RGGI Debate Continues With New Comment Period

The clock is ticking toward a March 6 deadline if you are burning with a desire to comment on the latest version of Virginia’s proposed Regional Greenhouse Gas Initiative regulation. Perusing the hundreds of comments from the 2018 round of comments, there may not be much to add.

If you liked the first version, you’ll love this revision. If you hated the first version, you will see this one as worse. It is very much the same, only more so – starting with the new beginning target for carbon dioxide emission from power plants of 28 million tons per year, down from the first proposal’s target of 33 million tons per year.  

Other than that, little has changed since Jim Bacon’s 2018 report, but others who understand this better may see other significant changes in the most recent revisions. It does take pages and pages just to note the alterations, and those that seem technical may prove otherwise.

If you are searching the record for easy access to basic information – a list of the plants involved, their current carbon emissions, the steps that would be required to steadily shrink those emissions, an honest discussion of cost – you search in vain. Only a small priesthood understands this holy text.

Virginia’s membership in RGGI is not mandated by federal law. It has been rejected by the General Assembly, with the bills vetoed. Given that it is a one-state solution in the middle of a vigorous regional electricity market, it likely will have only a minor impact on local emissions and make a tiny dent in regional CO2. As proposed, it will hardly be free, and only once implemented as its proponents intend will the real cost emerge.

Make no mistake, brilliant protests notwithstanding, the Air Pollution Control Board will vote in this revised regulation, which fills 35 tightly-packed pages in the most recent Virginia Register of Regulations. Governor (fill in the name) will most certainly sign off and voila, Virginia Saves The Planet. Your electric bill will do down a little or go up a lot, depending on who you believe. The truth is probably in the middle, a noticeable but not crushing increase.

As reported previously, the State Corporation Commission has entered a  prediction of $3 billion to $6 billion over ten years of consumer costs on Dominion Energy Virginia, the company that is the main target of this effort.  Virginia’s other investor-owned utility, Appalachian Power Company, runs only three natural gas generators in its territory, accounting for less than 200,000 tons of annual CO2 output.

But in a report worth reading from the Virginia Mercury, defenders of the proposal are sticking by their claims of minimal customer costs, mainly because as the regulation now reads, the utilities – not the state – will garner the revenue from the sale and purchase of carbon allocations and are expected to then pass the benefit along to their customers one way or the other, perhaps through the fuel charge.

Those of us who have spent a decade fighting, often with little success, to get Dominion Energy Virginia to fork over money it owes to customers would really like to see something in writing, preferably in the Code of Virginia. That same group of skeptics remembers just over four years ago the State Corporation Commission issued a highly-debatable report on the cost of the pending Clean Power Plan, which Dominion then used to stampede the General Assembly into self-serving anti-consumer legislation.

In its official comments to the 2018 version, Dominion stated that the various covered generating units (involving several owners, not just it and APCo) had emissions of more than 35 million tons of CO2 in 2016. If so, the target of 28 million for 2020 could prove onerous after all. The cap then shrinks 3 percent – 840,000 tons – per year for ten years, getting down below 20 million tons by 2030 and just above 11 million tons by 2040. Last year Dominion put the cost of RGGI compliance at just above $500 million over ten years.

If APCo’s three existing units account for less than 200,000 tons, which plants around Virginia must curtail operation or close entirely to drop output relentlessly by 840,000 tons per year?

Despite their protests that they do not seek us economic harm, the advocates behind this want the gas and coal plants silent, closed, kaput, sayonara, but we ratepayers will remain on the hook for 100 percent of the capital investment. That adds credibility to the SCC estimate, which includes those stranded capital costs and the loss of revenue if those plants cannot sell power out of state.

The argument in the Virginia Mercury piece that costs of RGGI compliance will be minimal rest upon a couple of major assumptions. The first is that the allowances for carbon emission in Virginia will be “free.” The power plant operators will be handed allowances for 28 million tons, and then will enter the carbon auction to sell and buy and there is little or no net cost. The year after that, they get 27.16 million tons in allowances, and the year after that 26.32 million. The revenue continues to flow back to the customers.

