Category Archives: Energy

Dispatches from the Front

by Stephen D. Haner     

I promised you updates, dispatches from the front lines as the General Assembly once again deals with legislation proposed by our largest monopoly power company. It is my intention this game is played out in the open. Here is my version of Bacon Bits:

(1) President Donald Trump and Congressional Republicans are about to cut your electric bill and Dominion want to take credit. You will search in vain for Trump’s name in the talking points or news releases. You hear about $1 billion in savings to consumers and an actual cut in the rates – it’s the mostly the federal corporate tax cut, which an early State Corporation Commission estimate put at $165 million annually. Dominion can give it back in advance because we pay the taxes in advance and the cash goes in a fund for taxes.

It is true that because of the 2015 legislation creating a regulation holiday the SCC lacked the power to order Dominion to pass along the tax savings to customers. But all around the country other utilities are doing just that, and the Federal Energy Regulatory Commission is working on making it mandatory.  Also Dominion had already announced a similar rate cut down in South Carolina if it takes over SCANA, and with the same genesis – the federal tax cut.  This was coming without any legislation. It is not a concession on their part.

( 2) Where are the bills? As of my drafting this on Sunday morning, only the main House bill has been introduced and posted on the legislative database. Senators Richard Saslaw, D-Fairfax, Frank Wagner, R-Virginia Beach, and Steve Newman, R-Forest, have all said they put in bills at the Friday deadline, but none of them are posted. Dominion has seen the bills, has been talking to legislators about the bills, has talking points in circulation about the bills –but those of who wish to dispute them are hampered by not seeing the actual text. It might be the same as the House bill, it might not.

Apparently in this hyper-computerized age the Senate bills were introduced on paper and need to be keyed in. The way it was done 20 years ago (but is still allowed.) Why? I submit to give them yet another huge head start in the rapid race that is Virginia’s legislature. It is possible the Senate bills could be in the Senate Commerce and Labor Committee on Monday afternoon, and the public and the skeptics have not seen them. Dominion has a platoon of lobbyists and skids greased with money, but they leave no advantage untaken.

(3) Dominion tends to fill its basket with eggs – multiple bills from multiple friendly sponsors, with elements of their ultimate bill sprinkled about. Bills are put in mainly as placeholders, as potential vehicles for a substitute or for amendments. Senator Glen Sturtevant, R-Midlothian, has a bill dealing making it harder for the SCC to challenge the cost of underground lines, for example, and Senator Ben Chafin, R-Lebanon, has a bill dealing with how the SCC views capital structure when it sets rates. Notice that they also set out long, long sections of the Code provisions involved in every other aspect of this – these are vehicles, little legislative Uber cars waiting just in case one of the main bills breaks down.

Stephen D. Haner, principal of Black Walnut Strategies, is a Richmond-based lobbyist. In the debate over energy policy, he represents the Virginia Poverty Law Center.

Dominion Closes Nine Obsolete Generating Units

The Bremo Power Station on the James River opened as a coal-fired power plant in 1931. Units 3 and 4 were converted to gas in 2003. Now they will revert to cold reserve storage.

As Dominion Energy Virginia continues to adapt its generating fleet to the realities of cheaper solar and abundant natural gas, the utility has decided to mothball nine of its older, less efficient power-generating units — all but one of them either coal-fired or converted from coal to gas. Because the units rarely run, they provide only one percent of the company’s current generation, reports the Associated Press.

As part of a month-long review of its power generation group initiated to increase its competitive position in the energy market, Dominion also decided to eliminate about 390 positions, including about 100 from its nuclear operations. The company expects many employees will be reassigned to other operations.

“When we look at the time, the materials, the people, when we look at the thermal inefficiency of these plants, and we look at the advancement of renewables, we look at continued gas-fired build, we just think this is a progressive step we can take to ensure that our fleet remain competitive,” said Paul Koonce, president and CEO of the power generation division.

In technical language, Dominion is putting the nine units in “cold reserve storage,” in which they are drained of oil and water, provided minimal staffing to ensure that they remain safe, and are capable of being restarted in about six months if market conditions warrant. Dominion will maintain all environmental permits and continue to pay local taxes.

