Emerging Lines of Conflict in Virginia Energy Policy

The General Assembly may have ushered Virginia’s energy sector into a new era with its passage of the Grid Transformation and Security Act of 2018, but the battle over energy policy is far from finished. It’s just entering a new phase under new ground rules.

New battlefronts are emerging over energy efficiency and onshore wind power, and the potential exists for controversy to erupt over the necessity (or non-necessity) of preserving coal and nuclear generating capacity.

The grid-modernization legislation declared it a matter of public benefit to promote clean solar and wind power, to invest in energy efficiency, and to upgrade the electric grid so it will be more secure and better able to handle intermittent power sources like wind and solar. To pay for these priorities, the General Assembly agreed to let Dominion Energy and Appalachian Power Co., reinvest earnings over and above allowable rates of return instead of returning the money to rate payers.

The ink has hardly died on the governor’s signature on the legislation before new conflict points became painfully clear.

Energy efficiency. The new law commits Dominion to spend $870 million on regulated efficiency programs over the next 10 years and contribute $6 million annually to a state weatherization fund — and that doesn’t include money spent by Apco. Advocates of a low-carbon energy future envision funds flowing to programs that allow customers to buy smart thermostats, add insulation, and replace inefficient lighting and appliances.

“Unfortunately, all of that potential could easily slip away,” Chelsea Harnish, executive director of the Virginia Energy Efficiency Council, told Energy News Network. Likewise, Harrison Godfrey, executive director of Virginia Advanced Energy Economy, said he is “not convinced utilities will invest in technologies that are real game-changers.”

It seems to have dawned upon energy-efficiency advocates that the real obstacle is not the electric utilities but the State Corporation Commission, which takes a hard-nosed view on the value of energy-efficiency programs. Last month, SCC staff rejected a lighting program, appliance recycling program, and three other proposals submitted by Apco on the grounds that they did not pass cost-effectiveness tests.

“I think there is a concern that the SCC will continue to ov­­erly scrutinize these programs in a way that they’ll continuing being rejected,” Harnish said.

Energy efficiency advocates say the conservation programs will reduce electricity demand, thus delaying the need to add new generating capacity at great expense to rate payers. But the SCC likes to see solid evidence that the programs actually deliver the promised benefits at reasonable cost to rate payers. The big question: Now that the General Assembly has declared energy efficiency to be in the public interest, will the SCC modify its cost-benefit methodology and become more receptive to utility submissions?

Photo credit: Kent Mason

Onshore wind power. In an effort to create a lower-carbon electric generating portfolio, Apco announced plans last July to buy the Beach Ridge II Wind Facility in West Virginia and the Hardin Wind Facility in Ohio. The company proposed to finance the development of the two projects with an $84.6 million construction surcharge spread out over 10 years to ratepayers.

According to the Charleston Gazette-Mail, in early April the SCC denied Apco’s request to recover its costs from Virginia ratepayers. The commission said the company doesn’t need the additional power generation.

Apco argued that its electricity-demand forecast expects CO2/greenhouse gas regulation to be implemented by 2024. Indeed, Virginia appears to be poised to participate in the Regional Greenhouse Gas Initiative (RGGI), a regional cap-and-trade program that would shave Virginia utility CO2 emissions by 30% over 10 years. Final regulations are being drafted for approval by the State Air Pollution Control Board.

“The Companies would be justly faulted if, in their planning, they ignored likely and expected developments simply because they hadn’t yet occurred,” Apco said. “There are many influential elements in American society today that favor such regulation.”

Still, the SCC appears to be acting as a guardian of the rate payer’s interests, and it needs to be persuaded that the acquisition or construction of new power sources can be economically justified. Whether the Grid Transformation and Security Act changes the commission’s calculus remains to be seen.

PJM territory

Coal and nuclear baseload. Virginia participates in the PJM Interconnection service territory, which maintains a wholesale electricity market for the Mid-Atlantic region. One of PJM’s primary goals is to ensure that sufficient reserves of electricity exist to sustain customers through extreme weather events such as January’s sustained deep freeze that put the grid under unprecedented stress. The PJM region made it through the cold snap largely without incident because it had maintained ample reserve capacity. But what happens if reserve capacity shrinks?

FirstEnergy Solutions, a subsidiary of Akron, Ohio-based FirstEnergy Corp., announced two days ago that it is closing three nuclear power plants with a generating capacity of 4,048 megawatts. The plants can no longer compete effectively in wholesale power markets where prices are set by super-efficient gas turbine plants and wind farms. The company has appealed for subsidies to keep the plants open but the pleas have so far fallen on deaf ears, reports the Plain Dealer.

PJM has acknowledged that the shutdown might pose localized problems until additional transmission lines were built to move surplus power into northern Ohio and southwestern Pennsylvania. There is no indication that the loss of those nukes would affect electricity supplies to Virginia. But the FirstEnergy decision demonstrates how uncompetitive many nuclear power units are in the age of gas and renewable energy.

Tom Hadwin, a retired electric utility executive who comments extensively on Virginia energy policy, cites the FirstEnergy shutdowns as reason to question the re-licensing of Dominion’s Surry and North Anna nuclear units over the next decade or so at a cost of roughly $3 billion to $4 billion. He writes Bacon’s Rebellion:

Spending billions on extending the life of 60-year old units will only make the energy from those units considerably more expensive. It is only the subsidy from the ratepayers (by putting the investment in the rate base or a RAC) that would make such an investment possible.

Investing in energy efficiency or renewables would avoid far more CO2 per dollar than would refurbishing the nuclear plants. The inflexible operation of the nukes is an increasingly poor fit with the needs of a modern grid. Small capacity, distributed renewables make the grid more resilient and our energy less expensive.

While renewables, energy efficiency and a modernized grid might provide a reliable supply of electricity during routine weather conditions, it’s not so clear how they would handle extreme weather events like this year’s Bomb Cyclone or the Polar Vortex of several years ago. Solar and wind have no surge capacity — they generate electricity at the whim of weather conditions. Nuclear doesn’t have surge capacity either — it runs 24/7 — but if nuclear plants shut down, their baseload capacity has to be replaced by another source. Coal, which does have surge capacity, is one alternative, but coal plants are increasingly uneconomical as well — and could be even more so if Virginia takes part in RGGI. That leaves gas as the main surge power source, but gas is subject to pipeline constraints.

