Dominion Protecting Renewable Energy Buyers?!

Dominion Energy Virginia is simply trying to protect the unsuspecting public from environmental fraudsters, you understand.  Companies like Costco Wholesale and The Kroger Company lack the energy expertise to decide for themselves if a competitive service provider really is providing 100 percent renewable energy. They are being denied that service by Dominion for their own good.

That’s the basic argument Dominion has advanced for its refusal to allow willing customers of Direct Energy Business or Calpine Energy Solutions to switch.  It has said so in briefs filed at the State Corporation Commission and repeated it during hearings on the two companies’ efforts to force Dominion to accept the various applications for competitive supply. 

“Dominion Energy Virginia is protecting customers and declining to be complicit in Calpine’s provision of unauthorized and illegal service to customers,” one of its attorneys wrote in a brief.

All three SCC judges sat through the hearing August 7 from 1 p.m. well into the evening, first hearing about the Direct Energy Business motion and then the similar motion from Calpine.  The motions were for immediate action on injunctions, but the SCC did not rule from the bench and indicated late on August 8 that decisions on the motions were coming “promptly.”

As previously reported on Bacon’s Rebellion, Dominion started this conflict with a request to the Commission for a declaratory judgement on what level of renewable supply a renewable provider must “control” to abscond with Dominion’s customers.  Then the utility decided that based on the answer it suggested, while waiting on the SCC, it could deny any customer departures.    The two competitors then filed injunction motions to force Dominion to transfer the accounts.

The August 7 hearing was on the injunctions but kept bleeding into the main issue. No new arguments emerged, but the witnesses did fill in some facts.  Both Direct Energy and Calpine were early in the process of establishing their first Dominion zone accounts when Dominion froze the process.

Direct Energy provided numbers.  It has submitted 16 customers with 90 different metered accounts to Dominion for switching, and 12 had cleared the first review hurdle and had been given start dates for the switch.  Another four accounts didn’t clear the process, perhaps because of some discrepancy between the application and Dominion’s own records.

But a flood was coming.  Ronald Cerniglia, Director of Corporate and Regulatory Affairs for Direct Energy, said it has another 93 customers with 1,981 metered accounts considering or ready to leave Dominion.  The size of these accounts was not revealed, but they are mainly commercial, not residential, and thus represent a substantial load and perhaps a substantial loss of Dominion revenue.

In its filings, Calpine included customer information but put it under seal.   Two potential major customers have joined the case, however, and both Costco Wholesale and The Kroger Company sent lawyers to participate August 7.  Costco has also been seeking to escape Dominion by the other allowed route, aggregating its various stores into one large account that exceeds a five-megawatt demand.  So far, the SCC has rejected that effort.

But the section of the law dealing with renewable energy says Dominion customers “shall” be allowed to leave for a provider of 100 percent renewable energy, as long as the monopoly lacks its own approved renewable tariff.  Dominion does lack that, but its latest application to create one is pending. Unless or until that is approved, the competitors can sign up customers and keep them for their full contacts.  Losing that window is one irreparable harm they may suffer if the SCC does not order Dominion to let their customers go.

Dominion is arguing that neither Calpine nor Direct Energy, large national firms with years in this industry, are really selling 100 percent renewable power to Virginia buyers.  For example, it pointed to a contract Direct Energy shared with it from a company providing power from dams and noted force majeure language, absolving the provider if a drought reduced output.

Cerniglia testified that Direct Energy has other renewable suppliers all around the country, plenty of them within the PJM Interconnect LLC territory that serves Dominion.  It has back-ups.  Reliability is not an issue, because Direct Energy is also a licensed load service entity (LSE) and wouldn’t be if PJM were not satisfied it had capacity.  But could it prove it would provide 100 percent renewable 100 percent of the time, even in weather events or peak load, Dominion’s lawyer kept asking?

Judge Mark Christie, perhaps betraying a bit of skepticism about the whole exercise, pressed the Kroger lawyer during his opening comments. Does it bother Kroger that it might not be renewable generation 24-7 for 365 days a year?  “How much purity do you need…how green is green enough for Kroger?”

“As green as we can get,” replied Kurt Boehm, who traveled to the hearing from Cincinnati, Ohio.

This is and always has been the reality of this business.  Any customer buying electricity from the main grid, not from a solar or wind field or dam directly tied to its building, is getting electrons from all forms of generation.  These renewable providers match the demand they are serving with the renewable energy they are buying under purchase contracts, and there is some variation on whether those balance hourly, daily or even monthly.  There are certainly times when the two do not fully balance.

To be in this business, Calpine and Direct Energy have gone through all the review and licensing procedures of PJM, of the SCC, and even have been put through a registration process by Dominion.  They operate in multiple states.  This challenge to their legitimacy, to whether they are operating legally, appeared very late in the game, and only after Dominion had its own tariff request moving forward.

