Dominion Responds to Calls for Deregulation

William Murray

Dominion Energy has responded to calls for electric deregulation in the form of an op-ed by William Murray, senior vice president of corporate affairs and communications. His argument: We tried deregulation once, it didn’t work, and the arrangement we have now works just fine.

Electric deregulation was “in fashion” in the 1990s,” he wrote in the Richmond Times-Dispatch. “It promised lower prices and more choices for customers. What really happened was something quite different. In fact, electric rates in deregulated states are more than one-third higher today than rates in states that have retained regulation.”

Moreover, Murray argued, 1990s-era deregulation did nothing to make the electric grid stronger, more secure, and more resilient — “pressing needs today in the face of threats such as cyberattacks from hostile nation-states.” To the contrary, deregulation invited predatory players like Enron into the system, leading to price spikes in New England, Maryland, Delaware and California. The outcome in California was particularly disastrous, bringing rollouts and widespread economic chaos.

Maybe his argument stands up, maybe it doesn’t. This may sound like a cop-out, but we need more data.

Earlier this month a coalition of free-market and environmental groups led by former Attorney General Ken Cuccinelli called for a massive restructuring of Virginia’s electric system. The  proposed deregulating electric generation and electric transmission but retaining local distribution lines as a natural monopoly. The emergence of new technologies, the invention of new business models, and the influx of new players into the market makes the 2020s far different from the 1990s. Furthermore, the disastrous outcomes of 1990s-era deregulation in California, they argued, stemmed from partial deregulation, not the Texas-style system they envision.

Murray responded that things will not be better this time, even though Virginia utilities belong to a regional transmission organization, PJM, which creates wholesale markets for electricity in a large swath of the Mid-Atlantic and Midwest.

Experience shows that PJM membership does not immunize a state from deregulation’s pitfalls. The “M” in PJM is for Maryland, a founding member and one of the case studies in the challenges of moving ahead with deregulation. Plus, Dominion Energy Virginia was a member of PJM for almost two years before the General Assembly chose to re-regulate our state’s electric industry. Belonging to PJM is not a shield against the consumer protection and price volatility challenges of deregulation. …

Virginia has chosen a better way. We have low, stable prices for customers. We have a rapidly growing portfolio of renewable energy. And we are transforming the grid itself to accommodate renewable energy and to further improve service. We are also strengthening the grid at a time when threats come from both natural disasters and foreign aggressors.

Bacon’s bottom line:

Virginians have three broad sets of goals when it comes to the electric grid. We want reliable power. We want inexpensive power. And we want green power. Different people might emphasize one over the other, but broadly speaking, any electric system needs to balance those three priorities.

Reliability. The most essential to my mind is reliability. If the power goes off, people stop caring in a big hurry how much it costs or how much CO2 it puts into the atmosphere. I would like to see numbers comparing the reliability of Dominion’s system and Appalachian Power Co.’s system to that of other electric systems and ascertaining the degree to which reliability may (or may not) be a function of regulation. Presumably, objective metrics exist based on the frequency and length of power outages, and presumably there are ways for adjusting for factors that utilities cannot control such as severe weather event so that we can make fair comparisons.

Rates. Next, I would like to see a comparison of electric rates that does not engage in cherry picking data. How high are Dominion and Apco rates compared to other electric systems, and how stable are they? (By stable, I mean mainly how rapidly have rates been rising?) Making apples-to-apples comparisons is tricky. Adjustments must be made for average temperatures, temperature extremes, humidity, cloud cover, and other meteorological conditions as well as access to low-cost sources of electricity such as hydroelectric power.

Carbon intensity. Finally, I would like to see a comparison of CO2-equivalent emissions that captures not only CO2 emissions but methane emissions (more potent but shorter lived than CO2). The methodology should include not only CO2 emitted during natural gas combustion but methane leaked from natural gas pipelines and drills, as environmentalists insist should be counted. But any life-cycle methodology also should take into account methane leaked from others source,, most particularly from mines, some of which are notoriously gassy. If thousands of acres of land are to be turned over to solar farms, then the methodology should include the opportunity cost of not converting that acreage to carbon-sequestering woodlands. In other words, we need to capture all aspects of the issue and not frame the methodology to advantage one side over the other.

If we had the data on reliability, rates, and carbon intensity, then we as Virginia citizens could make better informed choices about the merits of regulation versus deregulation. Until then, we’re just captive to our biases and predispositions.