How all these factors play out over the next decade or two are less than obvious. But someone will have to sort out the implications for Virginia, and that body is likely to be the SCC. Striking a balance between grid reliability, costs to ratepayers, and environmental sustainability won’t be easy.

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65 responses to “Emerging Lines of Conflict in Virginia Energy Policy

  1. re: ” It seems to have dawned upon energy-efficiency advocates that the real obstacle is not the electric utilities but the State Corporation Commission, which takes a hard-nosed view on the value of energy-efficiency programs. Last month, SCC staff rejected a lighting program, appliance recycling program, and three other proposals submitted by Apco on the grounds that they did not pass cost-effectiveness tests.”

    Dominion should NOT be doing these programs. They should be done by the market – by competitors in that market – a process that will ensure value and ROI.

    Paying Dominion to do that just invites skullduggery… where Dominion will seek to “sell” their “ideas” to the SCC – and truth be known – NEITHER of them can substitute for how a real market would work.

    This is like VDOT telling their favored contractor that they have a pot of money and to come back with some “ideas” on how to best spend it – as opposed to VDOT putting a specific project out for bid ….

    So Dominion is right that the SCC should not be doing this – but then Dominion is even more wrong for claiming they are the ones best suited to decide.

  2. Re: Wind Turbines
    Recently I took another drive down Rt-160 from Somerset PA to Cumberland, MD to take another look at all the wind turbines on that windy mountain ridge that goes down thru WV. I don’t know how much potential there is to further build out that wind resource.

    Re: Nukes
    I wonder why FirstEnergy needs subsidies to continue the nuke plants? Dominion would simply charge rate payers for the excess. I’d like to understand the difference between Virginia and Ohio as far as how we structure the utilities. I am more familiar with NJ/VA where we are always fighting the state politicians/utility conglomerate.

    • P.S.
      Re: Joining RGGI
      I assume RGGI-joining is not something that the Va. GA agrees to, but rather the Democrats can force that by executive action by the Gov. So I expect that to be contentious, and on-again/off-again (like NJ) depending on who is in the Gov’s seat.

  3. “The big question: Now that the General Assembly has declared energy efficiency to be in the public interest, will the SCC modify its cost-benefit methodology and become more receptive to utility submissions?”

    It is tiresome to argue with people who didn’t even read the bill. The SCC did not insert the Ratepayer Impact Measure into the Code of Virginia, and it is the RIM test which has been the largest obstacle to efficiency programs of dubious value to ratepayers. Does the benefit actually exceed the cost in dollars (as opposed to in wishful thinking ideology)? Don’t blame a court for following the law. The 2018 legislation weakened the application of the RIM test, and I fully expect that some programs that failed before will now pass. Hold onto your wallets…

    A year ago had there been a major proposal to gut the RIM test the utilities would have come to me, as the lobbyist for a huge ratepayer, to seek my help in killing or amending the bill. It had happened in the past. This year, the utilities led the charge to throw their own customers under the bus in order to further fatten their stockholder’s pockets. The geniuses at the major business groups stood at the podium and applauded.

    The General Assembly runs the game now, not the SCC.

  4. I would like to emphasize the ignored efficiency market for Virginia….
    First, compare the efforts by our utilities to what has unfolded in MA, the state that ranks first on the 2017 State Energy Efficiency Scorecard, (http://aceee.org/state-policy/scorecard) MA scored 44.5 points out of a possible 50. Virginia tied for 29th, scoring 15.5, 2.5 points more than last year.

    A comparison of MA utility performance with Virginia’s clearly shows where Virginia needs to change.

    “VA UTILITIES (0 OUT OF 20)
    Utilities reported very small budgets for electricity and natural gas efficiency programs, and energy savings were among the lowest in the country. Natural gas utilities may decouple profits from sales, but electric utilities may not. The state exempts certain large customers from paying new efficiency programs.

    MA UTILITIES (19.5 OUT OF 20)
    In MA “Utility revenues are decoupled from sales,” … and MA also adds “performance incentives … to encourage program administrators to meet or exceed energy savings targets. In addition, the state’s Low-Income Energy Affordability Network (LEAN), which coordinates administration of government- and utility-funded energy efficiency services to income-qualified customers, is considered among the most successful programs of its kind in the country. In 2017, LEAN will oversee the delivery of approximately $120 million in ratepayer and federal funds for low-income weatherization and energy efficiency programs.”

    In other words … MA no longer holds onto the monopoly business model. They have decoupled revenues from sales. Until Virginia does that I can’t see why our utilities would decrease their sales and their profits to either cut energy use or transfer energy generation to distributed platforms and ownership. Virginia needs to restructure their utility regulation..

    Still, much can be done by adopting appliance efficiency standards and promoting private loans to finance the upfront cost of efficiency measures for buildings and corporations. Comments by Virginia Advanced Energy Economy regarding the Carbon Mitigation Rules say “not only could Virginia surpass its mitigation target (with efficiency and renewables) but also that it could do so while maintaining, even lowering, electric rates, spur $1.3 to 4.6 billion in new in-state investment, and generate $80 to 420 million in new state and local tax revenue.” Kinda puts the rate freeze law to shame.“ The state could reduce emissions by over 13.3 million tons between 2020 and 2030 at little to no cost, far surpassing the emission reduction targets in the draft regulation.”

    “The U.S. building efficiency sector is large, accounting for $68.8 billion in revenue in 2016. Overall, U.S. Building Efficiency products and services grew 8%, or $5 billion, that year, led by energy efficient lighting and commercial building retrofits, both up 7%, reaching $26.4 billion and $8.4 billion, respectively.” Virginia needs to take part in that market.

  5. https://wallethub.com/edu/energy-costs-by-state/4833/

    Massachusetts ranks #4, VA #30….Expect that gap to narrow.

    • Not sure what you mean. MA monthly electric cost is$131 vs. VA at $142 and its cold up there.

      • Fair point! Here, use this per kwh comparison instead. The point is per kwh the cost of electricity in MA is way, way higher – no matter how much you use. Not sure I want to emulate MA.

        http://www.neo.ne.gov/statshtml/204.htm

        • Thanks for the data. When New York and New England states pay 50% to 60% higher electricity rates than we do in Virginia, it’s no wonder that those states invest more in energy efficiency (EE). The return on investment is waaaay higher. The disparity in rates illuminates why the SCC contends that EE programs that might make economic sense up north do not make economic sense in Virginia.

