SCC Raises Estimate of Clean Energy Bill Costs

By Steve Haner

The State Corporation Commission staff popped up in a House of Delegates Committee Tuesday to provide another unwelcome lecture, with revised estimates on the likely cost to Dominion Energy Virginia customers of the pending omnibus clean energy legislation.

The numbers it provided to the House Labor and Commerce Committee Tuesday afternoon were higher than the estimate it provided in a Senate Committee two weeks before. That first document provided a range of from $23 to $31 per month more on 1,000 kilowatt hours of residential use. Now the SCC is saying the range is $28 to $36 per month, or $334 to $432 per year. Here’s the sheet, which looks much like the prior one. The big addition is an estimate of $4-6 per month for future energy storage. 

The legislation in question, styled by proponents as the Virginia Clean Energy Economy Act, is heading for a conference committee to iron out differences between the House and Senate versions. In a Senate committee Monday afternoon, the first step in that process drew no commentary. But the procedural vote in the House committee turned into a long debate once the SCC provided its analysis.

It was a presentation new to that committee, if not to Bacon’s Rebellion readers. It provides an opportunity to address in detail some of the points raised in the discussion. One problem is that people on all sides are confusing rates and bills, and those are different things. What the SCC is attempting to illustrate is the cost of compliance per 1,000 kWh of juice to a homeowner, the rate impact. (And the real residential average use is closer to 1,200 kWh per month, so add 20% if you want average costs.)

Could energy efficiency cancel the cost? The proposed legislation will expand efforts to improve energy efficiency in homes and businesses, and proponents claim (correctly) that if people or businesses cut their use they will save money on their bills. Energy efficiency measures will not reduce the price of the product, however, just the amount bought, explained Kimberly Pate, the SCC’s director of utility accounting.

The other thing to remember about energy efficiency efforts is many of them come with substantial up-front costs, costs which this bill (and previous gems from the General Assembly) impose on all ratepayers through those infamous “rate adjustment clauses” tacked onto monthly bills. It now adds 34 cents on 1,ooo kWh for residential users. Adding more programs with more rate adjustment clauses will not lower rates. He who saves is not the same as he who pays. 

As noted before on Bacon’s Rebellion, not all energy-efficiency measures are created equal. The SCC runs its own efforts to persuade utility customers across the board to conserve, and has done so for years. Nothing prevents energy-efficiency investments now, but the voluntary approach isn’t moving the consumption needle much, so advocates want a harder push.

Will the rapid move to wind and solar reduce the fuel portion of monthly bills? That’s another critique of the SCC accounting. It could, Pate said. That is a part of the customer bill that goes up and down annually with actual costs, and it produces no profit to the utility. But she noted nobody can project those costs that far in the future. I will add this: The bill in question actually closes few fossil fuel plants, and the nuclear plants will remain for a while at least, so how much can fuel costs go down?

Again, fuel costs will have no impact either way on what customers pay for decades to cover the capital costs and profit margins of an $8 billion offshore wind facility, 10,000 or more new megawatts of utility-owned solar farms and the related battery installations. In other words, lower fuel costs can lower bills, but not rates.

Then Del. Alphonso Lopez, D-Arlington, went to the inevitable “what is the cost of doing nothing? What is the cost of business as usual?” Pate ducked that as a policy question outside the purview of an accounting analysis, but here is what might be said:

Business as usual for many years now in Virginia has been a steady decrease in coal generation and a steady increase in the amount of solar energy available, sometimes to all customers but often to those willing to set up power purchase agreements with the utility or a third party. Most of the fossil-fuel generators this bill orders to close were closing anyway, a point even picked up this morning by Virginia Mercury, which is all for this bill. Business as usual could still include development of offshore wind, just not with a mandate that the SCC approve 100% ownership by Dominion with its guaranteed profit.

Business as usual would be a continued steady decrease in CO2 emissions from power plants.

The better “business as usual” case was made by an advocate for the bill, lobbyist Albert Pollard, after Pate sat down. He pointed back to Dominion’s capital plans in a 2019 presentation to stockholders, now largely moot if this bill passes but also a very expensive set of investments. Compare this plan to that plan and the costs might not be that far apart, Pollard noted.

The problem is that some of the costs in that old plan will still show up on our rates in coming years, but are not reflected yet in the document Pate shared. On one version of her report I saw, it noted upcoming costs for grid transformation, burying more residential tap lines, extending the nuclear licenses and for coal ash remediation not yet reflected in today’s bills. The closing fossil-fuel plants have almost $700 million of remaining book value the ratepayers must still pay.

Also following Pate to the podium was Brett Vassey, president of the Virginia Manufacturers Association, claiming that those unlisted and uncounted costs will double down on the SCC’s projected consumer impact, into the range of $50 or more per month on 1,000 kWh. He may be right, but thanks to the actions of previous General Assemblies, we’re already stuck with those costs. Nothing in this new bill fixes any of that. Proponents just hope you’ve forgotten.