Northam To Ask Again To Spend Carbon Fees

The gap between the amount of generation Dominion projects it will need by 2033, and what the SCC and an outside consultant project. It deals with thousand of megawatts of capacity. Source: SCC staff comments on Integrated Resource Plan case.

Virginia Secretary of Natural Resources Matthew Strickler told a legislative commission today the Governor will again ask the General Assembly to keep and spend the proceeds of a new electricity carbon tax, rather than find a way to return it to ratepayers.

Strickler pointed to Senate Bill 696 and its companion House Bill 1273, defeated by General Assembly Republicans on party-line votes, as models for what might come back in the 2019 session.  He estimated that once Virginia joins the Regional Greenhouse Gas Initiative (RGGI), and Virginia utilities are having to buy carbon credits at auction for their fossil fuel generation, it will generate $200 million per year.  The fiscal note on the failed bill estimates between $175 million and $208 million.

(Here’s an earlier discussion of RGGI on Bacon’s Rebellion, and here is the Richmond Times-Dispatch coverage of the meeting.)

The draft regulation pending at the Department of Environmental Quality would have the money paid to RGGI in the auctions eventually return to the utilities, after RGGI dips into the pot for its cut.  When former Governor Terrence McAuliffe started the regulatory process in 2016 he said the money would come back as credits to ratepayers and in effect create a shell game with little final cost.

The bottom line of the briefing before the Manufacturing Development Commission was all talk of money is just speculation until DEQ and the Air Pollution Control Board release the final regulation, and no details on that were reported.  The draft sparked 7,500 written comments and the Air Board can amend it before it takes a final vote.  Strickler predicted release of that in early December.

With all the other electricity rate increases barreling toward Virginians because of recent state legislation – building new solar and wind, a major effort to place residential lines underground, a massive roll out of smart metering and other grid improvements – it is easy to dismiss the cost of RGGI fees as a rounding error.  But $200 million more piled on annually will make a difference if the money is spent on other things the state wants, or somehow is retained by the utilities – which is very possible.  Some of that will be paid by customers of Appalachian Power or other smaller generators.

The State Corporation Commission staff told the commission that any cost estimate will depend on the actual CO2 emission targets set for Virginia by RGGI.  The starting point from which you measure the planned 3 percent annual reductions will matter.  Greg Abbott of the SCC staff said it is possible the utility could have an easy time meeting early goals and make a profit on the effort.  Just what happens to those dollars once RGGI sends them back to Virginia is not spelled out in the law and may depend on how the utilities treat the money in their own accounting.

The issue is also tied up in the SCC’s review of the Dominion Energy Virginia integrated resource plan.  Several of Dominion’s proposed capital plans assume a need to comply with RGGI and assign a cost.  But the SCC and others are challenging a key assumption behind those projections – the growth in demand for electricity from Dominion customers.  Slower growth makes meeting the RGGI goals easier and cheaper.

A chart from the SCC testimony in that case illustrates how its projections vary is at the top of this post.  An outside consultant to the SCC, Robert McBride of DrillingInfo Inc., believes Dominion will need less generation in 2033 than it currently has.

For its part, Dominion today provided absolutely no details at all on the cost or policy implications of RGGI, not even what it has included in the IRP.  It turned up with a short slide set to show how low its rates already are in comparison to other states, and tell how it helps low income customers.

Senator Frank Wagner, R-Virginia Beach, chair of this Commission and obviously still a RGGI skeptic, indicated he may call everybody back before his Joint Commission on Administrative Rules, which has statutory authority to challenge pending regulations.  Wagner questioned the need for RGGI membership, pointing to his own 2018 bill which authorized up to 5,000 MW of new renewable generation.

If that gets built, he asked Strickler, doesn’t that more than meet any carbon reduction goals RGGI might set?  So why join RGGI and layer on the carbon tax costs?   Strickler zeroed in on “if” and pointed out that the legislation did not actually order construction of those assets.  Joining RGGI sets a goal that creates more pressure to build them, he argued.