          • Yes…but here’s the thing… When electricity is expensive, people use less of it and are more incentivized to use devices to save it – and that, in turn also means less pollution….AND less need for more plants!

          • CleanAir&Water

            The rebuttal numbers I was looking for showed up in an email notice this AM from my fav stats place …. https://www.bloomberg.com/view/articles/2018-04-28/u-s-electricity-prices-don-t-always-match-consumer-bills

            “Ten highest average monthly household electricity bills by state … Alabama in the Lead … VA is number 9”

            “It’s a paradox: Some states have low electricity prices but residents pay more to power their homes, and others have high prices and low consumer bills. But the occurrence of high prices paired with high bills is rare.”

            “In other words, a state’s low rate won’t necessarily make your electricity cheap. With electricity prices flat in most markets, efficiency measures that reduce consumption are a far easier way to lower power bills. Insulating homes, swapping incandescent bulbs for LEDs, and replacing aging appliances all reduce the energy needed for people to live at the same (or better) standard.”

        • The northern states are not a good comparison in terms of cost per kWh compared to the mild climate, non-union states in the southeast.

          If you look at many of the states with higher energy costs than Virginia you will see that many of them are in the northeast. Utilities in these states have a much higher electrical usage during their 6-7 month cold period compared to the electrical usage during their 3-4 month hot period. This requires them to build and maintain generation for the winter peak that is not used as much during the remainder of the year. This requires ratepayers to pay more per kWh to reimburse the investments for these units.

          Virginia, North Carolina, and Kentucky have winter and summer peaks that are very similar so their investment in generating units is used more hours per year lowering the cost/kWh paid by their ratepayers. Our slightly lower than average rates are a benefit of climate more than a result of management activities. Northern utilities typically have a unionized workforce that increases costs, higher land prices for utility infrastructure, higher taxes, more storm outages of longer duration and other issues that utilities in the southeast do not have to pay for.

          If you look at the trend in the northeast, they are reducing energy use, reducing costs to ratepayers, and reducing CO2 emissions. The trend in Virginia is exactly the opposite.

          SCANA, the utility in South Carolina that Dominion wants to buy, has the highest utility bills of any investor-owned utility in the continental U.S. according to legislators there, because of their ill advised and poorly managed investments in nuclear facilities.

      • Would venture to guess that MA uses more heating oil, propane, and natural gas furnaces. So what they aren’t paying in monthly electric cost they’re paying for fossil fuels.

        In Virginia, where the winters are more moderate, if natural gas isn’t available (and there are MANY places in Virginia where it isn’t), it’s cheaper to heat with an electric heat pump than it is to heat with oil or propane. (That being said, recent developments in heat pump technology make them a viable heating option even for colder climates).

        So the higher monthly average electric cost in VA may simply reflect greater use of heat pumps as opposed to fossil-fuel burning furnaces.

        It may also reflect summers that require more use of air conditioning.

        By the way, some home energy experts claim that heat pumps are a more “green” efficient option compared to fossil-fuel furnaces.

    • Virginia is relatively average cost, but I guess we use a lot of elec. Not sure why, or if that reflects the data centers. My friend in MA is paying 24-cents/kwhr to charge his plug-in vehicle, about double our cost of elec.

      Yes if elec is very costly (MA), and the state refuses to build power plants, then conservation becomes most important.

  6. re: ” but gas is subject to pipeline constraints.”

    so here’s a question that is now apparently an issue. What if gas is just as bad as coal on greenhouse gases?

    Would that push Nukes to the top?

    and renewables – without mated with a fuel that can modulate … and having to run opposite to Nukes would essentially make renewables irrelevant.. because the Nukes cannot dynamically reduce power in response to renewables generating. Nukes have to run 24/7 no matter what solar or wind is doing.

  7. Jim,
    I hope BR will continue to be a valuable forum for dialogue about this important issue. I am concerned about characterizing it as a “battle over energy policy.” Although that is an accurate description of what it has been. The various interests have seen it as a zero-sum game. Utilities want to control the process and own the assets because that is how they currently get paid. Other interests see opposing the utilities as a “win” even though that might weaken the utilities in the long run or cause them to defend old habits that have outlived their usefulness.

    We need an objective, passionate conversation about how we can create a modern energy system in Virginia in a way that serves a wide variety of stakeholders throughout the state. It should not be about winning or losing but about designing an outcome where everyone does well.

    We should not only decide how to modernize our grid and select the proper resources to save or generate energy, but we must also consider how to transform our markets so that innovative, job-producing new businesses can collaborate with our utilities to increase the reliability of our energy system and lower our costs. This will require regulatory transformation that gives utilities a financially sound path forward without penalizing the ratepayers.

    “Insight is not so much having a new idea as stopping having an old idea.”

    Edwin Land – Inventor of the Polaroid camera

    • There’s no one who represents consumers playing in the game. Environmentalists do not represent residential and small business customers.

      • You might be right TMT… but whose responsibility is it to represent consumers if not themselves? Don’t blame the enviros who do take responsibility for representing their interests… they’re pretty clear that they are not representing typical consumers but instead those who want to protect the environment. Typical consumers are much more interested in saving money rather than what is best environmentally… usually.

        • Larry – as far as businesses are concerned, the chambers of commerce should be representing businesses, but, in all truth, they represent whoever gives them the most money. In this case, it’s probably Dominion. The world’s oldest profession!

          The attorney general’s office should represent consumers and just consumers. There is not perfect matching between the interests of consumers to pay the least amount reasonable for reliable energy and those of environmentalists, some of which would like to force up prices to reduce demand. There should be no inside or outside pressure on the legal team assigned to represent consumers.

          Then, in the mix of a hearing, the competing interests present their cases and challenge those of other parties, with the end result presumably decisions that serve the overall public interest – something that probably doesn’t fully satisfy everyone.

          I do think the SCC should not just accept energy conservation programs when proposed by the Utility or any other group, but must test them for cost-benefit results. Again I don’t trust the environmentalists any more than I do Dominion.

          • re: ” I do think the SCC should not just accept energy conservation programs when proposed by the Utility or any other group, but must test them for cost-benefit results. Again I don’t trust the environmentalists any more than I do Dominion.”

            I don’t know anything about the SCC’s expertise in determining the cost-effectiveness and ROI of demand side energy conservation – either and I don’t know how they analyze and determine or have opportunities for other parties to challenge their findings.