But the environmental movement, many state legislators and the Governor (again, pick any of the three names) do not want the proceeds to flow back to ratepayers. They have sought for several years to capture the money for other purposes, as is done in the other northeastern states that belong to RGGI. In fact, the only reason the proposal now calls for the money to flow back and forth to the utilities is the state Constitution prohibits a regulatory agency from creating and spending a tax.

Only the legislature can do that, and to see how read House Bill 2735. It turns Virginia’s proposal into a true carbon tax, with the cash not being used to maintain electricity rates. It failed, but if the Democrats control the legislature, expect a bill like that to pass. The SCC cost estimate, at the high end, assumes that a such real carbon tax comes soon.

For environmentalists to point to the “free” allowances in the pending regulation and argue that will protect us over time is a classic bait and switch. They want the real tax.

Another huge assumption? Virginia Mercury states: “Our nuclear plants, which provide a big chunk of Virginia’s electricity, are already operating at full capacity, and that’s not expected to change.” In 2030? Probably true. In 2040? Very, very doubtful, and expect the same environmentalists to be leading the charge to prevent their new licenses.

As with so many things in this arena, the big decisions are being made while the people who will bear the burden and pay the price are unaware.

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9 responses to “RGGI Debate Continues With New Comment Period

  1. ” If APCo’s three existing units account for less than 200,000 tons, which plants around Virginia must curtail operation or close entirely to drop output relentlessly by 840,000 tons per year?”

    As a purely practical matter, apart from the politics, how would one actually reduce the emissions from a gas plant that is needed to produce electricity for people?

    And AN answer would be for the utility to use SOLAR when it was available. Every hour of solar is an hour less of gas.

    So you don’t shut the plant down nor reduce it’s output but rather you use that ‘other’ fuel – solar when it IS available.

    And let’s also address the amount of space it would take for solar – a LOT – yes – but the idea that it’s a lot more than gas is a bit silly because if you add up all the miles of pipeline right-of-way – you’ll, no doubt, get a LOT also. Beyond that – ALL of those power-line rights-of-ways also.

    It’s the politics of RGGI that divert and distract from whether or not we CAN reduce emissions in a practical way that is also beneficial to us.

    We did something like this before with acid rain – and the funny thing is – even though acid rain was devastating streams and creeks in terms of wildlife, the actual direct impact to people was practically nil – but we went ahead anyhow and did it despite arguments from those who did not think acid rain was an over-arching problem… it was, in fact an “environmental” debate.

    And that’s what is going on with RGGI – it’s not really about the practical idea of reducing emissions and replacing gas with solar when possible – it’s, in the minds of some something the believers of Global Warming are trying to impose on people who don’t believe in Global Warming, because – like the acid rain… they don’t believe it’s a real threat to humans – an artificial imposition without a legitimate basis.

  2. If we had a proposal to increase electric rates but make ALL of that money available to people as a credit for buying more energy efficient equipment so the goal was to use less fuel – to waste less fuel. Is that something that many would oppose and on what grounds? do-gooder social engineering?

  3. Thank you Steve. I will probably make a public comment. In any case, RGGI seems to be a political football, with Dems wanting to join RGGI and Repubs wanting to skip it. New Jersey and I forget if Pa. used to be in RGGI are examples of flip-flopper states.

    In any case, Virginia seems content to allow Pa. and WVa. and Ohio take the economic benefit of power generation, while we sit back and import electrons from them. We could probably reduce CO2 more by using natural gas to compete against WVa’s coal plants. But the natural gas in Virginia is of the highly toxic variety, thus our hands are tied. Our contribution to the local economy will be outhauling coal ash.

    As the new joke goes (re: Virginia’s blackface issues), West Virginia is feeling pretty smug right now.

  4. Those of us who have spent a decade fighting, often with little success, to get Dominion Energy Virginia to fork over money it owes to customers would really like to see something in writing, preferably in the Code of Virginia.

    Amen

    Try telling this to the Green Party. I’m like you guys get what YOU want and you will see riots like no ones business. At some point, woo woo theology is a killer.

