Green Virtue, Certified By The Hour

Is it enough to be green and virtuous on a month by month basis, or must one be green and virtuous every hour of every day?

That is a facetious version of a real question facing the State Corporation Commission as it considers the most recent effort by Dominion Energy Virginia to create a 100-percent renewable energy tariff for its residential and smaller commercial customers. A hearing examiner who has looked at the year-old case recommended last week that monthly virtue will be enough.

This is a case that pits consumer choice against a utility’s monopoly, and a small window for choice may close if this new voluntary tariff is approved. 

Senior Examiner Alexander F. Skirpan, Jr. issued a report on several issues, supporting the company in part and those who objected in part and setting the stage for a final round with the full commission. Along with rejecting the hourly approach, he also ruled against allowing the utility to earn a return on equity on this new rate. In a point for the utility, however, he wrote it could include a 25-megawatt cap on participation and still not be deemed an experimental tariff.

Approval of any renewable tariff that is not deemed an experiment, even with those strict limits, would bar any Dominion customer from seeking a competitive supplier promising similar energy sources.  It would close the existing loophole which allows customers to buy elsewhere if the utility doesn’t have its own way to serve that demand. This tariff is limited to customers with a peak demand below one megawatt, so competition would remain available to larger users.

If and when that 25-megawatt cap is fully subscribed, however, competitive service providers could return to the market unless Dominion expanded the program. The 25-megawatt cap represents less than 1 percent of the residential and commercial customers who could volunteer for this program.

Pure renewable energy pulled off the grid is impossible, given the physics of a grid taking electrons from all kinds of generation. The substitute is a 100-percent renewable tariff, where the utility charges those customers a premium but promises that the demand from those customers is balanced by a similar amount of renewable power coming into the grid.

Dominion has proposed to use its own limited renewable generation sources, power purchase agreements with third-party generators, and power purchased off the grid to provide that balance.  Most of the power it will use comes from hydroelectric dams. An earlier attempt by Dominion and Appalachian Power Company to use renewable energy certificates (RECs) to comply with the requirement was rejected by the SCC.

The SCC staff analysis of this proposal concluded it did not pose a risk that costs would be shifted to the customers not participating.

The proposed voluntary tariff, or rate scale, which Dominion has dubbed CRG-S (continuous renewable generation -subscription), included an hourly-balanced pledge.  Dominion argued only that really qualified as true dependence on renewables. Others who have entered the case, including the Office of the Attorney General, argued that a a month-long balance test met the General Assembly’s desires.  A potential daily or annual balance requirement was also discussed and priced (what, not minute by minute?).

“Using an hourly balancing standard unnecessarily increases costs for customers,” the Attorney General’s staff wrote in its final brief. “The result of using an hourly standard, as proposed by the Company, is a higher rate ultimately to the customers that participate in the program . . . [because] [t]here [is] a greater amount of renewable energy that needs to be procured under the hourly standard than would necessarily be the case under daily, monthly, or annual standard.”

Dominion is proposing to charge residential customers 9.627 cents per kilowatt-hour (“kWh”) and non-residential customers 8.6080 per kWh. Moving to the monthly-balanced standard cuts that by almost 25 percent. By removing the profit margin, Skirpan further lowered the rates to 6.9 cents for residential and 6.34 cents for commercial customers.  Those he deemed reasonable.  This CRG rate will substitute for the lower generation and fuel charges that appear on non-participants bills.

Dominion’s proposal, filed in November 2017, drew opposition from competitive service providers, such as Direct Energy, and large commercial customers Wal-Mart and Sam’s Club. Direct Energy’s final brief includes a litany of complaints about the proposal.

It takes away customer choice but limits the customers who can sign on for the new tariff, with a short 90-day window to join, Direct Energy noted. It includes prices which are based on old estimates and which ignore declining costs for renewable energy. Direct Energy also complained about the hourly-balance pledge and the proposed profit margin, two elements the hearing examiner did overrule.

“Dominion customers will be denied the opportunity to obtain energy produced principally from solar or wind resources, because CRG-S energy will come principally from hydro,” Direct Energy added.

Carrie Harris, the attorney for big box retailers Wal-Mart and Sam’s, noted that one part of the state code protects the utility monopoly if it offers a 100-percent renewable choice, but another part demands that any rate be just and reasonable.

“The appropriate balance is one where customers receive a viable (and affordable) option for procuring 100 percent renewable energy. If the utility is going to be the only option – which is the impact of approving a Subsection A 5 tariff – then the offering should be at least as good as could be achieved in a competitive market,” Harris wrote. “If it is not, then it is not fair or reasonable to leave customers with no option other than an uneconomic one.”

