Dominion: Two Reports, Four Predictions

Dominion Energy Virginia bill breakdown, for 1,000 kWh of residential service. Base rates were recently reduced by the federal tax cuts, and fuel fluctuates, but rate adjustment clauses (RACs) proliferate and grow, with more to come. Source: SCC

by Steve Haner

There is no sign, nine weeks out from the big General Assembly election, that the arcane and obscure field of electricity regulation is going to change any votes or win any elections in Virginia in 2019. There is plenty to debate if anybody wanted to in two recent reports now public at the SCC and linked below.

The State Corporation Commission just issued yet another report that Dominion Energy Virginia is reaping massive excess profits, more than half a billion dollars in 2017 and 2018 combined. There is very little chance that the company’s 2.45 million customer accounts (about two thirds of Virginia customers) will see any refunds or price reductions as a result. Prediction number one: The company keeps it all come the 2021 review and base rates do not change.  

This is entirely the fault of the General Assembly (with some notable dissenters) and all recent governors, but the sins are bipartisan, the utility campaign contributions happily accepted by both parties and legislative caucuses (hypocrisy thrives), and the math is so dense that economists get rich arguing over it. The 26 percent Dominion price increase since 2007 does not have voters exercised, while the 62 percent price increase for Appalachian Power Company has drawn more complaints. But APCo is not reaping excess profits.

“Excess” profits, returns that exceed the allowed profit margin, is a concept hard for voters to understand. Issues you have to explain are useless. Isn’t that the goal of business? Many of those voters are Dominion employees, stockholders, suppliers or others who will benefit from the transferred wealth.

Appalachian Power Co. bill illustration in the SCC report, pointing to the same dramatic growth in RACs. APCo’s base rates were also reduced by the recent federal tax law changes. Source SCC.

Dominion itself filed an update with the SCC last week repeating its plans for even more expensive capital investments, including one pure political boondoggle, that pumped storage facility proposed way outside its service territory.  The headline was the possible $6.5 billion marginal capital cost of moving more rapidly to retire coal and replace it with natural gas and renewable generation, but the real story is that even the plan with no special effort to reduce carbon emissions has a $33 billion price tag.

Dominion’s report assumes that Virginia will join the Regional Greenhouse Gas Initiative just as soon as the new Democratic majority in the 2020 General Assembly can authorize it, forcing it to early-retire another five coal generators with more than 2 gigawatts of capacity and replace them with new solar and more gas units. But the language in that part of the report is vague and dodgy, leaving Dominion free to retire them anyway – which is hereby officially prediction number two. Those units are toast, Virginia, with or without RGGI.

The RGGI regime demands a 30% reduction in the emission of carbon dioxide (CO2) from Dominion’s generation units by 2030, but the company has announced its own goal of an 80% reduction by 2050. RGGI is passé. Ignore the $33 billion price tag of the no-carbon-reduction Plan A, ignore the $41 billion cost on the Plan B Dominion ties to RGGI, and go straight to the $42 billion Plan C, which the company has given the marketing label of “Sustainable Investment.”  That is where the company plans to go, using our money and blessed by a fully compliant Democrat controlled Assembly.

That’s my prediction number three – the General Assembly Democrats will be all in on more solar and the full 852 megawatts of offshore wind, cost or actual need be damned. Additional support will be bought with the Southwest Virginia pumped storage facility, a pure economic development bribe.

About that RGGI price tag: Dominion sure made it easy in the report to conclude that the $8 billion in Plan B additional costs (and it’s $8 billion, not the reported $6.5 billion) is due to RGGI compliance, but that’s false. The total (p. 13) includes $2.3 billion for the so-called grid transformation, another $400 million for some to-be-named boondoggle underground transmission line, and $1.5 billion more for additional underground distribution lines. That is more than half of the $8 billion marginal cost which is totally unrelated to swapping out generation.

But if RGGI appears to cost $8 billion, and the General Assembly has ordered it, why not spend $1 billion more for the glorious “Sustainable Investment?” The costs of Plan B are jacked up to make Plan C look easy. Plan C will be the counteroffer to roadblock any serious effort to change the regulatory structure and end Dominion’s monopoly. Expect the television ads to start running right after November 5. I’m tempted to predict the ads are in the can and the time on the schedule.