Costco was in the process of moving 28 accounts over to Calpine, and for a while thought it had done so, according to its brief.   “It was only after Calpine recognized that its usage volumes for billing purposes were not as expected, and made inquiries with Dominion as to the reason for the discrepancy, that Calpine discovered that Dominion had paused the enrollments…. At no point did Dominion notify Costco of any enrollment delay…”

“Dominion has deputized itself judge, jury, and executioner during the pendency of these proceedings, taking the position, incredibly, that it may choke the lifeblood of Direct Energy’s Virginia business operations… This is a clear usurpation of the role of this Commission in regulating the Virginia energy marketplace. This Commission should not endorse this sharp tactic. Specifically; this Commission should reject Dominion’s attempt to use its state-chartered monopoly to starve a captive business,” wrote Michael Quinan on behalf of Direct Energy“This is a usurpation of this Commission’s powers and should be met with a sharp rebuke.”

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12 responses to “Dominion Protecting Renewable Energy Buyers?!

  1. As long as Virginia relies upon a system of regulated monopolies to supply electricity, there is no getting around this problem: If large commercial and industrial customers are allowed to seek energy suppliers offering lower electric rates, rates for residential customers will go up. Obviously, Dominion doesn’t want to lose its biggest customers. But residential customers shouldn’t want Dominion to lose its biggest customers either.

    On the other hand, allowing big commercial and industrial customers to seek lower electric rates and renewable energy sources could be good for economic development. That’s a good thing. But let’s just be honest about the repercussions if Dominion’s largest customers are allowed to escape its orbit.

    • Unless, as TomH points out and others propose, we change the model. This shows the pressure is huge. Perhaps we need a shock to wake up the public. None of that excuses this kind of behavior, cutting off the process at the very last minute with no legal authority. They love what the GA does for them, seek to evade what does to them. They make whatever deal they need to get their legislation passed – and this goes back to 2007 – but then don’t keep up their end once they have what they want. That’s not energy policy, that’s a question of corporate integrity.

    • “If large commercial and industrial customers are allowed to seek energy suppliers offering lower electric rates, rates for residential customers will go up.” Jim, that is a highly questionable hypothesis. Dominion has spent a lot on expert testimony to try to prove that on the Dominion system as currently built using current ratemaking this statement is true. But here are some common sense things to consider:
      * The premise is that Dominion will be left with an investment in facilities that are no longer needed to serve a smaller customer base. That premise is false: (1) the wires and substations will still be needed and will be billed through the wires (transmission and distribution) charges, which are unaffected by retail access, so let’s take these off the table; and (2) the generators will still run just as often as they now do — their energy will still be economically dispatched in the PJM energy market and their capacity will still sell in the regional (PJM and bilateral) capacity markets and Dominion will be paid for this.
      * What will change — assuming the SCC requires Dominion to do so — is that Dominion will not automatically recover 100% of its investment in generation through locked-in “ratebased” charges to retail ratepayers and will not automatically attribute 100% of that income to those same retail ratepayers. Instead, to the extent its generation is not committed in advance to serving its retail customers’ forecast peak load, Dominion will have to recover those costs through the wholesale energy and capacity markets as a “merchant.” Which, by the way, Dominion is already free to do and which is what every independent generation company does by choice. There is no reason to believe that Dominion won’t find this to be even more profitable than “ratebasing” all its generation; it just doesn’t want to take that risk.
      * Cost shifting between rate classes, such that one class subsidizes another, has to be allowed by the SCC. It does not make sense that the SCC would require residential customers to subsidize the loss of large commercial customers. Indeed there would be nothing to subsidize if any generation in “excess” of retail customer needs on Dominion’s system can be sold profitably in the wholesale markets — which I believe it probably can be.

  2. I am thinking Washington DC decided to go with wind energy from Pennsylvania. Virginia does not have access (within our state bundaries) to the Appalaican wind corridor that runs down Pa, Md. and WVa. Every timne I go to Pittsburgh I see more and more wind turbines over there. Geez it is getting late to act, as the big wind subsidy is ending unless extended. Spilt milk. I dunno why Dominion did not grab a piece of that out-of-state pie for us.

    As far as 100% renewables, I feel some of the corporations are being unfair to Virginia though. As I mentionbed above, the fact is, Virginia is not as well-endowed with low-cost renewables as some other states. Also we are a heat pump state, so we have less nat gas to houses directly. The main gripe I see is high profit margin of Dominion, and to encourage growth of busniess in Virgina, I am inclined to let commerical go elsewhere.

  3. re: ” But residential customers shouldn’t want Dominion to lose its biggest customers either.”

    I think that’s a false choice because you’re implying that the ONLY “choice” Dominion has when they lose a big customer is to shift that loss to other ratepayers – as if they are entitled to every penny they would get otherwise.

