Northam Appointee Opposes DEV’s Green Tariff

Virginia City Hybrid Energy Center in St. Paul, which burns both coal and wood biomass. It is the centerpiece of Dominion’s proposed 100% renewable service, infuriating environmental opponents. Dominion photo.

By Steve Haner

Is Governor Ralph Northam now on both sides of the electricity retail choice issue? Having sent a strong signal weeks ago that he would oppose 2020 legislation creating competition for all customers, his administration has now intervened in a regulatory dispute asking to protect competitive choice for 100% renewable electricity. You are only free to choose if you choose green?

In order to stop other companies from selling so-called 100% renewable electricity in the Dominion Energy Virginia territory, the utility needs its own version of this shell game approved by the State Corporation Commission. The next hurdle in that long road is a hearing at the SCC Thursday.

When we visited this saga in August, Dominion’s application for what it calls Rider TRG had been filed but few of the likely opponents had responded. A long list of complaints about the idea is now part of the case record, including objections from the Northam Administration filed Friday in the name of the Department of Mines, Minerals and Energy.

Under a Virginia law Dominion helped to frame, once it has an approved “green” tariff, any and all competitive service providers must cease taking customers seeking 100% renewable. That concerns John Warren, DMME’s director:

“The loss of competition means there will be only one renewable energy product available in Dominion’s service territory. As evidenced by consumer statements in this case, a number of customers are satisfied with the products offered by (competitors) and are opposed to the product offered through Rider TRG. Approval of Rider TRG would likely create a scenario where customers are unable to purchase satisfactory renewable products, refuse to pay for Rider TRG, and renewable investment will fall despite high market demand. This scenario would be highly detrimental to the state’s energy goals.”

Could a compromise outcome with the utility be forming in front of us? Warren’s boss, Northam, is on record opposed to legislation allowing electric retail competition in general, but here is his DMME fighting hard to preserve choice in this one narrow corridor – 100% renewable power. If this is the result, it is a compromise with nothing to offer to those not eager to pay more for green virtue.

And it is also a compromise that could fall apart if the SCC approves Rider TRG, which merely takes Dominion’s renewable generation already built or under contract and charges extra to customers seeking to claim those particular electrons serve them, ignoring how the grid works. A similar scheme has already been approved for the Appalachian Power Company by the SCC.

Recognizing that, perhaps the most effective counterattack comes from a witness hired by environmentalists, who seeks to differentiate the APCo and Dominion proposals.

“(APCo’s) Rider WWS portfolio of resources was cheaper than the rest of APCo’s generation portfolio. Dominion’s Rider TRG, on the other hand, bundles renewable resources that are more expensive than the rest of Dominion’s fleet and dedicates those more expensive resources solely for TRG customers. Since those more expensive resources will no longer serve non-participants, non-participants’ rates should go down. Here they do not. In this way, Rider TRG does not hold non-participants harmless.”

Adding another absurd element noted by all is Dominion’s reliance on the burning of coal and wood products in this proposal. The largest generator dedicated to Rider TRG is the 600-megawatt hybrid coal and wood plant in Southwest Virginia. And three other 51-megawatt pure biomass plants dwarf Dominion’s utility-owned solar facilities in the program (only 33 megawatts).  The hybrid plant must burn coal and biomass together. In all, Dominion claims it could serve 50,000 residential customers with Rider TRG,

The State Corporation Commission staff in its comments did not oppose this proposal or how Dominion proposed to run the accounting, but it did propose eliminating the biomass projects from the mix.  With them included, Dominion proposes to add an additional four-tenths of a cent per kilowatt hour for TRG customers ($4.21 on a 1000 kWh bill). Pull the biomass out and the surcharge would go to less than two-tenths of a cent per kWh ($1.78 per 1000 kWh). It also cuts the potential customer base by more than half, demonstrating just how dependent this idea is on burning coal and wood and emitting CO2.

