Things Legislators Didn’t Hear (Or Want To)

“It might have happened without this bill.”

“I think it was going to develop anyway.”

Both comments were made today about the prospect that Virginia will actually see 5,500 megawatts (MW) of new solar and wind generation installed within its borders in the next few years, the amount of new solar designated as “in the public interest” by Dominion’s Senate Bill 966.   The law takes effect July 1.

Photo credit: GreeneHurlocker. Your correspondent on the far right. Eric Hurlocker at the podium.

The comments came at a continuing legal education forum sponsored by Richmond law firm GreeneHurlocker PLC and attended by many of the key players in the legislative struggle over Senate Bill 966.  The discussion of the bill itself was a replay for most, but the follow up discussion of its likely impacts got interesting quickly.  The audience included legislative staff and several key players from the State Corporation Commission staff.

(The firm also distributed updated copies of its excellent summary of Virginia electricity regulation, reflecting the recent changes.)

That first quote above is from Francis Hodsoll, a former investment banker who is now CEO of SolUnesco based in Reston.  Hodsoll said his was one of up to 26 renewable energy companies that spent perhaps tens of thousands of hours negotiating with Dominion to bring more solar to the Commonwealth, and not just as special projects “ring fenced” for specific customers such as Microsoft or Amazon.

He noted that Virginia is the southern-most state in the renewable-hungry PJM territory, which is why several of the ring fenced projects are underway or in development.  But Virginia has only 56 MW of solar serving general customers and only those 56 MW have gone through the most rigorous SCC.  The actual legal weight of the phrase “in the public interest” on the SCC’s authority remains a source of concern for the solar developers, he said, but they are enthusiastic about the 2018 law.

Similar enthusiasm was voiced by the second person quoted above predicting that the solar developments were likely without the bill, Eric Hurlocker of the host law firm.  When asked to provide a letter grade to the legislation he gave it an A but was open about why:  the chaos and confusion it creates “will invigorate business.”  The crowd of lawyers listening joined in his laughter, but of course he wasn’t actually kidding.

Will Cleveland of the Southern Environmental Law Center, asked to provide the same letter grade, gave the bill an incomplete – or really “too soon to tell.”  He identified several “atrocious” elements in it, but clearly he hopes it does live up to all or a least some of the marketing hype about renewable energy and a modernized grid that supports further innovation and cost savings.

Matt Gooch from the Office of the Attorney General, careful to say this was his opinion and not that of Attorney General Mark Herring, said the bill earned an A from the utility and its stockholders, he gave it a C as a boost to the wind and solar industries, but added “the big losers were the customers, the people who pay for electricity.”

As everybody understood during the session and as was emphasized again today, the bill does not – does not – mandate the development of a single megawatt of renewable energy.  Nor does it force the SCC to approve any particular application.  The legislation used much stronger language elsewhere in the bill to dictate policy to the SCC on paying for underground power lines.

And nothing I heard today undermined my personal opinion that the pleasing green energy smiley face on the cover of the bill was nothing but a cover story for the violently anti-consumer elements buried in its bowels and its multiple enactment clauses.  To the extent you see more solar farms or wind turbines in Virginia, they were coming anyway.  The Northam Administration’s pending carbon regulation and the federal investment tax credits will have far more to do with that outcome.

The other big element of the bill popular with environmentalists was a requirement that the two major utilities invest about $1 billion (of ratepayer money) in various energy efficiency programs designed to reduce the demand for energy (see enactment clause 15 in the bill).  But Assistant Attorney General Gooch raised a good question about that, too.  Given that the purpose of these programs is to drive down demand, thus depriving the utility of revenue, will that lost revenue count toward the $1 billion of “cost” required?  Or will the utility be allowed to recover that lost revenue, profit margin included, meaning the programs might actually cost consumers $2 billion?

That was one wrinkle on this bill that was not noticed (or at least brought up) during the session. You can bet the chess grand masters at Dominion have gamed that out, but in the meantime Hurlocker’s expectation will be fulfilled:   chaos and confusion equals billable hours.

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9 responses to “Things Legislators Didn’t Hear (Or Want To)

  1. Does every state struggle with enacting reasonable legislation regarding their monopoly electrical companies?

    • No. More importantly, the politics usually stays at the Commission level and remains within the Commission’s discretion. The notion of the legislature itself trying to regulate the state’s utilities directly is very . . . well, “19th Century.”

  2. Dominion made clear in its 2018 Integrated Resource Plan that it saw solar energy and combustion turbine as the future of electricity generation in Virginia. That was coming one way or another. The breakthroughs in the legislation were the commitments to invest heavily in energy efficiency, smart grid, micro-grids, cyber-security, and grid resilience. Perhaps they were inevitable, too, although that inevitability was not apparent in Dominion’s IRP.

    • Energy efficiency was/is coming anyway — even though DOM would like it to advance as fast as a glacier in global warming. The “smart grid” as usually defined is already here; cyber security and grid resistance are already here — thanks to huge industry initiatives that go back years, and lots of prodding by PJM and FERC and the States. Now, “micro-grids” are another matter. That is a b.s. concept that does not belong in the company of the others you mention. The “micro-grid” concept is heavily abused in dreamy and impractical consumer advocate comments as a proxy for “all the things that customers ought to be allowed to do but aren’t.” In short, if your “micro-grid” is a mini-distribution set-up by a single customer on a single piece of property (like an industrial complex) it’s already done all the time, and if your idea is a grouping of scattered customers to establish a competing utility distribution business, that’s what the existing co-ops are, and if you want to create a new co-op or its like, you’ve rightly got a bunch of hoops to jump through and an angry legacy utility to pacify.

  3. There is this bridge I’d like to show you, Jim. Get it for you cheap…none of that was central to the bill. Keeping the excess earnings was goal one, weakening the SCC was goal two, preventing future refunds was goal three. There was another quote from the Assistant AG about how the country is seeing dropping electricity prices but Virginia will not see that at all.

    No, DJ, no other state is as totally owned by a single utility as is this one. In fifty years it will be a case study in every business school in the country. South Carolina got talked into some provisions on those nuclear plants it is now regretting, and all states have to struggle with these issues. But Virginia stands alone.

  4. Very good report, Steve. You do say, after discussing ring-fenced solar, “But Virginia has only 56 MW of solar serving general customers and only those 56 MW have gone through the most rigorous SCC.” My understanding of the law is (or was) very different. Under the Utility Facilities Act, ANY generation built at ratepayer expense by a utility must be cleared by the SCC as “in the public interest”; and it use to be that a generator built as a merchant plant required the same SCC approval “in the public interest” on the grounds that the public shouldn’t be saddled with a bankrupt utility that went out on a limb even with stockholder funding. There were some carve-outs from SCC approval for small solar units, regardless of who built or paid for them, but that’s not what you are talking about here, is it?

  5. So where was Mark Herring during the legislative session? If he wants to be Governor he had a great chance to rip the bill from a bully pulpit. Methinks he’d rather be in Dominion’s good graces!

    • TMT: In fairness, doing that would have put Herring nose to nose with the governor, who considered the final bill an environmental win and was pushing hard for passage in the final stretch. The AG’s office staff criticized the bill to the end as I recall, but Himself never appeared.

  6. It was Will Cleveland who said only 56 MW of solar is part of the general utility portfolio so far and therefore had been approved by a full SCC review. I don’t think he meant to include the small projects with the lesser requirements but I’m not sure.

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