave, causing far more economic hardship than just higher home electric bills.  Again, that is perfectly true.

Should the bill pass as written, it would not cover all companies that can make the argument they are especially vulnerable to higher energy costs.  The exemptions are limited to 200 megawatts in aggregated demand for Dominion’s territory, and 40 megawatts of aggregated demand among industrial customers of the Appalachian Power Company in Western Virginia.  Which companies make the cut will be fought out in front of the SCC.  It could end up being a short list of very big companies.

A story on the bill in the Richmond Times-Dispatch translated Dominion’s 200 megawatt ceiling as equivalent to 180,000 residential accounts.  Think of every home in the City of Richmond, for example.  The PIPP customers exempted from paying for the turbines might equate to another major city.  Perhaps before the session ends somebody will get the SCC staff to produce some real numbers on the impact on the rest of us.

In testimony on Ware’s bill, a Dominion vice president said the company endorsed it, and a lobbyist for Appalachian said that firm had no position, but with a couple more tweaks might add its support.  While APCO does have some major green energy project costs coming, which its big customers might want to avoid, it has nothing comparable to Dominion’s wind and solar ambitions.

So, in the giant political trading marketplace that Virginia energy policy has become, both Dominion and Appalachian have goals they want to accomplish this session.  Dominion’s new rewrite of its regulatory process, discussed here last week, is now formally introduced as House Bill 1770.  Appalachian has filed an even more dramatic revision to the rules, a breathtaking escape from SCC oversight.  See House Bill 1777 and Senate Bill 1075.

Even Governor Glenn Youngkin (R), reported as taking no position on the Dominion regulatory scramble, has something he badly wants that may need utility support to pass.  His ambitions with regard to small modular nuclear reactors are fleshed out in House Bill 2333.  The bill is clearly drafted to favor Dominion as the entity that would develop such a multi-billion dollar project over the coming decade.

We have something brewing that’s good for manufacturers, other bills likely to enrich Dominion and Appalachian stockholders, and a high profile project that a governor clearly desires.  The absence from this game of average ratepayers or someone fighting for them, be they homeowners or small businesses, is obvious.  The inviolable rule of legislative politics is, if you are not at the table, you are on the menu.


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Comments

39 responses to “Consumers Be Wary When Energy Elephants Dance”

  1. James C. Sherlock Avatar
    James C. Sherlock

    The bill on nuclear reactors needs to be rewritten to require a provider other than Dominion or Appalachian. We need competition. Simple (and hard) as that. The Governor likely doesn’t want Dominion to oppose the bill, but that is short term thinking. Did I mention we need competition?

    1. Stephen Haner Avatar
      Stephen Haner

      Possible but unlikely that a third-party merchant generator would develop such a project.

      1. LarrytheG Avatar

        We say we want 3rd party for wind and solar… why not nuclear?

        1. William Chambliss Avatar
          William Chambliss

          Larry, there are literally thousands of megawatts of non-utility solar and wind generation projects waiting to interconnect into the Dominion transmission zone while PJM studies the impacts of each project on the reliability of the
          regional transmission grid it manages. Plus, they all want their interconnection costs to be covered by retail electricity customers, too.

          1. LarrytheG Avatar

            so Dominion produces it’s own power and buys some power also? Most Co-opts in Virginia do not have generation
            facilities. Who do they buy from?

          2. William Chambliss Avatar
            William Chambliss

            Yes, Dominion produces most of its own power. It and the co-ops both are members of PJM, which operates an energy market. Sometimes Dom or the co-ops buy out of this market if their own units are in maintenance outages for instance.

    2. Nancy Naive Avatar
      Nancy Naive

      I suppose we could drag an old SSBN up the river and wire ‘er into the grid. A portable genset that would turn Generac green. And by green, I meant with envy not ecologically.

    3. William Chambliss Avatar
      William Chambliss

      James, under current Virginia law, a non-utility can petition for approval to build a nuclear facility, but, as Steve notes, it is impossible to imagine any such entity undertaking such a risky enterprise.

  2. James C. Sherlock Avatar
    James C. Sherlock

    Outstanding article.

  3. Eric the half a troll Avatar
    Eric the half a troll

    Sounds like another case of Republicans shifting costs from corporations to tax payers… nothing new here… why not just cut a check from the state coffers to manufacturers for each new job created… a heck of a lot more transparent… maybe that is the problem, eh…

    1. LarrytheG Avatar

      if you’re not at the table…. menu… true that.

    2. Stephen Haner Avatar
      Stephen Haner

      And as noted, also a case of Democrats shifting costs from low income to slightly less low. Making that connection was kinda my point, as we enter this “every group for itself mode.”