            At the least, there needs to be more transparency about their process and their findings.

            I don’t trust Dominion not go game the issue and I do not trust the SCC to have enough expertise or knowledge on demand-side technologies – now – and into the future…. I’d feel 100% better if they put out for bid – to have companies that do have the expertise and credentials to do that analysis. I fear the SCC has a penny-wise, pound-foolish approach.

          • @TMT – the Attorney General is “govt”. Do you trust the AG any more or less than another govt agency like the SCC?

            why would you trust one and not the other? Isn’t the SCC also supposed to represent consumers?

          • TooManyTaxes

            Larry, let me try to answer your questions.

            First, as to the cost-benefit ratio for energy-saving programs, Dominion should be required to conduct cost-benefit studies that are submitted to the VSCC. They should be made subject to review by not only the staff, but also other interested parties. Parties should then submit their written analysis of the studies, upon which the Commissioners or a hearing examiner would make a decision as to which programs provide more benefit to consumers than their costs.

            Regulatory agencies have been doing these types of reviews for longer than I’ve been practicing law. And that’s been awhile.

            While I personally don’t think much of Mark Herring’s legal skills based on a number of arguments he made during his first term, I still trust the institution. Staff members should be able to develop and advocate positions that protect residential and small business consumers and, as appropriate, challenge the arguments made by Dominion and other parties.

  8. Energy Efficiency

    You say “the real obstacle is not the electric utilities but the State Corporation Commission, which takes a hard-nosed view on the value of energy-efficiency programs.” Isn’t it the regulators job to determine if a utility’s investment is cost-effective? Shouldn’t the utility make investments that have value to their customers, especially since they are earning a profit from it? The SCC should not be asked to water down its cost-benefit assessments just so the utility can undertake more mediocre projects.

    Clean Air & Water notes that Virginia, and Dominion in particular, is rated very low (31st out of 32 according to the ACEEE) for its performance relating to energy efficiency programs. It should come as no surprise that a utility is not very good at investing in programs that will lower its revenues, even if they make a profit doing it.

    Utilities that have a good record with energy efficiency programs are in states that have decoupled a utilities’ financial performance from the need to build more generation.

    I have suggested that Virginia set up a program where individuals can contribute to a fund that provides low-interest loans to families and businesses for energy efficiency projects. This would allow customers to select the most experienced and most cost-effective providers of energy efficiency services to do the work. Utilities could earn more by handling the billing and payment services, collecting a monthly fee from customers in addition to their reduced utility bill and paying back the loan fund directly. This reduces the cost for all participants and the interest on the loan (less administrative costs) would go back to those who invested in the fund. This would give Virginia citizens a low-risk way of saving for retirement (it might be made part of 401k plans) while they help their neighbors reduce everyone’s energy costs.

    A project of this sort would be a huge job creator providing long-term employment for building trades and others. Many more long-term jobs would be created compared to building a new power plant, for example.

  9. Offshore Wind Power

    Although Virginia is seeking ways to reduce CO2 emissions, a full membership in RGGI is probably not on the near horizon. The GA has denied membership the past two sessions and will likely continue to do so as long as Dominion and APCo oppose it. The utilities will probably continue to oppose full membership because RGGI uses money from the carbon charges to fund energy efficiency and renewable projects, often undertaken by third parties. As long as they are paid on a “build more to earn more” scheme this isn’t good for the utilities. We need a new formula that allows utilities to prosper by doing things that are good for their customers.

    APCo would make more money if they owned a new wind generation project. Remember for every $1 million invested, the ratepayers pay back $4 million to the utility; $1 million to repay the investment, $2 million in profit to the utility, and about $1 million for interest charges. It could be less in this case if APCo is looking for just a 10-year recovery period.

    With a huge surplus of generation in PJM it is difficult to approve such an added cost to ratepayers. The customers might benefit if APCo entered into a PPA for the wind energy at prices below what they are generating with their coal plants. This would allow them to reduce the amount that the coal plants are used and diminish the CO2 released. But APCO would lose out on the profit that putting new generation in the rate base would provide. This is just another example of how the lack of market and regulation transformation is hampering making good decisions and is setting utilities against their customers.

  10. Coal and Nuclear Baseload

    Energy planners for a modern grid are recognizing that the usefulness of baseload generation is rapidly disappearing. Especially if it is provided by coal and nuclear plants that are very inflexible in their operation.
    Merchant generators that own nuclear capacity in deregulated markets are struggling to match the energy costs provided by gas-fired units and renewables. FirstEnergy, as happened with Dominion’s Kewaunee nuclear plant, cannot operate its three nuclear plants at a competitive price in the wholesale marketplace. These units are probably fully depreciated and have not been extensively refurbished, but still cannot generate energy at a competitive price.

    Dominion paid just $192 million for the Kewaunee plant in 2005, but could not run it at a profit and closed the facility in 2012.

    That is why I am questioning the economics of Surry and North Anna. Dominion has estimated that they will spend $3-$4 billion to refurbish these units 10-15 years in advance of when the money will be spent. These estimates probably do not include the interest costs associated with those projects, which is the second highest category of expense for nuclear units.
    If nuclear units that have not received billions in upgrades cannot operate without subsidies, how can Surry and North Anna be competitive after billions more have been invested in them? They can’t. The difference will be made up by the ratepayers in Virginia.

    A lot of the conversation about baseload units has involved the fear of not having that reliable 24-hour source of generation around which we dispatch additional sources of generation as demand increases. But the future grid won’t work that way. It will be far less expensive and more responsive to alter demand in response to changes in the availability of generation. This is a major shift that is hard for the old guard regulators and utility planners to adjust to.

    It is essential that we adjust our mindset. Otherwise, we will incentivize electric vehicles to recharge at night using increasingly expensive and obsolete nuclear units, when we really need that recharging load in the daytime to absorb the high output of solar generation during the hours of peak sunshine. This is the hazard of clinging to old ideas and failing to evolve our thinking as technology and costs rapidly change.

    Striking a balance between grid reliability, costs to ratepayers, and environmental sustainability will be easier than we think when we get the payment formula for utilities right. The cheapest sources of generation are now the cleanest. Once we show utilities that they can profit by offering useful services and not by building more, but unnecessary, assets, we can align the interests of shareholders and customers. Then we can end the “battle” and begin the collaboration.