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48 responses to “Dominion Responds to Calls for Deregulation”

  1. Steve Haner Avatar
    Steve Haner

    If only Virginia had retained regulation. If his company hadn’t spent the last decade undermining the SCC’s authority and using its political power to corrupt the GA and set all the rules, this PR blather of his might mean something. But Virginia is not a regulated state and hasn’t been for years and years. Can we get back there, Murray?

    This was in the TD, and (unlike anything I write) included in the VPAP clips. I’m sorry you used it here, too, Jim, especially since you didn’t link the other piece the TD paired with it, which had its own problems. You just shoved my piece today further down the page, out of view and out of readership….

    1. Dick Hall-Sizemore Avatar
      Dick Hall-Sizemore

      Another example of the arbitrary double standard of VPAP.

  2. djrippert Avatar

    I am glad Mr. Murry likes being a state sanctioned Monopoly. The regulated part of Dominion should be structurally separated from the unregulated part – to maintain purity. He and the other executives at Dominion’s regulated company should be compensated along the same lines as Virginia’s senior civil servants. Since our governor makes $175,000 per year … that will be the cap for Dominion.

    1. Steve Haner Avatar
      Steve Haner

      If only that salary for the guv were the real state salary cap! But it’s not….:)

      1. djrippert Avatar

        I’m sure you’re right. Whether it’s paid by the state or through some other means, I suspect UVA basketball coach Tony Bennett makes a tad more than that.

  3. LarrytheG Avatar

    There is a perception issue here that Dominion is wholly in charge of the electric grid in Virginia and nothing could be further from the truth:

    1. djrippert Avatar

      You’re like those conservatives that show how Republican America really is – by geography. Now, by population ….. ?

    2. TooManyTaxes Avatar

      If you look at Larry’s map, it becomes clear that a significant number of legislators can give Dominion what it wants without negatively affecting many of their constituents. Couple that with the fact that many Democrats want higher and higher prices for fossil-fuel-generated electricity and one gets a pretty clear understanding of why Dominion gets its way. As I maintain, there is a big gap between environmentalists and consumers.

      1. Steve Haner Avatar
        Steve Haner

        Dominion is about 68 percent of customers, APCO about 14. A couple of the coops hit four percent each. The other ten percent spread out quite a bit.

        If you REALLY, REALLY look at the map and do some analysis of votes, you’ll find many of the legislators who always vote as Mr. Murray asks them have no or very few Dominion customers in their districts. Makes it WAY easier to screw the rest of us.

        1. LarrytheG Avatar

          The fact that it IS – spread out – is as important or more so than the density of the homes served. The grid in less dense areas is extensive and requires substantial effort to keep it reliable. The fact that this job is done by a dozen or more providers proves that Dominion is not the only entity doing it.

          The point about elected legislators in districts that Dominion does not serve – still voting FOR Dominion is especially perverse because it’s almost like they are giving Dominion credit for the grid that is being maintained by their own non-Dominion co-op!

          The original point stands. Dominion may have 70% of the customer base – but what percent do they have of the physical grid in Virginia? I’d say that quite a bit of the grid in Virginia is NOT maintained by Dominion!

    3. Acbar Avatar

      Larry, this chart shows the retail service territories of all the electric retail suppliers (or LSEs in PJM parlance) in Virginia, including yours, Rappahannock Electric Cooperative. This is NOT a map of who runs the electric grid except at the “distribution” level. The transmission facilities are owned by various parties (often but not always the local utility) and are operated by PJM, the independent system operator. As a practical matter PJM is “in charge” of the transmission grid throughout Virginia and a dozen other States. When most people talk about the “Grid” they are talking about the transmission grid.

    4. Rowinguy Avatar

      Your map is not exactly a map of “who controls the grid,” Larry. Other than the red area representing Apco, the far southwest tip of Virginia and the Eastern Shore, Dominion controls the transmission grid in all other areas, even those served by the electric cooperatives. PJM operates the grid in all areas of the Commonwealth other than the far southwest tip, which I believe is TVA land.

  4. TBill Avatar

    Well I dunno.

    1990’s deregulation was good for me in NJ because, for some reason, it helped put an end to the proposed coal fired power plants the state wanted to hot dog ( I mean build).

    Seems to me NJ electric cost has moderated, so although higher than Va. it is approaching closer.

  5. Dominion’s response is an impressive feat of misdirection. By focusing on the half-baked attempts at deregulation in the 1990s, scare tactics can be used to divert customers’ attention from what is happening now. Many of the states that have deregulated had much higher rates compared to Virginia in the 1990s. For example, the RGGI states still have rates that are higher than Virginia’s for reasons that have previously been discussed. But those states deregulated, and in the last 10 years have saved $2.3 billion in energy costs through energy efficiency and adding renewables. In the meantime, energy costs in Virginia have only gone up. This is a slight-of-hand comparison.

