On Energy Efficiency, Ratepayers Lose Again

Fellow electricity ratepayers, we just took it in the neck again.

This morning’s Richmond Times-Dispatch brings the news that Dominion Energy Virginia will not seek to count lost revenue as one of the cost elements in the energy efficiency program it was ordered to undertake by the 2018 Ratepayer Bill Transformation Act.  This follows an earlier story, also by the Associated Press, that Governor Ralph Northam has written the company to insist on that position.

Missing from both stories is a key fact:   Dominion won’t spend a dime.  It is all your money.  When the 2018 General Assembly mandated $870 million of spending on energy efficiency and demand response programs, it was the same as a near-billion dollar tax increase.  One of many in the bill.  Now the $870 million customer cost will get larger.  

The issue is only before the State Corporation Commission at the current time because Dominion is seeking permission to increase your electric bill to start paying for this legislative mandate.   That case is ongoing, and I planned a future story once I had access to a hearing transcript.  That will follow soon, but I sense a teaching moment.

The General Assembly’s 2018 language stated that the $870 million over ten years could include an operating margin for the company, plus its administrative costs.  The various programs themselves are usually conducted by outside contractors, with their own operating costs and profit margins layered on.  Then your money is used to pay Dominion customers cash incentives to participate.  Actual benefits received by customers?  Highly debatable.

But another part of Virginia’s utility-written utility law grants Dominion payment for lost revenue if it can verify the program reduced sales.  It can be paid for the electricity it doesn’t sell, and it baked that into its first set of cost recovery requests.  That was the argument in front of the SCC – would the $870 million include lost revenue or would the lost revenue payments, if granted, be in addition to the $870 million.

The environmental advocates behind this demanded you pay the lost revenue on top of the $870 million, the Governor took up the cry, and now Brer’ Rabbit finds himself in the brier patch.   Nobody is arguing it is unfair to make us pay that at all.  If you think any Dominion stockholder feels like this was a defeat, think again.  At some point that lost revenue will be paid.  By us.  And that, as they say, is the rest of the story.

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12 responses to “On Energy Efficiency, Ratepayers Lose Again”

  1. quercus alba Avatar
    quercus alba

    If “generation” is cheaper via energy efficiency – and by all accounts it is about half – then EE is a win.
    The idea of “lost revenue” doesn’t make me feel warm and fuzzy but otherwise the capital incentives to build, build, build wins over the cheaper alternative of conservation.

  2. LarrytheG Avatar

    It … IS INTERESTING how this can be viewed from different angles!

    For me, I see the root of this problem in the legislation that the GA passed that basically allowed this to happen, indeed, sounds like it mandated it.

    These are some of the loons who argued that the RGGI was a “tax increase” on ratepayers – a “wealth transfer” if I recall.

    I’ve said for a while that Dominion intends to get every penny it can out of it’s monopoly and with the direct help of the very same folks who demonize RGGI and the tax conformity issue – the very same folks who have yet to require Dominion to give back the excess profits from the rate “freeze” as well as the tax rebates they received.

    This is what “tax policy” really is in Virginia – it SHOULD be called the ” Keep Dominions Investors Happy” tax policy.

    But I give Steve credit for calling it what it is but a bit bemused that he seems surprised at at this… I’m quite sure all of this is allowed in the legislation and all parties and lobbying folks were aware of it – even as not ordinary Virginian in a thousand knows.

  3. Steve Haner Avatar
    Steve Haner

    “….the very same folks who have yet to require Dominion to give back the excess profits from the rate “freeze…” Indeed, Larry, although there were a healthy number of “nays” on SB 966 last year.

    Quercus Alba, it was YOUR BILL that gave them the right to claim and collect lost revenue. Your bill a decade ago. You seemed pretty warm and fuzzy about it at the time. Sorry, you gotta own it.

  4. LarrytheG Avatar

    re: ” The environmental advocates behind this demanded you pay the lost revenue on top of the $870 million, the Governor took up the cry,”

    I’m confused by this. I would have thought the Enviros would opposed to Dominion making profits off of conservation… perhaps a I’m a bit thick but I thought the Enviros “schtick” was to employ conservation technologies to reduce pollution such that the savings zeroed out increase costs – a totally different motivation than Dominion. Dominion seems to be totally driven to make as much profit it can off of whatever conservation is used and to also claw back any “lost” profit as a result of less use.

  5. Other than you, Steve, I don’t see anyone in the public sphere who is championing the interests of the small rate payers. Once upon a time, that job fell to the AG’s office. But the AG is all on board with fighting the existential threat of climate change.

  6. Reed Fawell 3rd Avatar
    Reed Fawell 3rd

    After a while spent studying government, one begins to see (the light dawns) that the actions of our government, working with special interests, create and instigate most of our problems. Government solutions don’t solve problems, they acerbate and accelerate problems, and also ever rising cost imposed on taxpayers, to as to benefit government itself and special interests.

    The horrible effects of government backed student loans benefiting higher education are one example. Another is how hate crime prevention laws dramatically increase hate crime charges and hate crime hoaxes that tear our society apart for benefit of politicians.

    And now here, if I read these energy efficiency laws correctly per Steve’s reporting, these laws force taxpayers to have less electricity at a higher costs. It is as if our government decides that electricity is an evil to be stamped out. Meanwhile, the green lobby and energy utility chasing dollars cheers on and benefits directly from, the pain, burden and regressive taxes that are inflicted on citizens deprived of ever fewer critical services, and conveniences.