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21 responses to “Northam To Ask Again To Spend Carbon Fees

  1. I don’t think I have a good understanding of this issue and it’s ramifications in Virginia. If someone else can provide more background and the pros and cons… perhaps at least one of us would be better informed and able to offer a more informed opinion.

  2. I think I see a pattern emerging.

    Northam wants to spend the money from federal tax reform rather than return it to taxpayers.

    Northam wants to spend the money from the Internet sales tax rather than return it to taxpayers.

    Northam wants to spend the money from the RGGI carbon fees rather than return it to taxpayers.

    Lots of extra money to spend, and he can still say he didn’t “raise taxes.”

    • Also it gives Northam something he can give as a hand-out to the enviros, beings how they are so angry about the natural gas pipelines Northam is supporting.

    • Precisely –

      Northham is a practicing in public office Democrat. So you expect this illicit activity.

      Every day, like all practicing in public office Democrats today, he spends all his days, sitting around with his crony Democrat friends, figuring out how to take money away from hard working taxpayers, and how to spend it to serve his personal professional interest, a power seeker within the Democratic Party.

      You see, these practicing in public office Democrats need all these ill gotten monies they take away from hard working taxpayers in order to buy the votes belonging to other people, including many now in the Democratic Party who will sell their votes in return for a mess of pottage, including unearned comforts and lifestyles and zany ideologies.

      Why are these votes for sale today?

      Simply because many of those folks do not work for a living, have already been brought off, and given up, or they live off those stolen taxpayer monies by occupying patronage jobs in government or in crony capitalist corporations and non-profits, such a higher and lower education, for example. And now there are growing numbers who now want to jump onto the big gravy train going by daily, to join that unhappy group who don’t want to work for a living but want to live off the work of other people.

      So now all Democrats like Northam must buy votes that otherwise would go to Bernie and his ilk, or the anarchists among his ilk.

      But Northam is a nice and decent man, many say.

      I suspect he is a nice and decent man, unlike say his predecessor, slick Terry McAuliffe, or that “devote practicing Catholic” in the Senate Tim Kaine.

      But even nice decent practicing in office Democrats have been playing this tax and spend game for so long that its become a deep cultural habit bred into the bones of their Party, so it is expected and indeed demanded by their constituents, either they pony up and play this racket or they are thrown out of power, and left behind, abandoned on the side of tracks, by the speeding away gravy train.

      But “Many know not what they do,” you say. Perhaps a few, but not the professionals. They know exactly what they do and they play their corrupt game with relish. We see this every day too, like for example, what is going in front of our eyes today at the Senate Supreme Court hearings.

    • You got it. Northam is turning out to be a squirrelly little guy. However, I don’t understand why the General Assembly can’t legislate these matters. Virginia has long been a bastion of corrupt politics but also supposedly a place where the corruption is transparently on display. VPAP, single issue bills, etc. Seems like were keeping the corruption and doing away with the transparency these days.

  3. Virginia joining RGGI is against my wishes, so I’ll just have to put that in my list of things that the liberals want to mandate on me. Virginia does not need RGGI because our carbon emissions are already low and going lower without mandates. It is a layer of bureaucracy of people that have to be hired (by small surcharge on electricity) to count carbon emissions. Philosphically, it is basically a pledge to never build another fossil fuel power plant, and to eventually shut down the ones we have. Basically many of the Northeast states in RGGI are importing much of their electricity from Canada/PA/WV/OH. I see no need for Virginia to be in that club.

    • Because of opposition to pipelines, New England may start importing LNG from Russia.

      • I think they already are doing so, according to an article I saw last week. But I am not sure why they need to import from Russia per se. Right now USA is slowly building up LNG export, so they could get USA LNG someday, I presume.

        But don’t get me started….

      • Yes, that is true, however unimaginable.