    Our rates are higher than any of the surrounding states that deal with similar weather conditions. The only state with higher residential rates is Maryland, and their rates declined in the past year.

    Mr. Murray claims, “Virginia has chosen a better way. We have low, stable prices for customers.” I would suggest that Mr. Murray review the number of RACs that have been authorized over the past few years or are on deck to increase customer prices. The only thing that was accomplished by the rate freezes in 2015 and 2018 was the legislative denial of the refund of money that was over-collected from ratepayers. There is little in Virginia’s current energy policy that is friendly to customers. The price trajectory of all of the unnecessary or overly expensive projects that the GA awarded Dominion is going nowhere but up.

    Reliability – There are two parts to this. Reliable supplies of generating capacity and the reliable operation of the transmission and distribution system to serve the customer.

    PJM has a tested system of providing adequate supplies of generating capacity. The generation that has cleared PJM’s capacity auction is well above the projected future demand, plus the reserve requirement. Utilities, including Dominion, also have available generators that did not clear the capacity auction. Adequacy of generation is not an issue. If anything, Dominion is trying to stuff the system with solar that is put in the ratebase that will increase customer costs over what third-parties could provide, in order to obtain a 35-40 year stream of additional revenues.

    In SCC’s review of Dominion’s recently added solar facilities, it was identified that energy generated by those units did not reach customers because of unreliable operation of Dominion’s transmission system. Dominion’s gold-plated undergrounding program will have little improvement in system reliability, despite its high cost.

    Dominion has a subsidiary that that is effective at making modern grid improvements, but little is being done that actually improves things for customers. Most of the grid related projects undertaken so far are mostly for profit enhancement and not focused on modern grid improvements. The lack of useful customer feedback from expensive smart meters is an example of programs that serve the shareholders but not the customers.

    Rates – As I noted at the outset, Dominion’s rates are going up compared to rates in states surrounding us, rising every year for some time. We have residential rates that are 24th highest out of 50 states, with the nation’s 10th highest average electric bill. This is not a great accomplishment for a utility in the sweet spot (not-too-hot not-too-cold) for utility operation. Dominion’s rates are lower than the co-ops in Virginia because the co-ops buy power from Dominion (North Anna and Bath County storage), and have higher costs serving much less dense service territories.

    Carbon intensity – Thank you for considering total GHGs, not just carbon, in the comparison of generating alternatives. The methane emissions related to the production, transportation and burning of gas should be applied to the gas alternatives. Leaky mines would be associated with coal burning. Mines with significant coal-bed methane, such as those in southwest Virginia, capture much of the gas, which is sold for use in Virginia and other states.

    There is no over-riding reason that solar must occupy hundreds of acres of farmland. That is an artifact of Dominion wanting to control most of the state’s solar development and treating it as just another central station power plant. This avoids many of the cost and reliability benefits of placing solar in brown-field locations within the distribution system.

    Dominion and APCo could be great collaborators in moving us to a modern energy system in Virginia. Good data, as you suggest, is essential for having fruitful discussions about new policies. Comparing our current situation to what happened in other states in the 1990s is not a helpful approach.

  6. LarrytheG Avatar

    well…. sorry… but “good data” is not going to come from Dominion unless you believe in the fairy God Mother and apparently a good number of our GA reps do.

    Bottom Line – they have us by the figarative short hairs and are so confident about it that they blow smoke out of you know where just for giggles and grins like this cynical RTD PR blather.

    Yes.. we did TRY deregulation and Dominion made sure the way it was set up so that it was going to fail… just as they are now doing with solar and offshore wind… just let them do it and they’ll show us how it won’t work….

    their corporate behavior is consistent:

    the “rate freeze” (sic)
    the corporate tax cut refunds
    the coal ash cleanup
    their version offshore wind
    their version of utility”solar”
    their version of deregulation
    their version of grid “modernization”
    their “supported legislation for how the SCC should operate.

    so.. just let them do it and they’ll show us how it won’t work.

    1. Acbar Avatar

      LarryG, I have to defend Dominion here. For a variety of regulatory and financial accounting reasons the actual data from Dominion is generally very reliable, I suspect. It’s how that data is made opaque by (a) how it’s collected and reported, and (b) how it’s spun by the Dominion PR folks, that hides the ball here.