  11. re: who decides what energy efficiencies that buyers of electricity will use?

    Isn’t the obvious answer that customers themselves will decide that and not the SCC nor Dominion?

    Or perhaps I am… continuing to not understand exactly what kind of efficiencies that are done to the grid that are not at the customer level.

    what are those ? can someone give examples?

    • Larry,

      Usually it is the customer choosing the right solution and determining whether it’s a good investment for them.

      But the new energy bill incentivizes Dominion to invest $870 million in energy efficiency projects (avoiding customer refunds and earning perhaps twice that in profit).

      This article suggests that the SCC lower the bar for certifying that these projects have value for the customer, just so Dominion can earn their profit and reduce demand a little bit.

      I am suggested an alternative way of saving energy that is much less expensive and saves much more energy.

      We still have a challenge upgrading the efficiency of low-income, substandard housing that might require a different approach.

      • I guess I’m not opposed to that but again – that approach also has a bit of an agenda – and it’s a policy issue – which is fine – but you still need a real independent analysis of what the options are long term and sort term for implementing technology – overall… i.e. what technology would you put in the low income homes? Probably no different than the higher income – so the question is more of “what” technology.

        Also – I would use that money in a means-tested, match way.. i.e. we’ll HELP you BUY a much more efficient heat pump but not a less efficient one, etc.

        or we’ll give you a bigger tax credit if you use more efficient construction materials and methods…

        Dominion wants to somehow benefit itself from the spending of that excess profit… right off the bat… that sounds problematical. But again , I’m not sure regulators in general or equipped to look at cost-effectiveness and ROI either…. in an industry that is undergoing massive changes due in part to technology and a lot of such issues are tough calls for people actually in the industry…. as to WHERE to invest THEIR own resources… I can see how they would feel that the SCC did not have industry-grade expertise in making such decisions.

  12. re: what fuel mix for electricity and when?

    I realize that I’ve beat this horse to death multiple times but it’s always seemed to me that the ONLY fuel type that can rapidly modulate in response to dynamically varying renewables generation – is gas.

    So.. consider a hypothetical – a grid that has no gas or gas is very scarce or has been recognized as a higher contributor to global warming that coal.

    So just accept that premise for now – and state how the grid would “work” ….

    what role would renewables play in a grid that only had baseload plants – coal and nukes?

    I keep bringing this up and there are essentially no responses to it – as if I’m not seeing something myself that really invalidates my thinking on what role gas plays in a modernizing grid that is trying to incorporate more and more renewables.

    I understand the effect that demand side technologies will have on overall demand but I still do not understand how a grid would operate – without gas or with gas that is 5 times more expense – and more expensive than coal…etc.

    Can one of you kind souls who know – lay it out in simple terms so I can get past this blind spot?

    thanks!

    • Larry,

      I have responded to this issue several times, but perhaps not in an understandable way. Let me try again. It helps me to hone the explanation so more people can see how it might occur.

      First, I would like to restate your basic assumption. At this time, no one is saying that we should not have any gas-fired generation in our mix. What I have been advocating is that we don’t need any “new” gas-fired generation to be added to the mix even as old coal plants continue to be retired.

      Let’s start with the prediction by PJM that demand for electricity in Dominion’s service territory will be essentially stable over the next 15 years. Electricity use in the U.S. has been stable or declining over the last 10 years, during a period of economic and population growth, so this is a reasonable forecast.

      With the increasing surplus of generation in PJM there is no problem in handling the variation in renewables. That variation is quite predictable over a time period that can be accommodated with conventional generation. PJM says that its grid can accept 30% of its generation from renewables without any basic changes to our current grid. This takes us well beyond the 15-year planning horizon.

      A greater contribution from renewables could be incorporated but would require some grid modernization and changes in our approach to dealing with changes in demand.

      I think you are asking “what happens if gas gets more expensive, or we realize that that the 86-times higher potency of methane as a greenhouse gas (compared to CO2) is a problem that we want to reduce?”

      The first big shift we must make is to stop seeing every change in demand as a need for a change in supply. This is a 100+-year habit that is hard to break.

      We don’t need any new technological breakthroughs to handle this in a different way. If a significant portion of solar output is affected by weather for example, water heaters, space heating and cooling can be adjusted from control centers to meet the available supply. This is already being done in many locations and FERC is looking into establishing a market for demand response resources.

      This is done in a rotating fashion. No unit is off for a prolonged period so the comfort levels are unaffected, but demand is reduced and bills are lower for those customers participating in such a program. A variety of demand response techniques are being developed that will be able to deal with a substantial amount of the variation from renewables.

      For longer periods, the depth of resources within PJM and the ISOs it is interconnected with provide resources to meet changes in demand in a variety of ways. Cloud cover usually doesn’t occur everywhere at once, wind blows more at night, etc. Most people don’t think of this in the same way as building a new power plant, but it is far less expensive so we should use what we already have before we look to build something new.

      Utilities in other states are currently receiving bids to build solar plus storage facilities that will produce dispatchable energy at a price lower than the current price of energy from gas-fired combined cycle units. It won’t be too many more years before those economics apply to Virginia.

      Batteries will soon be cheaper and more responsive in meeting changes in demand compared to using gas-fired peaking units. Storage from the pumped hydro facilities, electric vehicles, etc. will also be accessible and affordable to even out the variations in solar output.

      Energy efficiency plus all of these other solutions will make baseload units less valuable and provide a more flexible, lower cost energy system.

      There is no need to wring our hands about the nuclear plants, more gas-fired plants or even the need for pipelines. We have all of the resources that we need right now. Building more will only lock us into old habits and a 40-year payback period for more expensive technologies.

      We have 15 to 20 years to work this out. But we need to begin now. The technological part is progressing. We already have many useful solutions and they are getting better and less expensive.

      The real challenge is to reshape our markets and our regulations to make this transition possible in a way that keeps the utilities healthy and gives customers more choices and lower costs.

      • Thanks much Tom..

        I’m not questioning whether we have too many gas plants or not…

        I REALLY am asking a hypothetical.

        How would the grid work – if gas becomes much more expensive – more expensive than coal – prohibitively expensive?

        Let’s say frack gas – runs out much sooner than expected and/or they export it – to the point that gas, once again, becomes more expensive than coal?

        Which is not really an insane possibility.

        What I’m not understanding is the basis for the 30%.. why not 20 or 80%?

        and … if you had little or no gas… would renewables still be viable?