Most of the units — those at the Bremo, Chesterfield, and Possum Point power stations — were commissioned in the 1950s and early 1960s. One, a combined-cycle gas unit at the Bellemeade power station was constructed in 1990. All told, they were capable of producing 1,200 megawatts of electricity, roughly comparable to a new, state-of-the-art gas-fired power plant.

In a handout, Dominion said the shutdowns reflected the changing economics of electric power industry:

  • Economics. Natural gas prices remain historically low, and forecasts call for supplies to remain plentiful. Gas and renewables have displaced coal and older, smaller gas units. And the cost to build large-scale solar has dropped 90% in the past six years.
  • Public policy. Virginia is considering policies that would mandate a 3% annual reduction in carbon-dioxide emissions over ten years, which would rule out running the older, inefficient power units even as a backup.
  • Technology. Energy efficiencies such as LEDs, EnergyStar appliances, and LEED certification are impacting demand across PJM Interconnection, which administers wholesale energy markets for a multi-state region. New round-the-clock generation technologies, such as those in the new Greensville County power station, are significantly more efficient than older-generation gas units.

Tarheel Coal Ash Data Could Inform Virginia Debate

Coal ash at the Chesterfield Power Station. Photo credit: Richmond Times-Dispatch

Last week I argued that Virginians need more information about the disposal costs and health risks associated with coal ash ponds before the General Assembly rushes ahead with a law requiring Virginia’s electric utilities to recycle and/or landfill their coal ash. Some of that data could come from the experience of Duke Energy in North Carolina as well as utilities in South Carolina, which are farther along in the process than Dominion Energy Virginia.

Travis Fain, a former Daily Press reporter who has moved on to WRAL.com, reported yesterday how Duke Energy has blasted its opponents in a regulatory filing, asserting that they leaned on “simplistic crutches,” false analysis, and a Pollyanna hindsight to argue against the company’s bid to raise electricity rates sufficient to cover its coal as clean-up costs. Duke Energy’s foes have some not-so-nice things to say about the utility, too. The bottom line for Virginia is that political and regulatory facets of the coal-ash controversy are further along in North Carolina than they are in the Old Dominion. Many of the same issues are likely to surface here, and economic data from the Tarheel State could illuminate our debate.

Writes Fain:

The company complied with existing laws and industry standards when it left wet ash in unlined pits for decades, they said. At one point “the lack of a liner was considered a feature, rather than a flaw” because soil would filter out contaminants, the company said. Impact on groundwater wasn’t initially a concern “because the ash basins were built more than a decade before the adoption of any federal or state regulation related to groundwater corrective action,” attorneys argued.

That same commission will decide now whether Duke Energy Progress shareholders or its customers will cover the majority of costs for a cleanup that has since been ordered by changes in state and federal law. Between Duke Energy Progress and its sister company, Duke Energy Carolinas, parent Duke Energy has asked for more than $1 billion a year in increases. …

“They fault the Company for not doing something that no one was doing, but at the same time washing their hands of any responsibility of paying for that which they – in 20/20 hindsight – wish the Company had done,” the utility’s brief states. …

The Attorney General’s Office referenced to a number safety reports, including an inspector who found “open cracks” and other problems in safety features at the H.F. Lee Plant in Goldsboro in 1999. That inspector returned in 2004 to note that “those same problems had not been repaired and still existed,” the Attorney General’s Office said.

If Duke had been proactive, cleanup costs “would have been far less than the costs are now and will be in the future,” the Attorney General’s Office said. …

The Public Staff also proposed that Duke Energy Progress split coal ash cleanup costs 50-50 with customers, something the company rejected.

Coal ash cleanup costs alone would add nearly $183 million a year to customer bills under Duke Energy Progress’ proposal.