      1. Nancy Naive Avatar
        Nancy Naive

        Ah yes, but taken together, the bills assure the mighty don’t just kill the weakest outright. “Stuck in the middle with you…”

        1. energyNOW_Fan Avatar
          energyNOW_Fan

          …and me…good song reference for Virginia tax policy in general

  4. James Wyatt Whitehead Avatar
    James Wyatt Whitehead

    Thank you. Appreciate the dissection. Energy policy is not something I fully understand. But I did enjoy how I am going to end up “on the menu”. Move over Beef Wellington, now serving chicken salad Whitehead.

  5. LarrytheG Avatar

    I’d like to ask, dumb question perhaps. Why did/does Virginia choose a monopoly to provide power in the first place and is it in the best interests of Virginia citizens and companies now?

    In the states (do we know who they are?) that do not have utility monopolies, how do they assure things like reliability?

    I just think Haner has a limited, somewhat partisan view here when he talks “Dems” do this and that. What can both Dems and GOP agree on to make it better as opposed to working at cross purposes much of the time?

    1. William Chambliss Avatar
      William Chambliss

      Here is the answer you seek, Larry. Virginia, like every other state (except perhaps Nebraska) granted utility service territories to monopoly utilities, mostly investor owned (all power in Nebraska is public owned). But not only did these states permit such utilities to serve every customer in that granted territory, they REQUIRED them to do so. The ability to serve was yoked to the obligation to serve, and serve all similarly situated customers at uniform pricing. This spurred the investment necessary to expand service networks to provide the vital public service of electricity. That’s the original “regulatory bargain” monopoly service territory coupled with obligation to devote the needed capital to serve everyone.

      Once the electric networks became ubiquitous, i.e., wires went to every home, some states decided to decouple the generation of electricity from the delivery of it to thosse homes. “Competition” in electricity is competition in the generation sector, not in the transmission or distribution of it. It is unclear which produces the lower cost of power overall at this point.

      1. LarrytheG Avatar

        Thanks. I did not realize that most other states had granted utilities monopolies in exchange for serving all in a territory, the same price no matter the actual cost per customer.

        Dominion does not serve all of Virginia. There are about 13 independent Co-ops. Are they also de-facto monopolies?

        I think Virginia has also “decoupled”. At least on my bill from a co-op the generation is a separate line item from the distribution. I’m not sure exactly where they get their power or if they can buy it wherever they please.

        1. William Chambliss Avatar
          William Chambliss

          No, Dominion does not serve all of Virginia, but it serves (almost) all customers in its service territory. The electric cooperatives are different creatures. Nearly all of them are distribution cooperatives that buy their power from either utility suppliers or, in the case of Shenandoah, its affiliate ODEC. The cooperatives ARE monopolies, at least in Virginia, and most of them grouped together a few decades back to invest in their own power supplier, ODEC. There are 3 or 4 co-ops in Virginia that do not belong to ODEC, but for those that do, ODEC is their sole power supplier, by mutual agreement.

          1. LarrytheG Avatar

            I’m familiar with ODEC but was under the impression that in high demand periods, ODEC may not be able to provide all that is needed and the Co-ops would then have to buy from other sources, perhaps Dominion, perhaps from PJM providers.

            I believe NOVEC does not buy power from ODEC but instead from PJM , not sure.

            At any rate, the Co-ops don’t come across as “evil” monopolies… like Dominion seems to be perceived as.

  6. DJRippert Avatar

    This is shaping up to be one of the great disasters in modern Virginia history. The cost overruns have already started. The special interest politicking has begun. Dominion and Appalachian are getting their way for their shareholders at the expense of the ratepayers.

    The Virginia Way is in full swing.

    Shame on every one of the 140 people we supposedly elect to represent us.

    1. how_it_works Avatar
      how_it_works

      Well, the good news is, when Dominion has another one of their outages, you won’t be paying for overpriced electricity.

      1. DJRippert Avatar

        I drove to and from Ohio over the weekend. Lots of large terrestrial windmills on the mountains in central Pennsylvania. On the way there, three of five were spinning in one array. On the way back, two in five. Hard to understand why they weren’t all spinning. However, give Pennsylvania credit – the experiment with wind generation has to be vastly cheaper with on-shore turbines than off-shore turbines. At least the ratepayers in Pennsylvania have that going for them.

        1. how_it_works Avatar
          how_it_works

          Pennsylvanians seem to be more pragmatic about things like that.

  7. Dick Hall-Sizemore Avatar
    Dick Hall-Sizemore

    There is no one fighting for the average ratepayers. But, wait! I thought the Attorney General was supposed to be looking out for consumers. That is what Shaun Kenney claims, anyway.

    1. LarrytheG Avatar

      Oh, EXCELLENT POINT! nowhere to be seen so far except for opposition to wind…

  8. walter smith Avatar
    walter smith

    Love the carping from the people on the Left. The whole expense shifting is because of your stupid new religion.
    Dominion Energy is a weird public company. It is regulated by the State because the citizens need electricity. But it also has a foot in the stock market.
    Meanwhile, we have politicians who know nothing about “climate change” other than they are for it (Dems as an excuse to grab more of our money and more power) or only kinda sorta for it, let’s just do it slower “good” Republicans, and then people like me who believe the “science” is flawed.
    Dominion has as its CEO a guy whose career was … – some kind of flunkie for Mark Warner, so Dominion is betting on “climate change” and lots of grift, while consumers get the shaft.
    I only recently heard about this – https://energyfromthorium.com/. I believe nuclear power is the clear answer, and if Thorium is as advertised, we should immediately stop all of the grift and graft and electricity from offshore wind which will not be dependable, will cost too much, and will have effects we still don’t know and start developing nuclear Thorium plants.