Absent from the record is any analysis or comment from the official defenders of Virginia’s consumers, the Office of the Attorney General. Perhaps that group will show up at the hearing and take a stand.

The other opposition is adamant.  Walmart has weighed in against this (its testimony was a focus of Virginia Mercury earlier), along with a coalition of large consumers billing itself as the Renewable Energy Buyers Alliance.  Its brief is a good summary of the opposition points:  This proposal 1) adds no new renewable energy, 2) is over-priced and 3) bars competitors offering better products at lower prices.

Expert witness John Hanger for Direct Energy Services picked up the same theme:

“(Dominion’s) purpose is not to save money for its customers. Its purpose is not to offer a viable or attractive renewable energy product. Instead, the purpose of proposed Rider TRG and this filing is to stop more customers from buying renewable energy at prices below VEPCO’s current utility rate.”

His testimony (see the summary) identified seven ways that the proposal is not in the public interest, a key issue if the SCC is to deny this application after approving APCo’s.  A second witness for that company complains Dominion has not provided sufficient evidence on why the surcharge needs to be that high, much higher than the surcharge APCo is imposing.  “Dominion’s Application presents a tariff that is artificially inflated at the outset, and that will be used to collect costs for all future generation investments, whether or not they are from renewable resources,” Frank Lacey writes.

If some of these companies and individuals seem familiar, they are many of the same players from the drama earlier this year, when Dominion unilaterally shut down customer transfers to competitive service providers and forced them to fight for life in the SCC.  This is another existential battle for them.

Dominion had sought to hold Thursday’s hearing in front of the full SCC, not just a hearing examiner, but the time saved by that compression of the process could mean less time for its competitors to sign up new customers, which they can keep even if DEV wins.  They opposed the request, it was denied, and Thursday’s debate is before a hearing examiner.

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14 responses to “Northam Appointee Opposes DEV’s Green Tariff

  1. The easy answer to this is in changing a goofy definition in VA law …. evidently biomass is considered ‘renewable energy’ even when it co-fires with coal.
    The law: “Renewable energy means energy derived from sunlight, wind, falling water, biomass, … Renewable energy shall also include the proportion of the thermal or electric energy from a facility that results from the co-firing of biomass.”

    The biomass included in Dominion’s new green tariff is combined with coal, so even though the total amount credited would not include the coal derived energy, this plant will be using coal and including it means a continuation of coal use and climate effects.

    So … how about getting the Legislature to remove the ability to include any facility that operat“es with ‘co-firing’, or how about removing biomass completely because it is not restricted to forest waste and would incent tree removal.

    Sooooo … AGAIN when, oh when, is someone in VA going to get serious about fixing the “central power means profit” incentives in our regulatory system? Third party PPA’s are what corporations are looking for.

  2. I would have hoped that the Dems would want to circle back on the SCC and related issues and get it back to some reasonable status.

    I does not sound like Northam is anywhere near the left on green….but who knows?

    Who would have thought Northam would survive and the Dems take over way back in the middle of the blackface dust-up , eh?

  3. I doubt getting a legal definition changed is easy. What is the argument being made by the utilities that is so convincing to their supporters?

    • The broad definition of “renewable” was established years ago, and it is not just the utility but the forest products industry which pushed it. VA does have this weak RPS standard and the utility wanted to count biomass toward that. And as noted in previous posts, the Europeans claim that burning biomass counts as carbon neutral, proof on its face that this is a movement of stupid people. But Virginia forest products companies happily ship the stuff over there.

      It has been called to my attention that in a rebuttal filing Dominion is backing off using Virginia City in this program, but standing firm on the other 153 MW of biomass generation.

  4. Citizens of Virginia SHOULD be able to use solar – either directly at their house self-installed or by a company. They should also be able to buy solar from a competitive supplier.

    Dominion should receive fair compensation for operating and maintaining the grid – an “availability” fee much like people have
    to pay to hook up to water/sewer.

