RGGI Reg Repealed, But RGGI Tax Returns to Bills

The states currently in the Regional Greenhouse Gas Initiative tax compact.  Put an X through Virginia as of January 2024? Pennsylvania remains covered with a question mark.

by Steve Haner

Virginia’s Air Pollution Control Board voted Wednesday to remove Virginia from the Regional Greenhouse Gas Initiative, keeping Republican Governor Glenn Youngkin’s promise to eliminate the related carbon tax that has been imposed on electricity ratepayers under RGGI since January 2021.

The bad news is the tax itself won’t disappear until at the earliest September 2024.  Collection from customers has been delayed.  A separate bill surcharge to collect the tax, imposed and then removed by Dominion Energy Virginia, is likely to be imposed again as of September 1 of this year.  A State Corporation Commission hearing examiner has recommended approval of Dominion’s petition to collect another $350 million or so from its customers.

The surcharge is still being calculated, as there remains some dispute over what the full costs are.  The warmer than normal winter reduced electricity demand and required fewer RGGI credits.  The surcharge should settle somewhere above $4 per 1,000 kilowatt hours of usage.  In effect, as the hearing examiner notes, Dominion is seeking to collect 17 months of RGGI allowance costs in just 12 months.

The carbon tax is a flat rate on every class of user, so major industrial and commercial customers really notice it.  They, too, seek to pass the cost along in their prices if they can.

The Air Board’s decision to withdraw from RGGI won’t be implemented until the end of the current three-year RGGI contract period, at the end of 2023.  Supporters of the regional cap and tax program are expected to sue, arguing that only the General Assembly has the authority to withdraw from the interstate compact.  So the lawsuit could either prevent withdrawal, or at least suspend the action until sometime in 2024.  Or the court could allow the withdrawal to proceed during the case.

Depending on what Dominion actually spends on RGGI compliance allowances going forward, the surcharge could remain in place into and beyond September of 2024.  Wednesday was also the date for another of the quarterly RGGI auctions, which set the price for the allowance needed to emit one ton of CO2 gas into the atmosphere.  Through the previous auctions Virginia had collected just under $590 million in carbon taxes.

As the dominant utility, with a remaining fleet of some coal and many natural gas generators, Dominion and its customers have been the most impacted by Virginia joining RGGI.  Several independent power plants also must buy RGGI allowances and pass the cost on to their customers, as well, and to the extent that power flows to Virginia electricity customers, that also comes out of their pockets.

The other large utility, Appalachian Power, has little to no generation within the state and buys few if any RGGI credits.  Virginia’s electric coops share ownership of a major Southside Virginia coal plant with Dominion, so the coops do buy significant RGGI credits.

This argument has lasted longer than five years.  Perhaps the first discussion on Bacon’s Rebellion showed up in May 2018.  Over the years several other discussions or news reports have been posted, and the Thomas Jefferson Institute for Public Policy issued a white paper on the topic in 2019, beginning its efforts to keep Virginia out of the compact.

Democrats were quick with their condemnation of the move, including a demonstration outside the Air Board meeting followed by a huge wave of social media.  Most of the messages followed what is now the usual tactic of blaming any adverse weather condition on supposed “climate change,” in this case the haze floating over much of the United States from Canadian forest fires.  There is zero evidence fires have become more common as temperatures and greenhouse gases have crept up in recent decades.

But ironically, just as it was a warmer than expected winter, the particulates from the fires should cool temperatures within the RGGI zone for a while, again reducing the demand for electricity and RGGI allowances.

Since the tax will still be on electricity bills and very visible, and the court challenge will probably be underway, Virginia’s participation in RGGI will likely remain a topic of debate for the November elections.  Clearly Democrats think it is highly popular, but polling continues to indicate most American’s have little tolerance for higher prices to fight “climate change.”  Many Democrats disliked RGGI in a poll done by the Jefferson Institute.

The Air Board was told the public comments it received, when repeated mass emails were discounted, represented about a three-to-one ratio is favor of retaining membership.  Much of the support centered on the ways the money is being spent, partly for flood protection projects and partly on home energy efficiency repairs.

A similar legal battle over RGGI is still raging in Pennsylvania, which has more than twice as many facilities that would need to start paying the carbon tax to operate.  Those are among the fossil fuel plants which feed into the PJM Interconnection regional electricity market, but at a lower price than Dominion’s plants due to the RGGI tax.  The disconnect between RGGI’s footprint and PJM’s is one reason RGGI has been ineffective at lowering total carbon emissions overall.

As the many links indicate, this has been a long and repetitive argument. In the meantime, if you are among those convinced carbon dioxide is going to kill the planet, pull up the covers and wait for The End. It keeps rising.  Forty years of hysteria and drastic action have not bent the extremely stable curve a bit.  Maybe we should ask again if humans are actually the main cause of that?