  7. Acbar Avatar

    What a bunch of garbled gibberish from Mr. Murray! And considering his knowledgeable, senior position at Dominion, I have to believe what he says is intentionally misleading.

    Dominion Energy joined the PJM ISO shortly after PJM began independent operation under FERC’s rules in the late 1990s. Dominion’s Virginia retail sales subsidiary became then, and remains, a “load serving entity” or LSE in PJM. Dominion’s NC retail sales subsidiary is a PJM LSE also. That means, all of Dominion’s retail customers receive their grid electricity from generators dispatched by PJM, over a transmission grid operated by PJM, through the wholesale energy market operated by PJM. At the same time, all Dominion generation located on the PJM grid (most but not all of it within the “Dominion Zone” of PJM) operates only when PJM “dispatches” it in economic rank order, and, when it operates, sells its output into the PJM energy market. Annually, Dominion, like every other PJM LSE, has to demonstrate to PJM that it has enough generating capacity, owned or contracted for, to meet its forecast (by PJM) peak load plus a reserve margin (fixed by PJM) to cover extreme weather and generation forced outages. PJM runs a capacity market for those LSEs who come up short. Simply put, Dominion is already deeply immersed in PJM for reliability and economic and operational purposes. Dominion’s subsidiaries have never ceased to be PJM members since they joined PJM.

    What is this “1990s era deregulation” he is talking about? Deregulation has nothing to do with Dominion’s LSE, which buys from PJM’s wholesale markets and resells that power at rates tegulated by the VSCC. Deregulation has everything to do with Dominion’s generating units, which sell into those PJM wholesale markets at market-based rates in PJM’s FERC-regulated market structure. The FERC regulates those markets structurally but the prices there are determined by supply and demand. Dominion’s generation therefore is deregulated; yet Dominion continues to seek (and obtain) VSCC approval of ratepayer funding for all its new generating units, in exchange for the VSCC’s “guaranteed” rate of return on Dominion’s investment in those units.

    Mr. Murray says, “Dominion Energy Virginia was a member of PJM for almost two years before the General Assembly chose to re-regulate our state’s electric industry. Belonging to PJM is not a shield against the consumer protection and price volatility challenges of deregulation.” There’s PR garbage for you! PJM is a regional marketplace, dampening but certainly not eliminating the inherent volatility of all competitive markets. Did Dominion leave that marketplace? No; it still buys and sells there. The GA never “re-regulated” after 2 years. That is merely how Dominion chooses today to describe its voluntary decision back then to seek a regulated rate of return at the SCC on its generation assets from its retail customers rather than an unregulated return, or profit, from the competitive wholesale markets.

    Jim, I agree with your three areas where more information would be helpful. I believe the current structure of PJM’s markets provides good assurance of hrid reliability for all PJM LSEs including Dominion’s VA and NC retail subsidiary. As for carbon emissions and retail rates, there’s much more to be said, I hope in future posts, but just let me say this: the retail rates in VA are made almost impossibly difficult to compare with industry benchmarks by Dominion’s ratemaking practice of multiple RACs layered on top of base rates that are frozen despite plant additions and retirements and changing financial conditions. All this produces an opaque rate structure increasingly divorced from a single cents-per-kilowatthour number for each customer class/rate bracket that could actually shed light on how Dominion compares with other retail electrics. This is something the VSCC could require be changed.

    1. TBill Avatar

      Thank you Acbar!
      John Q. Public has no way to understand this stuff.
      Cooch’s remarks had to be defended against apparerntly.

  8. Steve Haner Avatar
    Steve Haner

    I always get irritated when Jim lets Dominion regurgitate its propaganda here. Surprise, surprise, it always steps on one of my stories, too, bumping it down the queue. But you guys dissect it so well and leave it in tatters, and that helps. And Murray looks so smarmy in that photo I hope they keep using it! Used car salesman….

    1. “Regurgitate”? Steve, that’s harsh.

      I highlighted Dominion’s argument because, to be sure, no one else on the blog is going to do so. I followed my standard format of dispassionately summarizing the main points from a news story or op-ed, and then following with my own thoughts as “Bacon’s bottom line.” In this case, I called for more authoritative data on how to evaluate the claims made by Dominion (and others) regarding the efficacy of deregulation.

      1. LarrytheG Avatar

        I’m with Steve on this. BR is a platform for propaganda for Dominion more than a couple of times.

        Calling for more “authoritative data”? What? How long have these issues been in front of us – and all we get is Dominion’s PR/propaganda view and our “response” is to call for more “data”.

        Like from who? It’s not like there is not a blog called Power for the People and Ivy Main (or others) that could not provide – at the blog level – an alternative view including more data.