    1. LarrytheG Avatar

      is that “science” Walter?

      1. walter smith Avatar
        walter smith

        What are you asking Larry?
        Let me repeat everybody’s problem with you.
        You do not believe in “science.”
        You believe in “scientism,” which is the nullification of true science.
        In true science, an assertion can always be falsified and it is encouraged to ask questions. In scientism, you assert your “belief” in science, and question nothing, particularly over political matters that “your team” supports. This happened during Covid. Everything the “experts” did and said was wrong. Yet the “good” and “smart” people shut up all people asking questions.
        I only heard about nuclear energy from Thorium yesterday – maybe 2 days ago – if true, why aren’t we pursuing?
        You see – I asked a question. (And that fits in with The Jefferson Council and free speech at UVA.)

        1. LarrytheG Avatar

          but is thorium science or scientism? Is it real or a mirage? Dominion talks about SMRs along with Youngkin but I don’t hear either of them talking about Thorium.

          so I ask.

          is Thorium a “belief”? Do folks who believe in covid and climate also believe in Thorium?

          😉

          1. LarrytheG Avatar

            So if Climate Change is “wrong”, why do we care about Thorium? Will be cheaper than fossil fuels?

          2. DJRippert Avatar

            Nobody doubts that clean energy (sun and wind) would, all other things being equal, be a better way to power the world. However, all things are not equal. First, the cost of energy is likely to be vastly higher generating electricity with Dominion’s offshore experiment. Second, the reliability of Dominion’s offshore experiment is in serious question. Finally, there is no reason to believe that Virginia’s expensive and risky efforts will make an appreciable difference in global climate change given the large number of states and countries that could care less.

          3. walter smith Avatar
            walter smith

            Climate Change – so called – for the Left is a religion. One is not allowed to challenge it in the academy. If one wants advancement or research grants, one has to toe the party line. At this point, I am not aware of the politicization of thorium. I have heard the insistence on uranium was for nuclear weapons. I don’t know. So I ask questions. My problem with “climate change” is we can’t predict the weather more than 3 days out. yet are to believe the Doomsday predictions. I am sorry to be mean – AOC used to be a cute idiot in college. Her little dance video is stupid and funny. But her saying the world would end in 12 years – 4 years ago is just STUPID! (It also shows how worthless her so-called econ degree was, but I digress – there is so much to digress to!)
            So the “climate change” is a theory where it seems designed to put people in fear and authorize the government to steal mo money and mo power. Based on their Covid response, prove why any sane person not a Dem operative should trust them.
            This is what I think is going on with Dominion and government and the academy, at the expense of the “customers” (who aren’t huge businesses or already on the dole ) – https://youtu.be/c7AL44keDZw

          4. walter smith2 hours ago
            Thorium
            is an element. Supposedly, it is more available than uranium, produces
            more energy per ton and its disposal requires at most 200 years vs
            thousands for uranium. Is that true? I don’t know.
            What I do know is
            “climate change” and predictions of doom are based on models that assume
            perfect knowledge, and we don’t have perfect knowledge. Paul Ehrlich
            has been wrong for a long time, as have all Malthusians and all
            Marxists. I can admit to not knowing what I don’t know. It would be good
            if the political hack researchers who claim to be scientists had that
            same level of humility.

  9. energyNOW_Fan Avatar
    energyNOW_Fan

    Ugh I hate to reference a Struther Martin quote from Butch Cassidy…my fellow citizens, who are liberal, favor extreme expensive offshore wind and my fellow citizens, who are Repub, favor extreme expensive nukes, and my elected officials never met a $50-billion project they did not like.

    I have been complaining about Virginia business users getting off cheap on elec for a long time, and wow! we are apparently progressing further along that path.

    This partially why electrification is embraced so much in the USA, it has always been consumers – not business – paying the lion’s share the elec bills vs. fossil fuels where the cost is pretty much shared equally. Business such as FedEx keeps saying we want green energy fast (since they do not share the cost burden) And Virginia is King of the discount for businesses.

    1. Nancy Naive Avatar
      Nancy Naive

      I think the reference is “Cool Hand Luke”. “What we have here…”

      1. energyNOW_Fan Avatar
        energyNOW_Fan

        not the one I was thinking

        1. Nancy Naive Avatar
          Nancy Naive

          Yeah, but it works. I just couldn’t figure out how crazy or colorful fit the bill. Now, living in Bolivia could be fun.

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