        I might think a couple of things – 1. coal plants can have multiple generation units with some operating and others not and/or in stages of coming up or down.

        2. I also think that across PJM that there may be hundreds of such plants in various stages of coming online or going offline so that ..in effect… the tempo is more dynamic than if it were just one plant with one generating unit.

        If you look at islands – again – almost none use imported gas – because it’s simply too expensive and they don’t use coal because diesel oil is cheaper to transport. And diesel oil has another advantage.. it CAN ramp up and down quickly and a plant with multiple turbine units CAN modulate – and CAN mate with renewables – as effectively as gas (I think).

        I assume that over a 30-40 yr timeline that some folks think storage will become cost effective – so at that point – fossil fuels will be needed less and less IF you have enough renewables to charge up the storage during the day to power the night.. my suspects are that you’ll not do that for a long time so you’ll still need the nukes… but pairing nukes with renwables and storage is far better than coal – and gas.

        So .. at this point – we really don’t know for sure – even the next 10 years… If a breakthrough is accomplished in using renewables to make and store hydrogen for later use – everything changes. You COULD run on renewables alone – and GW would be perhaps under control.

        • Larry
          Here is a simplistic explanation of one interaction on the grid that compensates for intermittency …
          As originally proposed the Atlantic Wind Connection was to be an underwater grid running from NY/NJ ot VA and connecting the wind farms. The connection would save costs by limiting the land connections to just a few places and reduce intermittent wind electric production because ..”the wind is usually blowing somewhere long the coast”

          I am not sure how Dominion’s lease reads but their original bid for those offshore leases had a caveat that Dominion’s wind farm would stand alone making our offshore wind more expensive and not as reliable.

          Regarding storage … not 30-40 years out
          Here is a run down from my notes of ‘storage stuff’ being built and changing assumptions about how far away the benefits of storage are.
          • Florida Power & Light Co. has integrated a 40 MWh battery-storage system into its 74.5 MW Babcock Ranch Solar Energy Center in Charlotte County, Fla. FPL notes that this is the largest solar-plus-storage system in the U.S and plans to develop 50 megawatts of battery storage over the next few years.
          • The Honolulu Department of Planning and Permitting issued a record number of battery storage permits in 2017, the vast majority of which were for residential solar-plus-storage projects. (Pacific Business News)
          • In Arizona First Solar submitted the winning bid with a 65-megawatt solar and 50-megawatt / 135-megawatt-hour battery system, which beat out bids from conventional renewables, standalone batteries, and traditional natural gas peaker plants.
          • GTM Research and Wood Mackenzie believe that batteries overtaking peakers may be a common occurrence in the U.S. in as little as four years. According to a new report, by 2022, new natural-gas peakers will regularly compete head to head with energy storage. In ten years, new natural gas peakers may become a rare sight.
          • AEP’s $2.3 million storage proposal was much lower than the company’s $11.3 to $22.5 million estimate for traditional distribution system upgrades. The storage plan included a 500-kW battery to enhance a distribution substation and a 1-MW battery that could help if an important distribution line went out.

          The future ,,, GTM Research and the Energy Storage Association, which found 100 MWh of grid connected storage deployed in fourth-quarter 2017. GTM expects the U.S. energy storage market will almost double in 2018 alone, with more than 1,000 MWh of storage deployed this year.

        • Larry,
          “How would the grid work – if gas becomes much more expensive – more expensive than coal – prohibitively expensive?”

          I think I answered that above. Storage in batteries, EVs, pumped hydro would be used to store excess renewable generation to manage variations in renewable output and replace gas-fired peakers and other fossil generation. My point was that gas will not get prohibitively expensive all at once. There will be a prolonged period of transition. The faster the price of gas goes up, the more rapidly it will be replaced by the new technologies.

          Energy efficiency will offset the need for nuclear or combined-cycle units.

          I know many do not accept my confidence that new technologies will offer a reliable replacement for conventional technologies. But batteries have been cost-effective in PJM for the past 3-4 years and will be increasingly competitive as their costs go down and the cost of conventional fuel (gas) goes up. I think you are not paying attention to the cost of current installations if you think these technologies are still 30-40 years away.

          The 30% of renewable penetration comes from a recent PJM study that says this much renewable generation can be accepted in our current grid without any significant modifications. PJM could accept 80% renewable penetration (with appropriate storage and demand response measures to manage variations). But a good portion of that additional solar would need to be placed in locations throughout the distribution system and that would require modernizing the grid to accommodate two-way flows of energy and information. This is something that many other states, but not Virginia, are currently investing in.

          An amount of renewable penetration of 80% is certainly possible. A well-researched study shows that we could supply 80% of our electricity using renewables by 2040 with a much larger population and a 40% larger GDP, but with 9% less electricity usage than we currently have (using energy efficiency). PJM could accommodate that, but would have to spend some money to upgrade the grid to make that possible, which will be needed anyway because much of it is getting old and out of date.

          This is not pie-in-the-sky. The numbers work if we stay on our current trajectory. It goes faster if new technology gets cheaper faster than expected or conventional fuels go up faster than forecast. We just need to start planning now and not wait until we already have a problem.

  13. The warming debate still lacks a discussion of who should pay more to protect the interests of those landowners who are built on landfill or on beaches. I just got back from a week in San Francisco. We had a great time, but the place is as repressive as a small town in Alabama. More about that later.

    I did learn that significant parts of the City are built on landfill, many locations east of Stockton Street, including the Marina, North Beach, the Embarcadero, Mission Bay and Hunters Point. This includes much of the Financial District. Besides being quite susceptible to earthquake damage, I suspect a rising water line might hit these areas early on. How much should the average person or small business “pay” to protect these landowners? This question is somewhat of a variation of Larry’s questions about flood insurance and construction on flood plains.

    • @TMT – hey guy.. there is no government insurance for earthquakes! or tornados, etc… UNLIKE flooding… San Francisco is quite hilly… there may be some low lying areas but it’s nothing compared to places like Norfolk and Nags Head! Those places are PRIMARILY developed depending on Govt insurance.

      here’s San Francisco flood map:

      ?w=433

      • Larry, I believe we should have a national debate on the nature and extent of the obligation to bail out landowners who have constructed buildings on land that is likely to flood or otherwise be covered by water. Perhaps, a reasonably long phase-out period is appropriate.