        Steve does an excellent job rendering the lobby/regulatory side of the issue but it’s not like there are not other players – AND DATA out there to at the least offer something more balanced than Dominion’s transparently PR blather.

    2. Rowinguy Avatar

      Steve, you might want to take a look at what Dominion desperately wanted to do back in the late 90s/early 00s regarding “deregulation.” They wanted the SCC to approve the spin-off of all their generating units into a wholly deregulated (at the state level) subsidiary, as did Apco. The Maryland Commission was about a year ahead of us in the deregulatory curve and did permit BG&E and other providers up there to divest generation. Then Constellation (BG&E’s parent) ramped the prices for generation up by about 75% in one year. That is what, in my recollection, cooled the ardor for dereg here in Va.

      1. Steve Haner Avatar
        Steve Haner

        I DO want to read up on that – need case references ?! I remember, oh yeah. I know better than most how the direction changed, and its’s been 12 years, but I was in the room at a key meeting for my employer and its not my story to tell.

        1. Rowinguy Avatar

          Steve, the case in which the Commission considered Dominion’s functional separation plan was Case No. PUE000584, with the Order on Functional Separation being dated December 18, 2001.

  9. TooManyTaxes Avatar

    By way of comparison, the FCC has always (at least since I started practicing there) had a position that, for any effective competition to exist, there has to be at least three facilities-based competitors in a geographic market. It has believed that, absent this level of competition, a company can raise prices without losing customers. In other words, it has market power.

    It strikes me that, for effective competition in the electricity generation market for Dominion’s service area in Virginia, Dominion’s competitors must have sufficient generating capacity to supplant Dominion for retail customers if Dominion raises prices for electricity. Of course, this does not require sufficient alternative capacity to serve every retail customer in the state. Rather, the alternative capacity must be sufficient to prevent Dominion from raising prices for electricity. Presumably, a price increase by Dominion would result in a loss of customers and an inability to obtain the desired new profit level.

    How this works with PJM in the middle is unknown to me. But there must be a mechanism for customers and not Dominion to make supplier selections that prevent Dominion from exercising market power. Otherwise, the deregulation of the generation market will harm consumers.

  10. TBill Avatar

    Here is the overall situation as I see it.

    Dominion has a relatively low cost of generation, but Virginia elected officials have been friendly and have allowed relatively high profit margins, so as customers we pay average or slightly above average cost.

    The blue side wants to ban fossil fuels in Virginia and go with very expensive carbon-free options. Of course the Dems want to say carbon-free is not expensive, but they know they probably cannot have both high generating cost and high profit margin to Dominion and still maintain Virginia as a desirable state.

    Dominion I think is probably worried that higher cost electrons probably forces less profit margin. Just look at what the Dems want to do already: outhaul megatons of coal ash at ratepayer expense and join the blue RGGI ban-carbon club, at cost to ratepayers. Soon our electricity bills will start going up like other Northeast states and Dominion will be under pressure to reduce profit margins to keep the rate increases reasonable.

    1. TooManyTaxes Avatar

      No one is representing consumers. The interests of ratepayers are not the same as those of environmentalists, many of whom simply want to get rid of fossil fuels irrespective of the impact on consumers. And no one has the courage to challenge the allegations of environmentalists when they claim everything undesirable is caused by GHG and climate change without offering an iota of proof. Any asshat (thanks DJR) can claim X causes Y. But there needs to be proof that X causes Y.

  11. Peter Galuszka Avatar
    Peter Galuszka

    Normally, I’d be more than happy to pile on when it comes to Bacon and his incessant toadying for Dominion. Today I have bigger fish to fry. This “op-ed” from the Dominion flak is remarkable in what it leaves out. About the time of dereg, I had just returned to Virginia to work for JAB at Virginia Business. We did big takeouts on the utility. At that time, Dominion badly wanted deregulation. Its chief, Tom Capps, envisioned a new kind of firm that was involved in energy in many states and saw it as being a future “Saudi Arabia of electrons.” To some extent, Dominion has achieved some of this. The commentary in the RTD makes it sound as if dereg was shoved down Dominion’s throat which was hardly the case. a Few years later, when it was convenient for Dominion, the utility wanted to re-regulate and the docile GA obliged. What Jim’s story does not mention is that the Dominion article is a counterattack against a piece co-writtten by Ken Cuccinelli supporting deregulation. D must be terrified that cheaper rerewable energy and its diffuse generation system would take away its political clout and leave it with a bunch of base loaded white elephants no one wants.