    Who says that? Maybe Dominion does – but who else would advocate in that way for Dominion? Jim B? The Virginia Geneal Assembly?

    All this caterwauling about tuition costs and how terrible the Universities are and their BOVs and here we essentially defend Dominion for a litany of arrogant bad faith “screw you” behaviors towards ALL users of electricity – all completely legal of course thanks to the Virginia GA.

    Ask yourself WHY these companies like Kroger want renewable power to start with. Some cynics might claim it’s a marketing scam appease clueless customers but look at what else customers want – they want no hormones or anti-biotics in their meat; they don’t want mercury in their fish, they don’t want insecticides or ecoli on or in their produce. In short, they are responding to what their customers want AND YES – their customers want green energy also and Dominion is basically standing the way saying that both businesses AND residential are going to PAY if they switch to renewable fuel electricity – even if just for the times they can while relying on Dominion for when they can’t.

    That’s the crux of the issue. Dominion wants every penny they think their monopoly is worth and no one is going to take those pennies away from them without “someone” paying the difference.

    We should all remember – monopolies are not forever but more than that – they are allowed WHEN they are of benefit to customers and when they are not – the reasons for granting the monopoly are going to change and should.

    In the end, this is about the Virginia General Assembly and WHO they represent. I’ll grant that Dominion has a vote and they do exercise it quite effectively but other businesses and ordinary voters have a vote also,

    Times are changing and Dominion needs to get their mind straight on the difference between corporate obstruction and bad behaviors – and seeing business opportunities that do exist and getting in that game.

  4. Sounds like a situation primed for an antitrust suit by Calpine against Dominion. And Dominion can ask AT&T and the former Bell System how well the regulated entity defense to antitrust suits went.

    Speaking of wind turbines, last week I flew from O’Hare to Des Moines and happened to have a window seat. There were many, many wind turbines located on farm land. They seemed to be in both NW Illinois and Eastern Iowa.

    • TMT There is a terrific central wind corridor that runs from TX, who is doing really well with wind, up through Iowa and into Wyoming. T Boone Pickins saw the opportunity a long while ago. Wish more oil guys had followed him!

  5. Business is responding to their customers, as Larry remarked, but they are also investing in their own renewables, “so that we can control our exposure to fluctuating electricity costs,” according to IKEA. No fossil fuel price fluctuations, wind and sun are free, and a long-term contract has a known fixed price.

    “Power purchase agreements (PPA) continue to be the preferred procurement mechanism. 40 percent of the megawatts contracted through PPAs in 2017, or 2,178 MW, were signed by corporate and other non-utility customers, and more than 8,000 MW in PPAs have been signed to date.”
    https://www.windpowerengineering.com/business-news-projects/the-rise-of-wind-power-what-to-expect-in-2019/

    RMI thinks microgrids are a terrific opportunity for utilities, just like offshore wind will be once the industry is helped to its feet by the states willing to be involved. New England has had higher electricity prices, making them take steps forward sooner, but, the offshore potential is huge. Our shores possess a power potential of more than 4,000 gigawatts (GW), over four times the generating capacity of the current U.S. electrical system and Virginia’s potential exceeds Virginia’s current demand.

    According to the U.S. Department of Energy (DOE), the offshore wind project development pipeline includes more than 25,000 MW of planned generating capacity, with 2,000 MW expected to begin commercial operation by 2023 or sooner, but the industry is not just the purview of utilities.

    As Tom has pointed out, the states to our north are financing their offshore wind differently. Vineyard Wind, based in New Bedford, Massachusetts, is 50% owned by funds of Copenhagen Infrastructure Partners and 50% by Avangrid Renewables, a subsidiary of AVANGRID, Inc. and part of the IBERDROLA Group. IBERDROLA, S.A., is an energy pioneer with the largest renewable asset base of any company in the world. “Copenhagen Infrastructure Partners P/S (CIP) is a fund management company focused on energy infrastructure. CIP and its projects have offices in Copenhagen, the UK, the US, Germany, and Taiwan. CIP focuses on investments in regulated and long term contracted energy infrastructure.” https://www.vineyardwind.com/press-releases/2018/12/15/statement-on-record-setting-wind-development-area-auction

    In NJ, PSEG has partnered with Ørsted for a decade and will have the option to become an equity investor in the Ocean Wind project. Orsted will work with the utility’s non-utility affiliates to provide energy management services if the project is approved by the state. In NY the winner of their first offshore contract, Equinor, hopes to be the prime builder of an offshore wind core area on the U.S. East Coast.  None of these projects are solely owned by a utility.

    Instead of figuring out what the future will look like, and helping to build and define a new direction, Dominion has foolishly been satisfied attempting to protect their monopoly territory through political control. That will prove to be a losing battle.

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