Current RGGI States
Virginia’s Air Pollution Control Board will meet April 19 to consider the next regulatory step to limit CO2 emissions from Virginia electricity plants through membership in the Regional Greenhouse Gas Initiative.
The agenda packet for the meeting, on-line here, contains more than 330 pages on the complicated issue, probably the best point counterpoint discussion on that already-voluminous record. The entire record from the two comment periods is summarized, with DEQ staff politely thanking those who praise the regulation and vigorously disputing those who oppose it.
DEQ takes quite a bit of space to answer or challenge the recent State Corporation Commission staff estimate of the cost impact (previously reported on Bacon’s Rebellion) and re-assert its own position that the cap and trade regime, accompanied by a 30 percent reduction in allowances over ten years, will not jack up retail costs. To find that, read its response to Dominion Energy Virginia’s comment (number 20) starting on page 195.
RGGI will be the focus of discussion tomorrow as well. The Virginia General Assembly’s reconvened session will take up Governor Ralph Northam’s veto of the bill requiring legislative approval for membership in RGGI, a veto likely to be sustained. Less certain is the fate of Northam’s efforts to remove the same requirement from the budget, because for an amendment he will need a majority vote in both chambers to prevail.
The DEQ’s response to the claim of high customer cost basically challenges a couple of the key assumptions, and only time may prove who is correct. It also basically dismisses the role of the SCC staff in the debate and assumes the SCC is merely parroting information or models provided by the utility. There is a whiff of ad hominem in the response, which is unfortunate. If DEQ is right that the staff just cut and pasted Dominion’s work, that would be unfortunate.
RGGI is a cap and trade regime and the market per-ton price for the carbon allocation credits is not set in advance. The credits will become more scarce over time. DEQ projects the prices will remain basically flat and the SCC expects they will rise. The higher they rise, the more impact it will have on customer bills, especially if the revenue in the future is diverted from the utility to the government. That is clearly the goal of many advocates – a true carbon tax.
But there is also the impact on future capital decisions by the utility, with the SCC indicating early closures due to RGGI will stick ratepayers with stranded costs. DEQ responds that that many of the coal-fired plants put under additional economic pressure by this new rule are probably going to close anyway, and those closings when they come cannot be blamed on RGGI membership.
“Dominion’s analysis for SCC staff assumes that certain coal units will not retire for economic reasons in the absence of a carbon cap…To assume that the Chesterfield coal units will continue to operate in the 2034-39 timeframe (70 years after that plant was put into operation) when similar coal units are expected to retire for economic reasons, raises questions about the validity of Dominion’s analysis for SCC staff. Similarly, the units at Clover are assumed to continue to operate until their 55th birthday.
“In addition, based on publicly available information…operation of the Chesterfield units has decreased by approximately 50% over the past 10 years, and operation of the Clover units has decreased 33%. This suggests that these coal units–like coal units everywhere in the U.S.– are under considerable economic strain already because of low natural gas prices and low renewables costs.”
In an SCC proceeding, the claims and counterclaims would be followed by a wave of sworn interrogatories and an open hearing under oath. Absent that the lay person just hears the two sides and wonders.
The second round of comments did seem to include more challenges and objections. The expression of concern about customer cost was taken up by the Old Dominion Electric Cooperative, which has no stockholders to protect and is not known to stand with Dominion automatically.
“Even a modest increase in bills will be problematic, and larger increases in costs will turn electricity into a luxury item. The Cooperatives have only their ratepayers from which to recover costs; there are no separate stockholders. This fact makes the implementation of this rule all that much more troubling for the Cooperatives. This program has the potential to produce a multitude of unintended consequences, each of which could, individually, have sizable cost implications.”
There was also a focus on the question of energy from burned biomass, which also produces CO2 but is getting some level of exemption from the cap, requested by the forest products industry. This brought a sharp complaint from an environmental coalition:
“Allowing CO2 emissions from biomass combustion to go unregulated– when in fact, wood-burning power plants emit more CO2 per megawatt-hour than even coal plants–rewards cutting and burning forests for energy, when restoring and expanding forests is actually essential in the fight to reduce GHG. Virginia should show leadership by accurately counting CO2 emissions from burning biomass.”
Sorting out the competing claims would be hard for experts, and most of them enter this debate seeking a particular outcome. The lay person is lost, but notes with nervousness that the retail price of residential service is more than 21 cents per kWh in New England, the heart of RGGI, compared to under 12 cents in Virginia.