    Here’s some interesting info that runs counter to what I thought was said here about Virginia itself producing more than enough electricity:

    Statistics about energy are hard to comprehend and may not appear to be consistent if you confuse “energy” with “electricity.” About 55% of total energy used in Virginia is imported from outside the state’s borders – and most of that is gasoline/diesel used for transportation and natural gas used for heating/manufacturing/generation of electricity. Only 37% of the state’s electricity is imported, ”

    So Virginia does NOT produce all of it’s own electricity -it imports a substantial amount of it – 37%!

    http://www.virginiaplaces.org/energy/

    AND – I suspect it’s bought at wholesale rates and sold at retail rates and at the allowed profit margin.

    I’d like to see further discussion/explanation of this – since I’ve been left with the impression that we actually had excess electricity generation capacity and if that is true, why are we importing 37% from outside Virginia?

    • Dominion has a huge coal plant in Mount Storm, WV, right across the VA line, and that counts as “imported.” Appalachian has most of its generation in states west of VA. But the whole point of the wholesale PJM market is to make it easy to move power back and forth, with no effort made to keep output within a single state. Again, once on the grid electrons just go where they go…..

      In 2007 that was Dominion’s big sales pitch – VA should not be importing but should be exporting power. Somehow the existence of Mt. Storm in their stats never came up. As all that dawned on me or was called to my attention, I realized these are not honest people.

  5. Okay, but is Dominion, as a condition of it’s public monopoly entitled to buy power outside the state, import it at a wholesale rate and then sell it at a retail rate?

    If that’s true – then why would Dominion still advocate to build it’s own plants in Va to supply electricity?

    Would they make more/better profit from their own plants?

    I’m getting the impression that Dominion feels that it is ENTITLED to a profit from ALL electricity it provides no matter whether it produces it itself or imports it AND that it has exclusive rights to do that – i.e. no competitors can and that’s why they sell to PJM.

    And that would include power produced in Va from 3rd party and sent to PJM that auctions it – and Dominion may actually buy it – and then provide it via it’s grid – at a profit which is way more than it would cost if 3rd party competitors could sell it direct to customers.

    • No. Purchased power is passed through at cost, no profit added. They only make a big profit on their own equity investments. Power made by D and sold out of state does produce a profit for the utility, which is divided between the company and the ratepayers. The utilities also earn a return on the distribution system, of course, but no profit on purchased power.

  6. That is what is so insidious about this proposed tariff. It forecloses commercial and industrial companies from obtaining 100% renewable energy from other providers at a lower price. The bulk of the offerings are plants that burn wood waste and coal with a bit of oil thrown in to make it burn.

    These plants do not meet the nationally accepted standards for “green” or “renewable” – just Virginia’s interpretation of what “renewable” means.

    The most dramatic thing that this proposed tariff does is to prohibit customers from obtaining renewable energy from other providers at a lower cost. There is no doubt that solar energy can be obtained in Virginia at a lower cost than Dominion’s rates via a Competitive Service Provider or by using a Power Purchase Agreement.

    The major corporations objecting to this tariff have the ability to obtain 100% renewable energy directly from independent providers at lower than utility rates in many states throughout the nation. Many of the programs that exist were mentioned in some of the filings.

    Dominion wants to own and control nearly all renewable development in Virginia. Customer installed solar is still allowed but it is inhibited by caps on net metering, fixed and standby charges, etc. which add to customer costs.

    There is no benefit to customers when the utility builds a renewable facility in Virginia. Typically an independent developer builds a facility and adds its profit. This cost would normally be the basis for a PPA or the cost of energy from a Competitive Service Provider (after adding in their profit). This would be below the cost of the commercial and industrial rates charged by Dominion, or there wouldn’t be a market for them.

    Dominion’s plan is to buy projects that independent developers build. The utility would then add the cost of their debt financing, plus 30+ years of a guaranteed profit. Dominion would also get paid the wholesale price of generation from the facility. This yields a stream of payments from customers that is probably at least three times the cost of the facility itself.

