Energy Omnibus: What it Does, How it Costs You

What will Virginians see due to the Virginia Clean Economy Act? “Lots and lots of solar,” said the patron, Del. Richard Sullivan, D-Arlington. Higher bills, added the State Corporation Commission.

By Steve Haner

The General Assembly adopted Governor Ralph Northam’s clean energy package Tuesday, with party-line votes in both the House of Delegates and Virginia Senate. Two House Democrats joined the Republicans in opposing the House version.

House Bill 1526 and Senate Bill 851 appear identical but amendments were being adopted at the last minute. Now that they have crossed over to the other chamber, they likely will become identical.  And expect furious efforts to recruit some Republican votes in favor, as this new vision for Virginia’s energy economy will be disruptive, expensive and politically explosive.

Using the House version as it passed, here is a tour of some (not all) highlights, with line references so you can follow on this PDF version of the engrossed bill. If you want to see it without line numbers, but with highlighting of the new language instead, look here. For that I’ve used the Senate bill.

The bill overrides State Corporation Commission authority to look out for consumers in too many places to count, but you’ll find the clearest and most important example of that on line 1399 of the House bill. 

Notwithstanding the provisions of subsection C or D of § 56-585.1 or any other provision of law, each Phase I or Phase II Utility shall procure zero-carbon electricity generating capacity as set forth in this subdivision and energy storage resources as set forth in subdivision E.

Subsections C and D of that Code provision are crucial statements of the SCC’s authority, in C its authority over rates and in D its ability to accept – or reject – proposed investments or expenses as being reasonable and prudent. The language in subsection D goes back to the original 2007 revision of the regulatory process, and since 2007 Dominion Energy Virginia has sought more than once to eliminate or weaken it. With that “notwithstanding” in this bill, it is simply negated. That alone rated a “nay” vote.

One person who will remember that language well is former senator and now Dominion lobbyist John Watkins, who helped me save that provision (in 2013, I think) while he was chairman of Senate Commerce and Labor. Well, that was then, and this is now. Dominion will be building all this wind and solar generation with the SCC completely handcuffed.

The bill all but mandates construction of 2,600 to 5,200 megawatts of offshore wind. The main elements of that start on line 1195, with references sprinkled elsewhere. The bill continues to require that the project expenses “shall be presumed to be reasonably and prudently incurred” (line 1209) if the utility meets some easy hurdles. The “cost cap” set is based on the levelized cost of energy of a very expensive gas peaking plant. It means we could be paying three or four times as much for offshore wind electrons as New England utility customers.

At the very end of the bill, in line 2026, the SCC is granted authority to review increases in costs for the offshore wind or the other elements of the renewable portfolio standard, but only increases. In setting up the initial programs, the utility has carte blanche.

Line 638 allows the rider charge on utility bills “to mitigate impacts to marine life caused by construction of offshore wind generating facilities.” Only a legal analysis will reveal if that is inside or outside the “cone of protection” from SCC oversight.

On line 762, the existing goal of 5,000 megawatts of wind and solar energy which is deemed “in the public interest” for Dominion, set in 2018, is moved up to 16,100 megawatts. I read it to include wind and solar, but some discussions have said 16,100 megawatts of solar alone.

The Renewable Portfolio Standard language starts on 1264. This applies to both Dominion and Appalachian Power Company, but the electric coops are exempted. (There are several places where the electric coops and their customers are exempted.) The long RPS section includes schedules for the retirement of existing fossil fuel plants (line 1284) and the percentage of renewable replacements (line 1339). You can see what qualifies as a renewable source on line 1316. In general, there is a push away from burning biomass (wood waste), but one paper plant in particular had the political clout to preserve its status as a renewable supplier.

The retirement of existing fossil fuel plants way in advance of their normal lifespans, of course, creates stranded costs. The utility still collects from its customers, through various rate adjustment clauses, the capital costs and profit margin on those investments. The realization that the hybrid coal and biomass plant in Wise County is slated for early retirement drew opposition to the bill from Del. Terry Kilgore, R-Gate City, who spoke on the floor.

How much will those stranded costs continue to add to electric bills for decades? That element of the cost was not included in the SCC’s rough estimate released to a Senate Committee Sunday. It will be in addition to the $280 to $372 in annual residential costs the SCC outlined.

Not all Virginians (or even all Dominion customers) will pay the same. Low-income Virginians will be eligible for the new Percentage of Income Payment Plan, giving them free energy efficiency measures and bill subsidies (it starts on line 1844)  Low-income customers will be exempt from the rate rider placed on all bills to pay for the offshore wind, estimated by the SCC as between $11-13 per month. Low income persons will be given preference in hiring on the offshore wind construction project (line 716).

The phrase used often in this bill is “historically economically disadvantaged communities.” In the first drafts the bill defined that as “(i) a community in which a majority of the population are people of color and (ii) a low-income geographic area.” In later drafts, the “and” became an “or” to expand its application (both racially and financially – the “people of color” won’t have to be low income).

There’s much more to this bill, for additional posts. You’ll note starting on line 1412 that only about a third of the new renewable facilities can be owned by somebody other than the utility (a huge rip off of consumers), and on line 1512 you will find provision for major “deficiency payments” from the utilities if they fail to hit their renewable energy targets.

Somebody must expect that to happen, because line 1523 designates how the monies will be spent by the state once collected. Will the deficiency payments (fines?) hurt utility bottom lines? Oh no, line 1518 makes it clear that ratepayers will cover for any utility failures, with money collected through – you guessed it – another rider charge on their monthly bills.