The fourth prediction is the first paragraph. This probably won’t drive many votes. So far there are no signs that any campaign has developed a message on these themes. No one seems to be promising to push for an immediate rate review, with full SCC authority restored to order refunds, cut rates or reject imprudent investments. Certainly, challengers of either party could attack most incumbents for blindly agreeing to utility rent seeking bills, but only by risking the ire of many incumbents in their own party who voted the same way.

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21 responses to “Dominion: Two Reports, Four Predictions

  1. Crazy. Even more crazy is that people ignore this. I let them know.

  2. While it pains me to agree with the likelihood of Mr. Haners predictions, it does not pain me to once again compliment him on the quality of his reporting which has to be on par , no, better than virtually all media reporting of these issues – save perhaps Ivy Main over at Power for the People (who does have a differing view of how energy policy should play out in Va).

    And Steve is right about the public’s perception and knowledge of how Dominion actually does “business” in Virginia and to this point, it’s not an election issue unless some of those running for office want to make it a campaign issue against an incumbent – Dem or Gop.

    HOWEVER, right or wrong, MOST voters probably view the SCC as an agency whose responsibility is to protect ratepayers from excess profits and maintain the monopoly so that it benefits ratepayers while ensuing fair profits for Dominion.

    I think also, MOST ratepayers DO believe the coal ash should be cleaned up AND we should reduce greenhouse gases, build wind/solar, use technology to reduce energy use. Not all of them feel that way but a majority do despite loud voices from the minority who disagree.

    The SCC CAN turn down these bogus RACS that they KNOW will repeat excess and unwarranted profits for Dominion and why they seem to be approving them one by one with the excuse that the GA “made us do it, we have no choice” – I’m not convinced of myself e.g. “the devils made us do it” for each of the RAC approvals.

  3. You have made that clear, and Mr. Farrell enjoys it every time he reads it. Laughs himself silly, I expect.

  4. Re: Offshore Wind
    The East Coast excitement is analogous nuclear excitement in 1970’s: power so cheap we do not even have to meter it, and yet it creates massive industry with many, many jobs and factories to build the structures. Where I used to live in South Jersey (a sleepy dying factory town on the Delaware River) is getting a big manufacturing plant to build the offshore structures. Each state (Virginia in particular) is jockying for position to grab this industry. This is the nature of utilities: essentially state-run businesses, where rate payers guarantee mega-proftability.

    Virginia is on target to have one of the first projects completed with 2 turbines, second only to the Block Island project off Rhode Island. Perhaps our 2 turbines make more power thna that prokject, not sure.

    • Block Island is way more than 12 MW, and far less unit cost. I’m not opposed to a wind project off VA, depending on the business case, but very much opposed to it being 100 percent financed with Dominion ratepayer dollars with zero Dominion stockholder risk. Let a merchant developer do it, or at least a consortium of utilities. And watch the next 72 hours…..Dorian is heading straight for it.

  5. So … they aren’t going to give us back our monies. I agree with you that prospect is very unlikely. But maybe we could do away with the need for the SW VA new pumped storage facility bribe, I agree with your characterization there too, if we all supported a joint venture for those offshore windmills. Virginia coast has enough area with winds over 7mph to potentially create 94,000MWs of capacity. Those 13 coal plants are all running in the red and need to go. Incidently, there is a theory out there that with enough wind mills the wind speeds are actually reduced when a hurricane comes through.

    How about if we support Dominion’s efforts to build charging stations around the state for their proposed electric buses? Then, how about all around support for EV charging stations throughout the state in exchange for not blocking grid changes that would integrate substantial increased generation by distributed and third-party owners?

    Those offshore and charging station investments would continue the monopoly fiction that Dominion is not willing to forgo and as you say, probably has the “ads in the can” for their post-election projects already. However, citizen and legislative support for these new asset developments would at least go in the right direction, toward a sustainable energy future.