        • Well, I guess, I feel that we have no such obligation to start with. In a nation where we say we should not subsidize folks health care .. how in the world should we subsidize beach homes for folks?

        • TMT
          How about some action in Va to talk about and deal with Norfolk? In November, the Army Corps released a proposal for protecting the city from coastal flooding that would cost $1.8 billion … and it doesn’t include the Navy’s largest base, which … likely needs at least another $1 billion in construction..”

          We threw action away with the Virginia Coastal Protection Act and it’s plan to join the RGGI. Here is what some thought joining RGGI would do … We could step up and do that now.

          “RGGI = Revenue” (CCAN)
          “Virginia’s participation in RGGI is projected to raise more than $200 million per year by 2020 in auction allowances…. Money to fight climate change impacts and protect citizens from sea level rise … Revenue associated with the sale of pollution auction permits will fund adaptation solutions in Hampton Roads (50%), economic development assistance in Southwest Virginia, and clean energy and efficiency programs throughout the Commonwealth.”
          And https://powerforthepeopleva.com/tag/coastal-protection-act/

          • TooManyTaxes

            Clearly federal taxpayers must fund the United States Navy. And I can see some federal and state contribution to assist the City of Norfolk. But how much should others pay to protect the private property of others, especially if the property is located in areas prone to flooding? I think this is a fair question for debate.

            For the year my son attended ODU, we periodically drove past many of waterfront homes and businesses in the Hampton Road area. At one level I envied their location. But I also asked what obligation do I and the many others who don’t live in such desirable locations have to pay higher taxes and higher energy bills to protect and, maybe, reconstruct those structures.

            Drive through much of California where it’s hilly or even mountainous. Countless houses and businesses are constructed on the sides of hills that most people would regard as unbuildable. Do we have an obligation to bail out these people if an earthquake, fire or flash flood takes out their homes? Ditto for people in Virginia who have built in the flood plain or in areas where the sea level is supposed to rise.

            The use of so-called pollution auction permits will, sooner or later, become intertwined with Wall Street that, in turn, will develop a market for trading. The price of these permits will no longer reflect economics, but will be manipulated for profit just like oil and gas futures are now. Environmental crusader rabbits will enable Wall Street to raise the price of energy well above its economic costs, which, in turn, will hurt the vast majority of people. Die hard environmentalists are not my friends any more than the lobbyists for Dominion.

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  17. The Va. SCC refusal to allow ApCo to purchase the wind farms reminds me of my New Jersey days. NJ was blocking nat gas projects, because in the 90’s NJ had favored coal plants. I think Va. is probably favoring our nuke assets and does not want to throw a monkey wrench into the plans to invest heavily/extend the life of those$$.

    • In fairness to the SCC..nothing prevents ApCo nor Dominion from forming for-profit subsidiaries like Dominion has done with their pipeline… right? What’s the purpose of wanting the regulators to approve ratepayers paying for these things?

      Just let the unregulated, non-monopoly private sector do that, right?

  18. Here’s the question about longer term ROI. Who is best qualified to judge what technologies will or will not deliver ROI over the next 10-30 years?

    Does the SCC have, on staff, expertise to do that?

    Do environmentalists know?

    how about ordinary consumers?

    how about people in the actual industries?

    how about scientists and entrepreneurs?

    I don’t think ordinary consumers have much of a clue other than what is currently available.

    The Enviros are usually way too optimistic and not well connected to economic realities.

    I’m not at all convinced that the SCC has, on staff, people who are tuned in to technology evolution … and they seem more focused on regulating – as they know it now and show little inclination towards evolving regulation as technology evolves.

    I don’t trust Dominion either because they obviously are more interested in their own fiscal well being than how to evolve their industry. I’m not convinced either that they have on staff.. folks who know where the technology is going but even if they had those folks – corporate would not allow technology to go forward that harmed their traditional business model – even if it was the way things should be evolving. Beyond that – even with technology – there is no motivation on their part to utilize technology in ways to reduce the use of electricity; that fundamentally is not in their own interests.

    • Larry- Nobody knows the future. Coal was king because although nat gas was a little cheaper, there was widely agreed to assumption that nat gas prices would skyrocket. The opposite actually happened, and nat gas became so cheap that coal/nukes made less sense.

      • re: “who knows the future?”

        we don’t know chapter and verse but we do have some idea of where we are headed

        Do we think that Dominion will invest in technologies that will result in less and less electricity use?

        So we want to give them the excess profits for them to decide how to invest it and cut out the SCC in that process?

        There is a plethora of different technologies to invest in.

        Do we have any idea what they are and get them in some kind of rank order for ROI?

        What process should we be using to get that rank list of what to invest in?

        Should Dominion just tell us they’ve looked into it and we should accept their recommendation as provided?

        Should a 3rd party provide their opinion of what technologies offer the most bang for the buck?

        So. no I don’t trust Dominion to recommend the best technologies that would reduce the use of electricity… sorry… they’ve got a huge conflict of interest.

  19. Although we accuse Virginia/Dominion of being efficiency deadbeats, we did have an energy efficiency program.

    My current washing machine was a $650 LG washer high efficiency.

    I only paid $150 for it.

    A few years ago, the washer was on a Black Friday sale for $500, and Virginia gave me a $350 rebate for buying a high efficiency washer over $500 .

    • didn’t realize that DOminion did that… I bet TMT won’t be happy about that!

      • Well I think it might have been a Virginia state program as part of the economic stimulation after 2008 slow down.

        The implication though, when we say Va. has done near zero for energy efficiency, we are talking about zero out of Dominion’s budget.

        • Just FYI – Rappahannock Electric offers discounted hot water heaters and smart thermostats in exchange for being able to idle the water heaters at high demand periods.. and ditto heat/cold on the thermo.

          Also – there are Federal and State credits for big ticket items.

  20. Well I think it might have been a Virginia state program as part of the economic stimulation after 2008 slow down.

    But we need to realize that some effort was done.

  21. Going back to Steve’s post. Virginia characteristically has average electric cost (12/kwhr) but we spend more on elec than many other states. This is because we use a lot of electric.

    I forget the explanation for why Virginia’s elec use is greater than most (lots of electric heat pumps? or data centers?). But the implication is we can reduce electric generation by say converting to nat gas for home heating and water heating.

    • Virginia is not that different than a lot of states in the MIddle Atlantic latitude though.