        Don’t think my change of heart on Dominion Energy Virginia’s excessive profits by reason of its “outflanking” the public interests, or at least those who should be tasked to protect the public interest, is in any way a change in my views on the pipeline.

        Often the cheapest way is not the best way or only way, but only a part of it. We need a mix of energy generation types to protect us from a wide assortment of risks and enemies.

        • Buried in the SCC comments on the integrated resources plan is info from an outside consultant (same as mentioned above) supporting that the new pipelines will be very beneficial on lowering or keeping low the commodity cost of gas. That of course as I have learned is a separate issue from the transportation costs, and that is where we need to watch that DEV doesn’t charge us too much.

          • Steve,

            That is precisely the issue. The existing pipelines that serve Virginia are expanding their capacity in amounts greater than the ACP. They get their gas in the same region (Appalachian Basin) and can transport it much cheaper, because they have been mostly paid for by previous customers.

            The ACP’s approved tariff is $1.88. A negotiated rate will make this a bit lower, but the estimated cost of the pipeline just went up by $1.5 billion. Three years after initial operation the ACP can petition FERC to increase its rate based on actual costs. Using the published rate, the ACP will add a 78% premium for transportation costs to the current price of gas at Dominion South hub in West Virginia .

            With transportation costs so high it is not possible for the ACP to provide delivered gas at a price lower than can be provided by existing pipelines. Especially since Dominion will have no new power plants that will require more gas.

            DEV has already indicated what they want to charge us for no value in return – $4 billion over 20 years. Is that too much?

        • Reed,

          We currently have the greatest diversity in generation types as we have ever had. The question is why do we keep building new pipelines when we have several times more pipeline capacity than we need to move our maximum national use?

          Our policy of exporting gas is playing into the hands of our “enemies”. So is building unnecessary pipelines that increase our cost of doing business.

          At the core, this is a fairly simple issue. Do we want to reduce our energy independence, foreclose a variety of other energy options, and suppress economic development by raising our energy costs in Virginia for the benefit of just a few companies?

          I understand how political support can be purchased in Virginia. I don’t understand how business and labor leaders, and homeowners are willing to support projects that work against their interests.

      • This is not a fair characterization of the situation in the northeast. Studies have shown that at this time that there are limited number of days per year that there are constraints in the pipeline system in the region.

        There are several causes for this, including utilities that retain their unused pipeline capacity reservation to gain a competitive or economic advantage. If they released it earlier in the day, sufficient capacity would be available.

        The states in RGGI have very active energy efficiency programs that have already resulted in billions of dollars in customer savings. Energy use is declining year after year. Consumers and many energy companies in the northeast do not believe it is wise to invest billions in new pipelines that will take 40 years to pay off when the capacity constraints exist for only a few days per year and will not be an issue very soon.

        This side of the story is not as widely covered as the scare tactics of claiming “imports from Russia.” Russia has the largest reserves of natural gas in the world (five times greater than the US). It is mostly conventional gas (not fracked) that is transported mostly by pipelines.

        If you are concerned about the price and supply of gas in the U.S., please speak out about sending our cheap gas overseas. That is a nonsensical energy policy that for some reason is supported by business and labor leaders whose interests will be harmed by rising gas prices created by aggressive exports.

  4. Let’s get back to RGGI related issues.

    Even the founders of RGGI admit that the RGGI auction has not had a great effect on carbon emissions. The reductions in carbon emissions that have been achieved by RGGI have had much more to do with the way that auction funds have been applied.

    Early on, some of the states tried to use their portion of the proceeds to fund general budget items and were roundly criticized for that. If we did that here in Virginia, or worse yet, just returned the funds paid for by ratepayers back to the utility, it would defeat the purpose of the program.

    The successes have come from using the funds for energy efficiency programs, public awareness, and financing renewables. This allowed less reliance on old fossil units which were retired, reducing the CO2 releases over time. RGGI has achieved emission levels below the established targets because of these programs. It is not clear that Virginia’s implementation of RGGI will have these benefits.

