VA Energy Regulatory Conference All About Carbon

The Hon. Bernard McNamee, Federal Energy Regulatory Commission

WILLIAMSBURG — “The environmentalists don’t want to admit when they’ve won, but they’ve already won.”

That line was delivered by Joseph A. Rosenthal, principal attorney at Connecticut’s Office of Consumer Counsel, during a discussion Thursday on the status electricity grid modernization efforts in his state and several others.  It was a part of a day-and-a-half National Regulatory Conference and William and Mary’s law school which had several nominal topics but was really about carbon regulation. 

There was a final panel Friday about carbon regulation, with a focus on Virginia’s stalled efforts to join the Regional Greenhouse Gas Initiative (RGGI). The November election will decide that.  But even the first panel discussion, on the growing use of state subsidies to override the carbon-blind PJM Interconnect LLC’s capacity marketplace, turned out to be about carbon regulation.

The growing practice of state-level decisions to subsidize nuclear, create renewable portfolio standards or mandate specific energy sources such as major off-shore wind projects is playing havoc with PJM’s systems. Frederick Bresler of PJM gave the capacity markets (which are distinct from the market for energy) some credit for the huge drop in regional wholesale prices, and defended their continuing utility.  The capacity market is about generation availability.  Assets locked up in their states are not freely available. 

Glen Thomas of GT Power Group and a former Pennsylvania commissioner, said Pennsylvania, a retail choice market, doesn’t even do a regulated integrated resource plan and depends on PJM’s capacity market to send the right signals about generation needs. But New Jersey and Maryland next door have a series of subsidies and mandates tilting the field.  He called it “the worst of all possible worlds,” adding: “What I will dispute is whether states understand what they are doing.”

Subsidies for nuclear are a growing part of this.  Rosenthal, from Connecticut, told Bacon’s Rebellion he does know just how much Connecticut consumers will be paying to Dominion Energy in the new power purchase agreement that saves the Millstone nuclear plant from closing.  He could not discuss it.  The PPA price is, of course, confidential.  Isn’t that always the way?

Then the other side chimed in: “What some may be calling subsidies may also be called compensation for clean attributes,” said Michael Richards of the Maryland Public Service Corporation.  His citizens are expecting and demanding zero carbon energy at a low price, but “are willing and in fact are paying the premium.”  To Marylanders, he said at another point, all electrons are not equal.  The laws of physics end north of the Potomac?

Carbon concerns drove the next discussion on the future of electric vehicles, not surprisingly.  But then we learned the role of grid modification for many advocates is to enable time of day pricing to better mesh with solar generation and electric vehicles, or to allow distributed generation from whatever renewable power source a customer or group of customers wants.  (Nobody is putting combined cycle gas turbines in their garages.)  So, grid mod equals carbon regulation, too.

Finally, carbon regulation was the unrecognized elephant in the room as the newest member of the Federal Energy Regulatory Commission (FERC), the Honorable Bernard McNamee, gave a very judicious talk Friday where he avoided the interesting issues active before that crucial regulatory agency (think two pipelines).  Not making news was his goal, he admitted later to Bacon’s Rebellion.

McNamee worked nine years for Richmond’s McGuireWoods law firm on energy issues, worked for four attorneys general in Virginia and Texas and for former Governor George Allen, worked for a public policy group in Texas, and then joined President Trump and Governor Rick Perry’s Department of Energy.

He won a party-line vote Senate confirmation in late 2018 after much criticism that he lacked abiding hatred for oil and gas.  Soon after he got there the logjam broke at FERC on some pending natural gas export facilities, and he expressed a basic preference Thursday that “markets are the best way to allocate resources.”

He stayed away from controversy Friday but mentioned a bit of history.  He went back 42 years to President Jimmy Carter’s April 1977 speech (Jeremiad as I recall it) on energy challenges following continued shortages.   Carter told the nation oil and gas were “simply running out” and “we would use up all proven reserves in the next decade.”   Congress went on to pass a law discouraging natural gas and encouraging more coal for electricity generation.  That was then and things have changed, McNamee pointed out.

Just because the environmentalists don’t win every vote doesn’t mean they aren’t winning overall.  These were five presentations all flowing back to their favorite topic. (I did skip the legal ethics lecture – a feature of all bar events — and the cocktail party, so no idea how they went.  The room does fill up with CO2 at a good party.)

These useful discussions were accompanied by a two-inch binder it will take weeks to read. The State Corporate Commission and the energy law groups combine to plan and sponsor the annual event (this was number 37), with the 160 attendees including lawyers from the firms who do these deals and cases, utility company executives, regulators from Virginia and other states and some lobbyists. The amity and humor displayed within the community (plenty of revolving doors) takes the edge off the sharp elbows thrown in court and at the General Assembly.