      I think you’ll find that the higher the price of electricity – the more conservation. Works a lot like gasoline prices….

      You can see this also on most islands which burn diesel for electricity at about 30-40 cents KWH… electricity use on those islands is way down.

      Dominion is counting of high electricity use in Va to pay for their pipeline but if the SCC denies them a tariff to pay more for that gas than other competitors gas – they’re going to be in trouble. .. and perhaps that explains why Dominion wants to rid itself of SCC oversight…

    • Virginia and neighboring states have slightly lower rates but higher average electricity bills than many states in the north because many customers up north use natural gas or oil for space heating, which is their major energy expense. In our milder climate we can use heat pumps for winter time heating and summer cooling so our total electrical consumption is higher resulting in higher average electricity bills.

      It would be a mistake to use gas for space heating here. It’s cost is going up and the cost of solar is coming down.

  22. I think there is more to it than weather. Take a look at California and Hawaii:

    also… in Virginia – FYI – where Natural Gas is available – people use it for heat … and even where it is not available – people, like myself, use dual-fuel heat where the heat pump switches over to a propane furnace when temps go low and the heat pump goes to resistance heat strip (which is far more wasteful than gas).

    • The problem with dual-fuel heat pumps is that they cannot run the heat pump at the same time as the propane or natural gas furnace.

      Even when the heating load of the house is such that the heat pump cannot keep up, the BTUs it can produce are still produced at a COP high enough that it makes sense to keep using the heat pump.

      Except you can’t with a dual fuel system. You have either 100% heat pump or 100% fossil fuel, no inbetween. If you try to run the heat pump at the same time as the furnace, the heat pump will trip out on high pressure. So the controls are set to disallow that.

      Whereas with electric resistance backup heat, you can run both the electric resistance heat at the same time as the heat pump, so you might have 75% of the heating load met by the heat pump and 25% met by the resistance heat.

      (Reason why is that, in the air flow path, heat strips are placed AFTER the a-coil, but the furnace is placed BEFORE the a-coil, and if the air entering the a-coil is too warm, the heat pump will not work correctly or at all).

      All that being said, I have a heat pump in my house and I have a switch on the resistance heat control wire so that I can make sure it doesn’t come on except when when the unit goes into defrost (which, because the unit has a demand defrost that uses sensors to determine when the unit actually needs a defrost cycle, doesn’t happen often).

      This last winter I turned that switch on once and that was because it apparently got so cold one morning in early January that the outdoor unit shut down (Trane states this happens at -7F).

      Under normal circumstances, even down to 5F the heat pump will keep the house warm without using the electric aux heat strips, even though it’s running 100% of the time at that point.

      I guess all those cans of Great Stuff I put in the attic and elsewhere when it was being built paid off.

      Bottom line: I don’t think dual fuel systems are worth the extra cost. Spend the extra money on better insulation.

  23. and here’s the price by state – Again -correlate the higher priced states with use:

    If the price of electricity goes up:

    1. – people will willingly adopt higher energy efficient appliances and HVACs

    2 – they will switch to the lower cost fuels also…. if available…

    In Europe, for instance , where electricity costs even more than our most expensive states – people use on-demand water heaters that cost quite a bit
    more up-front – but are much lower in operating costs.

    • On-demand water heaters have no stand-by heat loss compared to a regular water heater.

      That is the only savings you’ll get from them.

      I installed a kilowatt meter on my 40 gallon electric water heater.

      The stand by heat loss on that 40 gallon water heater, as indicated by the fact that it uses almost no electricity (maybe half a kwh) in a 12-hour period when no water has been used, is minor.

      Gas water heaters have higher stand-by losses than electric water heaters, so the economics of using a tankless water heater might change if using gas.

      Also, electric tankless water heaters of sufficient capacity to supply water for a shower use enough electricity that a service upgrade is probably going to be required on most installations. Houses in Europe tend to have smaller electrical services than what is common in the USA.

    • Larry- Something wrong with price data as my friend in Boston MA pays 24 cents…I ‘ll try to figure out what gives

  24. notice that some European countries actually TAX electricity – over and above it’s base costs:

    and here is electricity use per capita in Europe:

    https://www.eea.europa.eu/data-and-maps/figures/electricity-consumption-per-capita-in-2

  25. You are right Larry. A lot of factors contribute to per capita electricity use: weather, availability of alternative fuels, policies for self-generation, and higher electricity costs promote conservation, etc.

    California and Hawaii have a high percentage of solar water heaters. And California’s building code strongly encourages energy efficiency.

    When I lived on Kaua’i, we had no heat and no air conditioning, plus a solar water heater with electric backup. But the difference in temperature between day and night was greater than the difference in temperature between summer and winter. Despite very low usage, I had electric bills equivalent to what I have most months in Virginia.

  26. In a recent report, PJM announced that FirstEnergy’s plan to shutter its three nuclear plants will not affect the reliability and stability of the grid.
    This supports PJM’s broader assessment that it will maintain reliable supply even as more coal and nuclear plants are unable to compete economically in an era of flat demand, low-cost gas and an increasing contribution from renewables.

    This undermines utilities’ and the federal government’s attempts to get bailouts for coal and nuclear plants.

    An NRDC spokesman said that there is a surplus of generation to reliably supply customers for years to come, so asking customers to provide a profit guarantee that would impose billions of dollars in extra costs on them without getting reliability benefits in return isn’t justified.

    https://www.greentechmedia.com/articles/read/pjm-says-it-doesnt-need-firstenergys-nuclear-plants-for-grid-reliability#gs.MMTujms

  27. @Larry
    @all
    https://www.chooseenergy.com/electricity-rates-by-state/

    This shows MA. most expensive state per kwhr after HI

  28. I’m not sure where they got the data. Looking at the regulator’s page and the http://www.electricrate.com/residential-rates-massachusetts/ site, residential rates in Massachusetts are about 12-13 cents /kWh, not too much higher than ours.

    National Grid is the largest utility in the state. It’s residential rate as of April 30, 2018 is 12.673 cents/kWh. The MA regulator’s page has the same rate.

    Eversource is the next largest provider. It’s rate through June 30, 2018 is 12.888 cents/kWh.

    Massachusetts has deregulated its market and electricity is available from other providers with various conditions that have rates ranging from 10.29 cents for a 6 month contract up to 12.69 cents/kWh for longer term arrangements.

    I think the chooseenergy site contains an error somehow.

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