    That is what Walmart, Costco, Target, and the data center owners are so upset about. In many other states they have the ability to lower their costs and pursue their corporate goals of using renewable energy. Dominion wants to deny them that opportunity in Virginia.

    We are being asked to hamper our state economy by adding to our energy costs while neighboring states, such as Maryland, are doing just the opposite. The Dominion tariff, while modeled on APCo’s, does not work in the same way or yield the same results.

    It is puzzling why we don’t hear an outcry from the Virginia Chamber of Commerce. This tariff favors one business, Dominion, at the expense of all of the other businesses in the state. The AG’s Office of the Consumer Advocate has had little to say in their submitted comments. Residential customers will also pay more for electricity if Dominion builds the renewable projects and puts them in the ratebase.

    This tariff would lock in billions of added costs (and added profits) for renewable facilities (wind and solar) built by Dominion. Governor Northam essentially ceded control over those projects to Dominion in his energy plan. I applaud DMME’s position saying that this is not a good thing for Virginia.

    We need a financially healthy utility to build and maintain a modern grid. We do not need them to build renewable projects that can be built much less expensively by independent developers. Direct to customer PPAs or having the utility purchase renewable energy via a PPA is being done in many other states and the utilities have remained financially healthy.

    We would have to properly determine how to pay for the wire services and legacy systems when some customers reduce their purchases from the utility. But this has been faced and figured out by other states already. We can find a fair way to do it in Virginia, if the SCC is allowed to do its job.

    This tariff, so far flying fairly low under the radar, will have a significant effect on our energy future. Either we will choose to increase our energy costs by tens of billions of dollars and leave our energy choices primarily in the hands of one company, or the SCC can deny this tariff proposal and embark on a collaborative process that is good for Virginians and our energy companies.

  7. “It is puzzling why we don’t hear an outcry from the Virginia Chamber of Commerce. This tariff favors one business, Dominion, at the expense of all of the other businesses in the state.”

    Chambers of commerce are generally whores for sale to the highest bidder. Example, 7 or 8 years ago, I spoke with a then Fairfax County Chamber of Commerce about an effort some were making to eliminate or reduce the huge subsidy paid to overweight trucks by all other road users. (I first became aware of the issue on BR.) At the time, the annual cost of road damage from these heavy trucks was estimated to be more than $210 million and the permit fees were something like $10 to $13 million.

    A number of organizations worked to get legislators to force a substantial increase in permit fees. Delegate Mark Keam introduced legislation after hearing us out.

    After reviewing all our materials, including UVA’s analysis for VDOT, and hearing our arguments about how every driver, including businesses, were hurt, the Chamber of Commerce rejected the request for help because it would cost some trucking companies more money. I don’t know how much the truckers gave to the Chamber. But it was screw the general business community to favor a special interest. How much money has Dominion been giving to the chambers?

    As a final note, I wrote an op-ed for the WaPo calling for full-cost recovery of the bridge and road damage costs with higher overweight truck permit fees, along other revenue-raising measures. The Post twice refused to print the op-ed because it was inconsistent with its never-ending goal of seeking higher taxes in Virginia. The Goebbels Gang strikes again.

  8. As folks here know, I am no ardent supporter of Dominion and in fact, think they corporate conduct with respect to legislation and regulation is just outrageous but to be honest -you need two to tango on that and our GA is just feckless to this point.

    But Dominion, like any other entrepreneurial enterprise is duty-bound to maximize its value – if it were a property – it’s “highest and best use”.

    They are, in addition, a government-sanctioned monopoly – NOT publicly owned but investor owned.

    So their “market” if you will is all customers within it’s designated service area.

    So, in their mind, the State should not allow competitors to “poach” on their guaranteed business.

    If there are going to be other “providers” – they should be essentially at-will sub-contractors to Dominion – not competitors chipping away at the value of their monopoly.

    I suspect prior to PJM – all investor-owned utilities with govt-granted monopolies had similar attitudes.