    Then, with another election and more storms, more toxic groundwater from coal ash, and the adoption by other jurisdictions of Arlington’s PACE loans resulting in reduced demand through building retrofits and onsite solar PV, … then at long last real regulatory change might actually have a chance.

    • “Virginia coast has enough area with winds over 7mph to potentially create 94,000MWs of capacity.”

      Source?

      • https://www.energy.gov/eere/wind/wind-resource-assessment-and-characterization

        Scroll to featured publications, then click on the ‘2016 offshore wind energy resource assessment” ….

        That is the gross amount. Several areas of the VA coast are out of bounds because of communications corridors to DC and also military issues. There are many blocks that the government has designated as available. Only 1 block was put up for auction so far and Dominion out bid other bidders. Their lease had some caveats including a time frames for a build, and so we have the 2 windmill installation. I have the total numbers of blocks designated and will look for it, but I believe the number would be about 1/2 of the gross number.

        • Correction … 20 lease blocks were put up and Dominion leased them all .
          The Blocks and leasing is done by BOEM …
          Did a copy and reduced the size, but can’t make it print here …

          • Yes, I knew Dominion had leased the single tract available for off-shore development, but had never seen an estimate for development any higher than about 3,000 MW, thus the figure you cited was eye popping.

          • Dominion bought sll the leases that BOEM put to bid so far, but there are more areas on the VA coast that have not been put out for bid. I did not find that total on my search yesterday …

          • So what do you want to bet, Jane, the real reason for DE leasing every one of the available blocks wasn’t to keep an independent generation competitor from shaming them by quickly putting up several large, profitable windmills there?

          • My thoughts that I wrote at the time to the Loudoun Papers was … Dominion is buying all the leases to put them “on layaway”.

          • My thoughts that I wrote at the time to Loudoun Papers were … Dominion is buying leases to put them “on layaway”.

  6. From Chap Petersen’s Facebook feed (today) …

    Petersen Senate Sentinel: The Consequences of Monopoly

    Friends, Virginians, Citizens of Fairfax:

    Four years ago, Virginia’s power monopolies promoted legislation — misleadingly called “the rate freeze” — which radically expanded its power over helpless consumers. The legislation suspended protections which would have returned over $1 billion in refunds from over-charges from electric bills. The losers? Homeowners and business owners.

    In 2018, the Assembly compounded the mistake by enacting SB 966, which repealed the “rate freeze” but let the monopolies “re-invest” the overcharges.

    Last month, Dominion Power requested an increase in its “return on equity” to over 10% per year, an increase which could lead to $30 monthly increase in power bills.

    As a State Senator, I’ve spent years fighting this broken system.

    In two months, this era may be coming to an end. With a new majority, the Assembly can end the monopoly system and bring competition to the retail electric market.

    What kind of competition? Renewable power. Price competition between producers. More choices for consumers.

    Years ago, they told me that the Richmond power structure would never change. But that change may be only months away.

    JCP Notes: Thanks for those of you who greeted me this weekend at the NOVA Labor Picnic in Mount Vernon, the St. Mary’s Labor Day Picnic in Fairfax Station or just door knocking this weekend as I finished up Mosby Woods.

    This Wednesday September 4 we are hosting a reception at the Maya Restaurant in downtown Richmond. Next Thursday September 12 I’ll be in Virginia Beach for a meet and greet. Please contact Hyun Lee for details at [email protected] or 703-470-9405. All proceeds benefit my re-election as well as the Senate Democratic Caucus.

    In meantime, you can donate to us at PO Box 1066, Fairfax VA 22038 or on-line at http://www.fairfaxsenator.com.

    Let us know how we can represent you better.

    – Chap Petersen

  7. “The 26 Dominion price increase since 2007 does not have voters exercised, while the 62% price increase for Appalachian Power Company has drawn more complaints. But APCo is not reaping excess profits.”

    This is known as the “boiling the frog” strategy, I believe.

  8. Ripper – none of us Richmond-bound lobbyists will fill our black satchels with cash and drive north on 95 if we can help it, so the politico’s need to hold a party in our town! You may have a point on Virginia Beach….

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