    1. TBill Avatar

      Peter you might be onto part of Dominion’s worry, but there really is no cheaper renewable energy for Virginia. We do not have good on-shore wind resources, and off-shore wind is very expensive. Utility based solar is OK but we have to go through Dominion’s profit margin. Roof top solar we probably should encourage, but that is expensive. Admittedly we could tax the carbon generation to give homeowners cheap solar via subsidies. But I see no magic bullet for cheap renewables (in our state, other states have some better on-shore wind etc). Also we have a lull in demand but much pressure to build renewables just due to the thought of urgent strategic need for Virginia to keep up with Jonses on renewables.

  12. Wow, you guys are a tough crowd. I drop the Dominion sponsorship (my decision), open up the blog to Steve and Don with their consistently anti-Dominion narratives, and open up the blog to any Dominion critic who wants to post comments. Then, when I summarize a Dominion op-ed — without endorsing it, mind you — just to inject into the discussion Dominion perspectives that no one else seems interested in acknowledging, I get accused of “toadying” and “regurgitating”!

    As for omitting the fact that Murray’s op-ed was a counter-attack against Ken Cucinnelli, all I can say is, aaargh! I omitted any mention of the context of the piece only if you exclude this:

    Earlier this month a coalition of free-market and environmental groups led by former Attorney General Ken Cuccinelli called for a massive restructuring of Virginia’s electric system. The proposed deregulating electric generation and electric transmission but retaining local distribution lines as a natural monopoly. The emergence of new technologies, the invention of new business models, and the influx of new players into the market makes the 2020s far different from the 1990s. Furthermore, the disastrous outcomes of 1990s-era deregulation in California, they argued, stemmed from partial deregulation, not the Texas-style system they envision.

    Murray responded that things will not be better this time.

    1. Reed Fawell 3rd Avatar
      Reed Fawell 3rd

      I agree, a bunch of grumpy bullies sticking the fork in Bacon the messenger.

      Plus, this Hate Dominion Syndrome is over the top. It’s a great company, delivering reliable power in massive amounts at reasonable costs for decades, generations even. A world class company, it is responsible for much of Virginia growth, and economic success, far above the norm. Now folks here all want to chase after a pig in poke on people who can’t be trusted, based on the experience and lack of track record alone!

    2. LarrytheG Avatar

      naw… you give Dominion a platform (paid or free).. then ask where the “data” is that would offset Dominion’s view.

      It’s not like such data does not exist. It’s that you have chosen to depict Dominion as the sole purveyor of “data” so that makes them the only credible view.

      Dominion is (a good company) who knows no limits on it’s advocacy for it’s own interests NO MATTER what the reality is. It’s Dominions view of the world and they pay good money to promote it – far and wide!

      Like I said – those who want an opposing view – just travel on over to Power for the People and Ivy Main. She keeps Dominion honest, UNLIKE this blog who clearly carries their water for them – for FREE!

    3. TBill Avatar

      Jim your predicament is analgous to arguing with electric vehcile advocates. If you are even neutral you will slammed to the ground and acccused of crimes and against humanity for getting in the way of saving humanity from ruination.

  13. Remember what Acbar has written. PJM manages a wholesale energy market where generators are dispatched according to the cost bid into a daily energy market. The lowest cost units are dispatched first.

    Generating plants cannot arbitrarily increase their costs to customers by 75%. They can only increase the cost of their bids, which means they will be dispatched less often. Perhaps Constellation increased the cost of a contract for the now disconnected generation with their subsidiary, the retail utility – but that would have to be approved by the state regulator.

    In states where generation is not put in the rate base, generating units must earn their keep in the wholesale energy market. Market-priced wholesale energy is purchased by the utility and sold to retail customers. This avoids incentivizing the utility to build more units. Utilities are paid fairly for maintaining the grid and providing reliable service.

    In states like Virginia and North Carolina, the dispatch and purchase of energy occurs in the same fashion, except that ratepayers fully subsidize the generating plant whether it operates at a profit or not. Ratepayers repay the full cost of the facility, the cost to finance it, and about twice the cost of construction back to the utility as profits.

    If excess generation is provided to PJM, Dominion’s ratepayers receive 75% of the profits (to offset fuel costs), the shareholders get the rest.

    You can see why investor-owned utilities in fully regulated states try so hard to get permission to build more projects. They get a boatload of profit from the facility (2 times its cost) and keep 25% of the operating profits from a facility the utility didn’t pay for. If the utility planners are wrong and the plant isn’t useful for its entire financial life, the ratepayers pay for it in full, plus profit.