    So Steve says that any power that Dominion buys from PJM cannot be sold with a profit – and I presume no matter how or where it is generated, i.e. it could have been generated from coal, or gas or solar or other – AND it could have well been generated within it’s service area and feeding that power through the Dominion owned and maintained grid.

    Everytime they buy that kind of power – it is NOT a profitable transaction.

    So if the terms of the current monopoly are further changed to allow solar competitors to sell to customers inside of it’s service area – it will take customers away from Dominion and thus decrease the value of their business ergo to would-be investors.

    Now that he Dems are in charge of the GA – will they change the terms of the monopoly so as to favor customers of electricity over the interests of Dominion and it’s investors?

    Do we “owe” Dominion the full and unfettered value of its monopoly?

    That answer is a no-brainer to the average person – the answer is NO – and customers tend to like to see monopolies done away with – no matter what they sell.

    So – it’s not really about “green” or “renewables” per se -it’s about money and profit – naturally.

  9. Larry, I think you have a misunderstanding of a utility monopoly. When Samuel Insull was convincing towns across the country to grant monopolies to the electricity companies he was setting up, monopoly power was granted for the wires. It made sense to allow only one company to string the wires instead of many wires from several companies. The same thing applied to gas companies, water, etc. – one set of pipes instead of many.

    For decades the generation came from streetcar companies, mansions that had their own generators that were used only at night, etc. Edison did provide his own generators, but it didn’t have to be that way.

    Eventually, most utilities discovered that they made more profit if they added generation to the ratebase too. And as plants became bigger and more complex, it made sense for specialized companies with ready access to capital to build them. For much of the 20th century, each time a bigger power plant was added to the system the price of electricity got cheaper.

    Then with the oil shocks of the 1970s and the huge nuclear build-out of the 70s and 80s, suddenly each time a new plant was built the price of electricity went up. And it has been that way since.

    Today, we have solar and wind that do not benefit from having a utility build them. Putting those types of facilities in the ratebase only increases the cost to customers. Why should a utility have the sole right to build something that can be accomplished less expensively by someone else?

    Having monopoly power does not grant companies unfettered access to their customers money. They must still show that whatever they provide has value to the customer. That is what regulators are supposed to review. The utility gets paid a fair return when they provide a necessary service at a fair price.

    Over 35% of other states have decided that should no longer include providing a guaranteed profit for generation. Much of the country provides a competitive wholesale market for generation. Those states allow their utilities to markup the wholesale price of electricity so that the retail price of the electricity they sell covers their expenses and provides a net profit. This gives them a fair rate of return for operating the wires and providing service to their customers. If they sell less because some of the electricity is provided by others (using the utility’s wires for a fee) or is saved using energy efficiency, the rates are adjusted to still yield a fair return on lower sales. In these states, utilities don’t have to sell more or build more to earn a fair profit.

    It works in a different way in Virginia. Dominion buys at wholesale and marks up that price in order to cover its cost and make a profit. Electricity purchased from PJM has to be sold at a profit. That is how the shareholders get paid. I don’t understand how you can say otherwise.

    What is different in Virginia is that we allow Dominion a guaranteed profit on whatever they build, even if what they build is much more expensive for us than if it was built by someone else. That is not part of the natural monopoly. It is no longer a “fair return for a fair price”, if the utility makes its customers pay more than they should just for their own profit.

    The monopoly is not in danger. They still control the wires and serve the customers. The utility could buy electricity using a Power Purchase Agreement from a renewable energy provider and sell the electricity at retail rates to its customers. This would yield a lower cost than putting that generation in the rate base. The utility would still receive a fair return for what it provides, just not as much as it wants.

    It is poor public policy to expose the citizens and businesses of this state to much higher costs just to allow a few investor-owned utilities as much profit as they can grab. They can still receive a fair return. But not a “sky’s the limit” return. There is no justifiable reason for that, except that under today’s system they can.

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