    One drawback of RGGI is that it is entirely focused on measuring carbon. That misses half of the greenhouse gas impacts related to using natural gas. So if Virginia intends to deal with climate change, this won’t do it. At first glance, the Virginia proposal seems to be another legislative attempt to funnel more money to the utilities, while increasing customer costs.

    Load growth is a major issue. Utilities have historically over-estimated growth to obtain permission to build projects that can provide a 40-year stream of profits.

    Even though the energy efficiency program in the energy bill is far too expensive and will be ineffective if done by utilities, it still should have some effect on load growth if we pour hundreds of millions (more like billions counting all that will be repaid to utilities) into saving energy. The growth estimates in the IRP appear not to take that into consideration at all.

    Creating a sound energy plan for Virginia will achieve what RGGI intends to do without the added bureaucracy and will keep costs low, if we reset the roles of our utilities. Without a sound new policy, we will be on a long-term path to higher energy costs in Virginia with no benefit to customers or climate goals.

  5. re:

    ” think I see a pattern emerging.

    Northam wants to spend the money from federal tax reform rather than return it to taxpayers.

    Northam wants to spend the money from the Internet sales tax rather than return it to taxpayers.

    Northam wants to spend the money from the RGGI carbon fees rather than return it to taxpayers.

    Lots of extra money to spend, and he can still say he didn’t “raise taxes.”

    a certain amount of baloney…..

    the sales tax issue is about funding transportation – and reimbursing localities loss of sales tax to online – and this actually was already in place from a bill that passed the GA prior to Northam being elected.

    The RGGI – I’m not seeing Northam suggesting it be spent for anything.. and again – this is an issue that was ongoing before he was elected…

    I’m also curious why the utilities have not come out strongly against RGGI… in Virginia – it would seem that if Dominion wanted it dead.. all they had to do was snort once… and the GA would roll.. as many times as needed…

    It seems to be based on a similar concept to the way Acid Rain was dealt with – and was effective… in reducing acid rain… that was then – now… we can’t reduce CO2 because it’s not really “pollution”.. and has nothing to do with GW…. according to those in opposition.

  6. The Analysis Group did an economic analysis of RGGI … The point of the Analysis Group’s work is to chart any economic impacts of RGGI.
    “The jackpot is the benefits, …The good news story is that the data have consistently shown that cutting carbon emissions can be a net positive for the economy.”

    But … making it work for the consumers means spending the money in the right place.

    “The program has clear costs to the owners of power plants that burn fossil fuels—buyers spent $901 million over the past three years combined to purchase credits”, the consumers ended up ahead. “That’s an out-of-pocket cost to consumers in the very short run, but in the long run consumers don’t spend as much on electricity because of the investment of the proceeds on energy efficiency. Increasing energy efficiency reduces the amount of energy needed, while investments in renewable energy reduce the use of higher-priced power plants.”

    “From 2015 to 2017, RGGI states reaped $1.4 billion in net economic value and benefited from 14,500 job-years (the equivalent of a full-time job for one year) even as the emissions cap was lowered and pollution allowance costs rose.”

  7. As I’ve written multiple times, who is representing the consumer? How is their interests served by raising the price for energy? Who will guarantee that they will receive the promised benefits?

    A couple years ago I attended an event at MWCOG where one of the subjects was carbon emissions. The D.C. Metro Area is formally committed to reducing carbon emissions and tracks progress. The discussion involved the various area that could be addressed. When the speaker turned to retrofitting homes in the area, the conclusion was the costs would be astronomical and totally unaffordable. The costs were so extremely high, that even the staunchest climate warriors among elected officials were unwilling to adopt policies that would try to address energy efficiency, including replacement of windows, doors, roofs, insulation, etc. on the scale needed to achieve major reductions in carbon emissions.

    Environmentalists have vastly different interests than consumers. Someone needs to stand up to them. RGGI strikes me as legalized theft.

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