    We have strayed far from a fair return in exchange for a fair price to ratepayers. The real reason that Dominion wanted to avoid the separation of generation from the rate base, is that they found it much more profitable to manipulate the legislative and regulatory process compared to competing in a free market.

    The last thing they want people to understand is that they are not playing on a level playing field. Things are greatly tipped in the utility’s favor.

    When you see the stories about how bad competition is, or how much a certain project will create jobs or save you money, know that the outcome is just the opposite. Energy companies’ PR machines are some of their greatest profit producers.

    As a former utility guy, it irks me that the unregulated utility holding companies have so greatly distorted the original agreement where being granted a monopoly means accepting a fair return in exchange for a fair price to customers.

    The holding companies do everything possible to increase revenues and profits to benefit shareholders. Laws written by the utilities and passed by the GA, often tie the hands of the regulators. I see very little participation in the SCC process by commercial and industry consumers, except for attempts to avoid the price increases caused by new projects such as under-grounding lines and energy efficiency. Rather than speak up for the state economy, they try to get an exemption so that the huge new costs are mostly borne by residential customers. The Consumer Advocate in the AG’s office has ignored those ratepayers, as well.

    It is only the obscurity of the issues relating to our energy system that keeps customers from realizing how badly they are being taken advantage of.

    While creating excess profits now, abusing customers in this way could come back to haunt the utilities too. Virginia can do better than this for all concerned. While Mr. Moret and his team are improving our business development efforts, we are losing on the energy front.

    1. Rowinguy Avatar

      “The events leading up to the 72% increase in customer’s rates has been referred to by BGE executives, state commissioners, and state legislators as “the perfect storm”. In the years since rates were capped, fuel prices had risen dramatically. Natural gas prices had risen about 125%, regular gasoline prices had risen over 150%, and heating oil prices had risen almost 200%. Maryland region’s fuel prices are tied greatly to natural gas prices. Subsequently, when Hurricane Katrina and Rita caused major natural gas pipelines to shut down for a short period, natural gas prices skyrocketed. Therefore, when BGE went to the market to procure power, prices for power were abnormally high.”

      1. TBill Avatar

        Thanks for that insight but I think it is pre-fracking natural gas price crash of the current era since 2008. It also tends to argue need for more than one pipleline supply.

      2. I see. This was all fuel price increases that had nothing to do with whether the plants were in the rate base or not. Fuel price changes are passed through to ratepayers after regulatory review.

        TBill is right, in the 90s gas was provided by conventional wells, mostly along the Gulf Coast. Refining and gas operations were vulnerable to temporary shutdowns due to the hurricanes.

        Nowadays, the largest percentage of gas supply comes from the Appalachian Basin. Multiple supply zones served by many different pipelines are dispersed in various regions and are less vulnerable to upsets related to any single event.

        We have already added so many new pipelines to access the Appalachian Basin that it will be years before we produce enough gas to fill them.

  14. LarrytheG Avatar

    re: “the blue side wants”

    here’s the “blue” – it’s a substantial majority of ALL people:

    If you find yourself referring to these kinds of majorities as the “blue side”, might want to consider where you fall on those numbers and if you are in the minority -and everyone else appears to be “blue” – you might need to rethink where you think you are because poll after poll shows strong and widespread support – way more than just “blue”.

    1. TooManyTaxes Avatar

      And what type of public opinion poll asks questions that assume changes are free? Pew is just part of the filthy swamp that is Washington, D.C.

      1. LarrytheG Avatar

        PEW is one of the more objective less partisan polls in my view but if you don’t like PEW, there are other polling organization that show the same results.

        The point here is knowing when you are in the minority -and calling the majority names like “liberal” or “environmentalists” when it’s just not the reality.

        Poll after poll from different poll organizations show that people do not want to burn fossil fuels – AND they know it might cost more – but they are concerned about human health and the environment.

        that’s just the simple reality and shown again here on a Gallup Poll ( no doubt, yet another “liberal rag” outfit, eh?)

        1. TooManyTaxes Avatar

          You miss my point. A decision about changing energy policy that only suggests benefits to climate change but doesn’t include the costs is not a good poll. I’ll gladly accept all green energy if it doesn’t cost me a dime more than I pay today. But what if it costs 10% more? 20% more? Etc.

          This is the Washington. D.C. way. Use a flawed methodology and produce invalid results.

          I’m not arguing against renewable energy but just the corrupt way the debate is being conducted.