    Our government and its money allies, the environmentalists and utilities, are working together to fleece the state’s citizens. It is all one big racket.

    1. Steve Haner Avatar
      Steve Haner

      Don’t sugar coat it….:)

      “It is as if our government decides that electricity is an evil to be stamped out. ” Exactly so. The basic premise would shame a Luddite.

      1. Reed Fawell 3rd Avatar
        Reed Fawell 3rd

        ““It is as if our government decides that electricity is an evil to be stamped out. ” Exactly so”

        You, of all people, Steve, should know the truth and accuracy of that statement. So, right here and now, I am patting myself on the back, and taking that statement to the bank, because now it is worth it’s weight in gold. Clarity is the key to all things.

  7. Guys, I disagree. The GTSA is not the government saying that electricity is an evil to be stamped out. The bill is all about assuring that our leading utility will make a huge profit on activities that can be be done much cheaper by others.

    If a citizen wants to hire an organization to make an improvement to their building (residential or commercial) or buy new appliances or equipment that will reduce energy use , they should be free to do it. If they are intelligent, they will do it only if they save more money than they invest. Done this way, energy efficiency is free. Actually it is a profitable endeavor.

    The utility that now sells less electricity deserves no compensation whatsoever. Even regulated utilities do not have a right to force customers to use their product.

    This whole thing has gotten out of whack because we in Virginia have assumed (or been convinced) that that everything that has to do with energy should be done by our utility. In today’s energy climate, it is often more expensive for the utility to do it, because they want to put everything in the rate base or in a RAC.

    Energy efficiency is less expensive if it is done by a skilled organization with no added costs by the utility. Dominion ranked 51st out of 52 utilities in the effectiveness of its efficiency programs. The $870 million for efficiency in the GTSA is a huge profit maker for Dominion, even without the compensation for lost revenue. Remember the $870 million is just what Dominion has been encouraged to spend. Ratepayers will be required to pay back several times that amount for little, if any, benefit.

    When done correctly, energy efficiency is the cheapest source of new generation. We could reduce the need for expensive new (or refurbished) power plants if we had some programs to educate consumers, finance projects, etc. This would lower costs to families and businesses and create thousands of long-term jobs ( many more than are being created by our typical energy projects). None of this would cost us anything. In fact, it would save us all money by reducing our peak usage.

    But it would hurt our utility’s income stream, which is why we need to pay them differently.

    When a normal business finds that it main product isn’t selling as well anymore, they don’t raise prices, that compounds the problem. They figure out a way to improve their product or service.

    Other utilities are doing it successfully in other states. Virginia is stuck on an old way of thinking which is costing us a bunch of money and will hurt the utilities in the long run too.

  8. Steve Haner Avatar
    Steve Haner

    Sadly, Tom, I do think that some (not all) who are True Believers think electricity is bad, electricity generated with fossil fuel is evil incarnate, and forcing all of us to do with less by skyrocketing the price and reducing supply is a Good Outcome. When of course the availability of reliable low cost energy makes us far richer and happier than any previous generation of humans that walked the earth……But in general I agree with you and all I can say is, watch for more on this case tomorrow….finishing touches….

  9. Steve,

    I don’t have the contact with the GA that you do. But my impression from afar is that the GTSA is a corporate welfare project and not so much energy policy slanted towards one viewpoint or another.

    If someone really wanted solar, I would think they would strive to open up solar development throughout the state, and work to ensure the utilities could participate too, but on an equal footing, not with a ratebase subsidy.

    If you wanted more energy efficiency, would you support a program that greatly increased its costs and reduced its effectiveness?

    If you were a wind supporter would you get behind an offshore wind project that produced energy at outrageous prices?

    If you wanted to ensure the prosperous future for our important energy companies, you would strive to create a way for them to thrive in a new energy economy, not lock them into hold habits that are increasingly obsolete.

    None of what passes for energy policy in Virginia currently makes sense unless you look at it from a revenue enhancement program for our utilities.

    Families and businesses will pay more for energy based on the path we are on. Virginia’s energy prices are becoming less competitive compared to surrounding states. More jobs won’t be created by building multi-billion dollar projects that make energy more expensive. Southeast Virginia will fail to attract more business development by promoting a pipeline that will double the delivered cost of gas.

    For the first time we can now make energy in ways that are cleaner and cheaper. Or learn to do more while using less of it. Our energy companies can make more money by adding innovative services and release their dependence on having to build more. So many different stakeholders can get something valuable out of the same solutions. Instead of coming together to explore the possibilities, we are splintering apart.

    In the marketplace, if you want to try other products you change companies. Businesses have to stay tuned in and adapt to customer preferences. That is not easily done with monopolies. Regulators are supposed to bridge that gap. But they do it in fits and starts and can be hindered by the legislative process.

    I’ll look forward to seeing what you have to say tomorrow.

  10. LarrytheG Avatar

    No one thinks electricity is bad, no more than they think gasoline-burning cars are bad. But most people realize that inefficient electricity and cars – not only waste resources but generate pollution and cars that get better mileage are no different than HVACs and appliances that use less electricity.

    Use to be that’s what the word “Conserve” used to mean – i.e. Conservation and Conservatives…

    Now.. it’s EVIL… go figure

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