  5. re: ” But the natural gas in Virginia is of the highly toxic variety,”

    I did not realize that. Can you further educate?

  6. If you are searching the record for “easy access to basic information – a list of the plants involved” …

    Good questions .. so I found my old list. Here are the plants that on my old list needed to be closed. They total a little over 6,000MWs, but first check their age. The youngest ones on my list are over 40 years old including 21 oil fired ‘peaker’ plants. Most of those are 50 years old. The youngest, Yorktown, is 40+ years old and uses heavy oil and Possum Point has 2 natural gas fired peaker plants that are 60 years old.

    Then there are 15 old coal fired plants range in age from 45 to 70 years old. My list of closures still leaves about 1,100MWs of coal fired plants that were built less than 30 years ago and 20 gas-fired peaker plants in addition to the large gas plants. The size of these plants also makes their closing look reasonable. Mt Storm has 3 units of 500+ MWs. A Chester plant has 800+ and 2 old other peaker units have 800+ MW capacity. The restn are small units. Spread over 10+ years that 6,000MWs reduction certainly seems doable.

    Virginia needs to catch up and catching up requires diversifying away from central generation into distributed on-site and community generation as well as moving to renewables. The clean energy future requires building out our extensive offshore wind resource, including storage as a resource, and developing demand reduction strategies to include demand flexibility, efficiency, and on-site as well as microgrid, networked generation. The question is will RGGI solve that issue? I am not sure.

    RGGI is a terrific program. The numbers through 2016 were:
    $1.7 billion in lifetime energy bill savings
    7.0 million MWh of electricity use avoided
    6.4 million short tons of CO2 emissions avoided.
    But there are very real differences between VA and the RGGI states. Virginia is still a monopoly rate-based state, and we are part of PJM which buys and resells whatever we generate within the state. Only 2 RGGI states are PJM affiliated, DE and MD. Finally, the RGGI states redirected their carbon tax monies to energy efficiency improvements and building renewable energy. The state directed the monies spent and, particularly the efficiency investments that saved consumers on their monthly bills.

    Then there are the financial issues that Dominion must deal with in the immediate future: coal ash, flat or declining demand and the rate-based overcharges they still have in our rates. Then add fast inflating price of the ACP from $5 to $7 or 7.5 billion, and the offshore leases that could be lost if not used. Finally there are the climate and energy related costs: preparing the Norfolk area for rising seas, and SW economic development that the state will have to deal with. Given these negative financial issues it would seem that tacking on a carbon tax is superfluous when we can easily see where the fastest carbon reductions will come from. A trading system also appears to complicate the issue, not actually assure it will be solved.

    Dominion is already participating in a market … PJM. What I read is that very soon building renewables will be cheaper than continuing to pay the fuel and maintenance cost of running old fossil plants, so a simpler solution to reducing carbon emissions might suffice. How about just rethinking the Grid Act to ensure closure of those 6000MWs of old coal and oil, to ensure that the distribution grid can handle 25% of community and on-site generation combined with storage, spliting that money between rates and shareholders.

    What would Dominion need to redo their business model in the manner of utilities around the country? A reasonable and doable efficiency goal alone could reduce demand by about ½ the capacity of the old plants on my list. A build out of the offshore wind lease would do the rest. Certainly all that can be done over the next 12 years. The only real issue is the lowered demand and Dominion’s lowered profits.

    Maybe if Dominion spent a little more time on what is best for the state and our future and a bit less on figuring out how to fudge the numbers, we could reach a good solution for Dominion and for the state without the complications of carbon trading. Simple solutions always seem better.

  7. Dominion, like most companies, wants to maximize revenues and like other companies, their goals are not what is best for consumers. This is why, for instance, we have piles or coal ash, along with mercury, NOX, SO4 and other toxins raining down on the environment – until and/unless, government – representing the interests of citizens – acts.

    I still don’t see zeroing out all fossil fuels as a realistic goal nor do I see people disregarding science on GW as reasonable either.

    The two are far, far apart and that’s why we see RGGI not as something to find a middle ground compromise on – but either necessary or unacceptable. Closing uber-polluting old plants, as well as incentives for demand-side technology conservation, CAN gain support as long as it’s not being sold as an antidote to GW.