Eventually environmentalists want only renewable power flowing onto and off the grid, which would eliminate even the symbolic value of such renewable energy tariffs. The country and the world are moving that way, if slower than they want.  In the meantime, the law being an ass, customers seeking that symbolism for their own reasons may pay a very high premium price from a monopoly provider.

A final finding by Skirpan, also passed up to the full commission for decision, allows for the whole thing to go away in 90 days if the tariff is approved but nobody signs up.

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4 responses to “Green Virtue, Certified By The Hour

  1. This whole issue has taken on an Alice-in-wonderland aura.

    Imagine that someone who says they care so much about the environment that they will only buy Nuke-generated power or they don’t want coal-generated power and only want gas.

    Imagine a utility that knows the realities of how the system is configured from a variety of generation sources… but then telling the customer – “sure, I’ll put on your bill that you only bought Nuke-generated power and charge you extra for it.

    Or further imagine someone who says “I only want to buy non-nuke and non-fossil fuel-generated power, i.e. renewables and you (the utility) figure out how I can get it 24/7 … and the utility says “sure, no problem, I’ll put that on your bill and charge you extra for it”.

    This is the alice-in-wonderland world we are now engaging.

    Does anyone have the intellectual honesty to admit that this is not a do-able reality?

    So Dominion is providing what customers say they want – no problem. And heckfire, if Dominion can keep 3rd-party providers out they can just sell as much premium-priced “green” power as the market will bear!!!

    So a simple-minded question.

    How come, Dominion can’t treat renewable power the same way they treat other fuels that are available and choose the one that actually is available and at the lowest cost – and feed that into the grid such that on a 24/7 basis they have consistently chosen a mix of available fuels at the lowest cost they can obtain it?

    How come – Dominion can’t charge those who want to generate their own power SOME of the time but remain connected to the grid so they can get power when they cannot get enough of it through their own system?

    Structure it like water/sewer is by charging “availability” fees for hook-ups that will not use the grid 24/7. Let people decide if that availability fee plus the cost of a separate solar system are cheaper in the long run than 24/7 grid electricity.

    How in the world has this issued evolved to the point it has now with more rabbit holes and warrens than Alice in Wonderland has?

    In the end, Dominion is going to do anything and everything they can to protect their business model and provide the stipulated power per their monopoly.

    The regulated “process” really is an uber adversarial environment where Dominion must take every action it can to protect its business and many advocated changes will result in harm to their financial bottom line unless they do any/all actions they can to alter those proposals.

    And that’s how we get to Alice-in-wonderland. If that’s what it takes for Dominion to prevail… that’s what they’ll do.

    The SCC is more like an attack dog on a GA leash than a body that would work to evolve the current model. And the GA is only listening to what Dominion wants to do. There is no one who is working to evolve the current regulatory model.

    And many customers are like TMT – they are highly suspicious of any change… convinced it will be at their cost.

  2. If there truly were suppliers that could substantially undercut Dominion’s rate for power with “green energy,” there would develop, over a fairly short time, strong consumer anger over the existing law. Some candidates for election in 2019 would likely campaign against the existing law, promising competition. Since Herring wants to be Governor, I’d expect him to jump on the bandwagon. Ditto for his 2021 opponent. With enough savings on the table, Dominion would be playing defense against a tsunami for change. At the least, Dominion would be filing rate cuts for its electricity.

    But there aren’t any companies waiting in the wings to use renewable energy to undercut Dominion’s rates. The great promise of lower prices for consumers just waits somewhere in the foggy future. And that’s a key reason why we are where we are. Unless and until the price cuts are ready to come on stage, green energy is just for big companies and people who have environmental guilt.

  3. Regs are the reason there is no one ‘waiting in the wings” to provide a foggie renewable future.

    Steve says of the new tariff … “It would close the existing loophole which allows customers to buy elsewhere if the utility doesn’t have its own way to serve that demand.”

    I am not sure where this stands now, but several years ago this loophole wasn’t exactly a loophole because if and when Dominion could offer the renewable energy the customer was then obligated to Dominion.

    Again, not sure how this worked if there was a 20 year PPA, but many felt the restriction negated any possibility of buying from a third party and then become obligated to Dominion if the company choose to build some renewable generation. This was when Dominion came up with the first of its Green Tariffs.

  4. Pingback: Dominion Withdraws Renewable Tariff Effort - Bacon's Rebellion

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