In fact, a review of the attendee list reveals that no legislator, legislative aide or legislative policy staff person attended. (Correction!  There was a staff attorney from legislative services there! But not a legislator or legislative aide.) That just says it all, doesn’t it?  The various folks shaping up to do battle over Virginia’s energy regulatory structure, again, were also mostly absent, as were those who will vote on it. Do they prefer ignorance? All of these discussions left me, despite my many objections to Virginia’s current situation, very reluctant to just charge ahead blindly to rewrite the rules, to copy this other state or that, even the Great State of Texas. That’s another column.

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18 responses to “VA Energy Regulatory Conference All About Carbon”

  1. LarrytheG Avatar

    re: time-of-day pricing –

    there needs to be a recognition that whether it’s electricity or roads (or planes or cell phones, etc) – that increased demand at certain times of the day incurs extra provider costs to meet that demand and that if we don’t allocate it to those that are creating the demand, we are, in effect, subsidizing it rather than motivating reduced usage at high demand periods.

    As long as the electric providers do not profit more from such pricing, it actually ought to lead to lower usage at peak demand periods.

    But once again, why are we doing any of this if Global Warming is a hoax? People who believe it is a hoax ought to be up in arms about all of this contemplated higher prices to reduce “carbon”. Right?

    1. TBill Avatar

      Global warming is not a hoax, but in America it is a Red Herring….not really what the argument is about. The actual argument is a political preference on the left to electrify American society without fossil fuels, including cars.

  2. Steve Haner Avatar
    Steve Haner

    I have never called it a hoax. I would apply the phrase “augmented reality” at times. The behavior of the advocates themselves has added to that impression, having been caught out fudging their data in a big way.

    As to time of day pricing, I happen to love it and want it implemented toot sweet, pardon by bad French. With it solar does work far better, and I’m all for integrating solar for reasons that go well beyond carbon. I love free fuel. THAT’s a conservative position! I’ll be all for choice, too, probably, but some might want a choice of all-coal, low-cost and dirty. Will you allow that choice?

    1. djrippert Avatar

      Coal is only low cost because the externalities are considered free. Whether you believe in anthropogenic climate change or not I assume you do believe in acid rain. And even if high society conservatives don’t care about the destruction of forests and killing of marine life through acid rain I assume the do care about statues and buildings. Acid rain destroys them too.

      I’m all for letting people choose to use electricity made from coal so long as they compensate those who are economically injured by that choice. Something tells me that “all-coal” will be plenty dirty bot not at all “low-cost”.

      1. TBill Avatar

        Not exactly what I would say. Coal was low cost because utilties could buy 30-yr contract at todays coal price, while the current cost of natural was historically multiplied by a factor of 10 or 20 to say natural gas fuel cost would inflate enomously and would be absolutely unaffordable during the life of the coal plant. This false paradigm worked for coal until about 2008 when US natural gas prices, instead of going up as predicted, crashed.

        You are hung up on externalities. I guess if the state wants to endure the local damage of coal mining, they can do so. That leaves the downstream damage such as loss of Adirondacks due to acid rain. That’s why after an eatly adulthood canoe trip to the Adirondacks, I became a natural gas advocate.

        But now we have a less straight forward argument about cost to planet of clean energy that still emits CO2 and methane.

        1. djrippert Avatar

          I am hung up on externalities. Failing to include the externality costs skews the true cost of energy and prevents the free market from working properly. That opens the door to the politicians regulating and micro-managing pretty much every aspect of energy.

  3. TooManyTaxes Avatar

    “‘What some may be calling subsidies may also be called compensation for clean attributes,’ said Michael Richards of the Maryland Public Service Corporation. His citizens are expecting and demanding zero carbon energy at a low price, but “are willing and in fact are paying the premium.”

    I’ll bet you a dollar to a donut that Richards has no evidence to support his conclusion that Maryland citizens are willing to pay a premium for what everyone is touting as lower-cost renewable energy. A fair public opinion pool would likely show that the typical Maryland resident doesn’t know the costs and prices for energy generated by different means. And certainly no one knows the specific amount of premium paid or the reasons for the higher price.

    If private parties tried to sell a product or service with the same level of misleading statements as the regulators and the greenies use, the FTC and state attorney general would be all over them. Fraud in the name of the environment is not right. Why can’t we have both honesty and environmental improvements at the same time?

    1. Reed Fawell 3rd Avatar
      Reed Fawell 3rd

      Pitch Perfect.

      Imagine, these people spend their entire lives living this way.

      Welcome back, Steve.

    2. Reed Fawell 3rd Avatar
      Reed Fawell 3rd

      My above comment “Pitch Perfect” was directed at Steve’s Post.

      I think that post is very fine. It conveys to the reader much information and insight in many subtle ways that delve into what went on at the conference. Like – What is going on at this Conference? What is not going on at this Conference? What are we learning if we attend this conference? What don’t we learn? What does the conference tell us about those attending and running it? What are these people doing? How does their professional culture and system work? How do and how will they address the alleged subjects of the conference. Are these the real subjects? What’s going on here really? It they think and act this way at the conference, how do they think and act on real problems in their professional lives outside the conferences. How will they make decisions. On what basis, why, and how? Is this deep state? At long last have we found the DEEP STATE, or variant thereof.