    I do not want to see plants closed without some admission that we still do need some plants… to maintain grid reliability if we have no other truly realistic options to maintain it.

    And in the end – neither side is going to implement what the other side opposes, not without whiplash changes as one side loses and the other side takes over.

    We can call it “education” or whatever – but if we do things like RGGI – they have to have strong support and not be turned into partisan issues.

  8. The facts about the aged and inefficient and polluting plants is another place to start a discussion about transitioning our electricity system. Replacing the electricity needs those old plants currently represent looks simple enough, and doing so will create a very strong economic boast as well. Building efficiency, like the RMI redo of the Denver office building that saved its owners 70% on its utility bill, and the actions by states to our North to launch offshore wind development in a serious way, both of those potential substitutions are capable of creating clean energy and an economic boost as well as.

    Offshore wind is not being developed by utilities to our North. Those utilities are purchasing the power generated by the wind from companies who are in the business of developing offshore wind. Building offshore wind includes a lot of expertise specific to that industry. Would power purchase by our utilities move our enormous offshore wind resource forward faster?

    Finally, some level of decoupling needs to occur in our regulatory structure. “In public utility regulation, decoupling refers to the disassociation of a utility’s profits from its sales of the energy commodity. Instead, a rate of return is aligned with meeting revenue targets, and rates are adjusted up or down to meet the target at the end of the adjustment period.“

    “Decoupling” is a regulatory mechanism that removes the pressures on utilities to sell as much energy as possible by eliminating the relationship between revenues and sales volume.” Twenty states still retain monopoly rate regulation. Others have instituted 4 different ways of decoupling. C2ES has described those different ways … (https://www.c2es.org/document/decoupling-policies/) Revenue decoupling programs typically also include performance targets or efficiency incentives…”

    “In sum decoupling eliminates the current tie between utility sales volume and profitability. In doing so, it makes efficiency measures not only palatable, but profitable to utilities, and eliminates one of the drivers that has catalyzed growth in the production and consumption of energy.”

    We need to begin this discussion with our utilities, a discussion that can lead to creation of a plan combining both electrifying building elements and transportation, actions that will increase demand, with incentives that provide strong support for increasing energy efficient buildings and on-site generation.

  9. There’s wide agreement here that:

    (1) so long as the RGGI auction revenue is handed back to the utilities and flowed back through some automatic rate mechanism to ratepayers, there wll be little impact on ratepayers under the current caps and for years to come even as those caps decline; and

    (2) every other RGGI state, and presumably Virginia once it enacts the necessary legislation, DOESN’T simply flow this money back to ratepayers but diverts it to some other cause, usually utility customer related (like applicance energy efficiency or home insulation) — but not necessarily for such a relevant purpose.

    This is indeed bait-and-switch. First, there’s no need to go through the motions of RGGI to devote tax dollars to energy efficiency. Second, there’s little likelihood that the Virginia political arena would come up with a better energy efficiency plan than the SCC and its regulatees could do, including right now without RGGI (using ratepayer dollars).

    You raise an interesting question whether a rate subsidy for an energy efficiency program would constitute a proscribed agency tax. Arguably not; many utilities have conservation and efficiency programs for customers simply on the basis of good customer relations (not as a “tax”) and some further cost-justify these programs as saving ratepayers money if the energy savings avoids the cost of expensive new generation.

    So what’s left — i.e., why bother with RGGI? Well, as we’ve discussed here before, it would help with making future decisions on what kind of generation to build to be competitive in the energy markets IF the price signal of carbon emissions was built right into the unit’s cost curve for energy market dispatch purposes. RGGI will do that by putting a price on the carbon emissions (otherwise, an unpriced externality). It will also begin the movement toward a kind of carbon tax, so that if one is adopted nationwide Virginia will already be there (at least in part). And it will divert dollars to those energy efficiency programs that, as Jane points out, the utilities don’t have an economic incentive to pursue.

    On balance I’m for the proposed Virginia RGGI, but only if the SCC plans all the details of how to implement it and how to spend all the income it yields.

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