          1. LarrytheG Avatar

            No. I got your point. The reality is that people vote for the coal-ash cleanup even though it will cost.

            re: ” I’m not arguing against renewable energy but just the corrupt way the debate is being conducted.”

            if you are saying that the entire debate – across the board – is corrupt then you’re clearly outside the mainstream as most folks believe these many, many polls are legitimate and accurately represent the majority – who do know and realize that costs are involved just as we all know that increased costs are associated with cleaning up sewage and CSOs, etc.

            Cleaning up /preventing pollution does cost more – if you’re not tallying the cost of the “externalities” – like we did with acid rain initially and phosphorous/nitrogen in sewage effluent, emissions from cars – look at China…

            when we find ourselves distinctly in the minority on these issues – it’s not really a conspiracy… sometimes when we are in the minority (and I include myself) – you have to accept that you really are in the minority. You’re entitled to your view but that does not mean others views are being misrepresented.

          2. TooManyTaxes Avatar

            B.S Larry, everyone is for stuff that is free. Put a price tag on things and then see what happens. It’s like the latest growl in McLean. After the shootings in Florida, everyone wanted safe schools, including prevention of weapons near schools and mental health services for troubled teens. Several community meetings were held. Now there’s a proposal to open group homes for teens with mental problems in McLean and all the Hillary and Governor Blackface voters are going crazy to keep them out of residential neighborhoods even though they are a by-right use protected by federal and state Fair Housing Laws. A number want the Fair Housing Laws changed to remove protections for disabled people.

            And the open borders liberals in San Francisco and other places went crazy when Trump proposed to bring a number of “asylum seekers” to their liberal cities. Or drivers of electric vehicles opposing taxes to on their cars to pay for roads. Conservatives often do the same things.

            Put a price tag on changes and then see what people say. Any poll that doesn’t do that is just plain dishonest.

  15. LarrytheG Avatar

    re: ” Ken Cucinnelli” – that flaming anti-Dominion firebrand, apparently is on the short list to be Trump’s hard-right immigration guy….

    not something that would get him elected in Virginia… despite DJs love.

  16. LarrytheG Avatar

    here’s some from the opposing side:

    Lies, damn lies, and advertising: Dominion goes for the green

    “Recently I criticized a Dominion Energy advertisement that boasted, misleadingly and inaccurately, about the company’s investments in solar energy.

    By contrast, the company’s investments in greenwashing are transparent and heartfelt. Dominion has suffered through several bad months here in Virginia and would very much like to change the conversation.

    Indeed, the company’s problems keep mounting. In the course of just two days this month, SCC commissioners lit into the company for telling Wall Street one thing and regulators another; the corporate customers behind Virginia’s data center boom filed a letter saying they want no part of Dominion’s fracked-gas build-out; and a coalition of libertarian, environmental and social justice groups called for a breakup of Dominion’s monopoly.”

  17. TBill says “I’m not arguing against renewable energy but just the corrupt way the debate is being conducted.”

    I couldn’t agree more.

    In Virginia, we pay our utilities more when they build more. With stable demand, the parent company has to come up with ways to keep building things, even if they aren’t needed.

    So we get a pipeline that we don’t need and that will add billions to our energy costs, we get under-grounding programs that do little to enhance system reliability but add to profits, exorbitantly priced offshore wind projects, etc.

    Most importantly, control of useful projects such as energy efficiency and added solar is hijacked by the utility to add to profits, but putting these programs in the rate base greatly increases the cost to customers.

    Ninety percent of Dominion’s CEO’s compensation is based on hitting shareholder targets. Other executives are treated similarly. They are bright people. They will continue to do what they are incentivized to do.

    What is different from other unregulated companies is that Dominion Energy gets 90% of its revenue from regulated or “regulated-like” enterprises. Their profits do not come from customers that have a choice whether to do business with them or not.

    Rather than providing a better product or a lower price as other businesses must do, Virginia’s utilities can manipulate the legislative and regulatory process to extract more money from captive customers. This was not the deal that was struck when the monopoly was awarded.

    We need to reset the rules for paying our investor-owned utilities. They should concentrate on developing a modern, highly reliable transmission and distribution grid. And stop requiring a customer subsidy on new generation. Asking them to compete on a level playing field with other energy generators is not too much to ask from talented executives.

    They will be granted a fair return for this and prices to customers will be lower without the subsidies on new projects.

    The misleading media reports and disingenuous advertising would no longer serve a purpose and should disappear. Doing a better job serving customer interests could also provide higher profits.

    1. TBill Avatar

      Tom – I like the quote, but I do not said I think I said it.
      If so, I accept.

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