      Post brilliantly suggests possible answers to these questions?

    3. djrippert Avatar

      If you want honesty I assume you also want to factor in the external costs of using fossil fuels like coal to create electricity. For example, economic damage to the hospitality industry cause by lakes being killed by acid rain or the owners of statues and buildings being destroyed by acid rain or the victims of asthma due to coal plant based air pollution.

      1. Steve Haner Avatar
        Steve Haner

        Are the external costs of Coca-Cola and Marlboro’s factored in?

  4. The hoax is that the energy industry has successfully limited the discussion about emissions that might contribute to Global Warming only to carbon limits. This distorts policy discussions because it ignores half of the greenhouse gas effects of using gas. How can we develop appropriate policies about our energy system, if our data is so skewed?

    We need a rigorous series of presentations for our GA members and regulators, with an opportunity for questions and counterpoints from our energy producers and other parties. This is should include a range of topics and presentation by legislators, regulators, energy companies and customers in other states describing what they have done to address these issues, what has worked and what hasn’t. From this we can discuss what policies would best fit Virginia’s needs.

    My concern would be that the major energy companies might not collaboratively participate as they have in other states because Virginia’s present system suits them fine, even though things are getting worse for their customers.

    Time of day pricing can be effective in changing energy use. Many states are heading towards a very dynamic system that would allow price alterations according to circumstances that are then picked up by customer’s smart energy control systems to optimize energy use depending on price. Such systems are available and coming down in price (but we can’t leave out low income consumers). But Dominion does not provide real-time feedback to customers from its smart-meters that the customers are paying for.

    Prices should be easily adjustable based on conditions so that proper responses can be made, including increasing daytime prices during cloudy days with significantly lower than normal solar output. We need an accurate signal to change behavior.

    When enough customer-sited distributed generation is available, the lowest cost time of day would be during peak sunshine to encourage charging EVs, behind the meter storage, etc. After the refurbishment of the nukes, the most expensive energy would be at night when only the nuclear units are running. This would flip how we use the pumped storage plant, and other uses. Without accurate pricing we would be making the wrong choices about generation.

    This could not be based on long-term, fairly rigid time-of-day tariffs as we have today. Technology now allows us to do this right, but we have to be willing to put it to use. Our utilities might mount the greatest resistance to market-based rates, because they have been able to manipulate policies to favor the shareholders so far. Transparency and accurate information could help them too, with the right new rules. But they probably won’t see it that way for a while.

    1. djrippert Avatar

      Isn’t it funny how some of the columnists on this blog who drive for free around the overbuilt roads in their cities think congestion pricing for NoVa (and, occasionally Hampton Roads) is a grand idea. Then they pillory time of day pricing for electricity as if maintaining a peaking system were free of cost. I guess variable pricing based on demand only makes sense when somebody else is paying for it.

  5. Reed Fawell 3rd Avatar
    Reed Fawell 3rd

    “How can we develop appropriate policies about our energy system, if our data is so skewed?”

    Truer words were never spoken. You nailed it.

  6. […] There was a Division of Legislative Services staff person present at the recent National Regulatory Conference in Williamsburg. My piece yesterday was in error.  Attorney Christine Noonan’s name was on the list and I missed it.  She’s been at DLS for a while, but only this session started as staff support for the committees doing energy legislation.  Even worse was any implication that the folks at DLS might not be interested in policy details, when my decades of experience has left me with firm knowledge the opposite is true.  No apology or correction was requested, which is all the more reason it was imperative.  I hope she and they will accept it.  A notation was added to the article. […]

  7. LarrytheG Avatar

    re: ” Coal is only low cost because the externalities are considered free. Whether you believe in anthropogenic climate change or not I assume you do believe in acid rain.”

    It’s sorta like asking if it’s okay to CHOOSE a product that causes harm, as in toxics, if that is “what you want”.

    It’s like saying that we spend too much to clean up sewage and it would be cheaper if we were not “hung up” on “externalities”. Or that we could get gasoline a lot cheaper if it were not required to be lead-free.

    By the way – I advocate time-of-day pricing for EVERYTHING of which demand exceeds supply – be it road capacity or internet or electricity or Washington Redskin seats or gasoline. It’s a “conservative” idea to let the markets regulate price.

    it costs money to provide enough capacity for peak hour demand. That excess capacity is not used at lower demand periods but it still must be paid for. The airlines, for instance, would have to provide as many planes as demand required if they were not allowed to price the seats higher when demand was higher.

  8. […] take the front and lead it.  Bob Inglis didn’t make my list of signs at the conference that environmentalists have won, but his talk was another such […]

  9. […] One of the environmental speakers at that State Corporation Commission regulatory conference a few weeks back admitted that were the government to return to the Obama-era Clean Power Plan, the entire goal structure would need to change.  Why?  Because the United States is moving toward the old CO2 benchmarks anyway.   As I noted at the time, they’ve won. […]

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