Dominion has said it would cost roughly $4.5 billion to landfill all the coal ash at its Bremo, Possum Point, and Chesterfield plants. Dominion foes have charged that its estimates are inflated because the utility could reduce its costs by recycling coal ash into cement, bricks and pavers. Basically, we have a he-said, she-said situation. Although both Dominion and the Southern Environmental Law Center have hired consulting engineers, no non-aligned third party has weighed in with a judgment.

One obvious step, it seems to me, would be to compare Dominion’s situation to Duke Energy’s. Duke Energy says the cleanup will cost $183 million a year. It’s not clear how many years we’re talking about — likely 15 at least, maybe longer. If so, that implies a total cost of  between $3 billion to $4 billion. As I recall, Duke Energy has to remove more tonnage than Dominion, so its removal costs per ton are likely lower than Dominion’s estimates.

However, it is dangerous to make simplistic comparisons. Costs vary widely power station by power station, depending upon a number of factors, and direct comparisons may or may not be appropriate. Furthermore, the properties of coal ash vary, and Duke Energy’s material could be more, or less, suitable for recycling. Finally, Duke Energy has first-mover advantage in recycling its coal ash. Its coal ash will flood the Mid-Atlantic market, arguably depressing prices and making the recycling option less attractive to Dominion.

The article hardly answers all the questions one might have, but it seems clear that we are talking about disposal costs in the billions of dollars. Whether recycling/landfilling is an economical option in Virginia remains to be seen. Hopefully, the General Assembly won’t pass law in the absence of authoritative information.

Senate Committee Spikes Bill to End Electric Freeze, Promises Comprehensive Reform

Sen. Chap Peterson. Photo credit: Associated Press

The Senate Commerce and Labor Committee today killed a bill championed by Sen. Chap Petersen, D-Fairfax, that would have ended the freeze on base electric rates, restored State Corporation Commission (SCC) control over rate setting, and enabled the refund of hundreds of millions of dollars in electric utility profits to rate payers.

Senate leaders said that they are working on legislation that will direct the long-term future of the electric utility industry, subsuming the regulatory topics that Peterson’s would address. “There will be a larger conversation that will take place in the next week,” said Senate Majority Leader Tommy Norment, R-Williamsburg.

Peterson has pushed for a return to the regulatory regime that existed before 2015 when the General Assembly, worried about the potential impact of the Obama administration’s Clean Power Plan, enacted a freeze on base rates and canceled biennial SCC reviews. Peterson contends that Dominion Energy Virginia has earned excess profits of more than $400 million. Moreover, the new federal tax law will reduce Dominion’s tax bill by $150 million a year. His bill will protect rate payers, he said. “This is not an environmental bill. It’s not a pro-business bill. It’s a pro-ratepayer bill.”

Sen. Frank Wagner. Photo credit: Helment2Helmet

However, Committee Chair Frank Wagner, R-Virginia Beach, said the legislature needs to consider rate regulation in the context of building an electric transmission/distribution system that can accommodate more solar power and keep the grid secure and resilient. Virginia needs to upgrade its grid, he said. “We’re not there — we’re not even close to where we need to be.”

About a dozen speakers mainly representing consumer, environmental and business-customer interests spoke in favor of Petersen’s bill.

In remarks typical of those who supported Petersen, Sam Towell, with the office of consumer council for the Attorney General’s office, argued that Virginia should return oversight of the electric power companies to SCC judges who have the staff and expertise to review complex regulatory issues. “If the rates are too high, as they currently are, the SCC should have the authority to lower them,” he said. “If utilities make prudent investments, they should have the opportunity to recover their investments with a fair rate of return.”

Another advantage of SCC oversight, said Louis Monacell, an attorney representing the Virginia Committee for Fair Utility Rates, is that the public hearings allow for the production of documents and questioning of experts. In contrast to Dominion with its army of lobbyists, who meet with legislators and aides in settings where people don’t have a chance to challenge their assertions, he said, “the SCC bases its decisions on an open record.”

Norment said he was “taken aback” at the insinuation that legislators aren’t getting all viewpoints. “How can you stand there and tell me that your voices are not being heard?”

Dominion has a far greater financial interest in the outcome of the legislative process and can afford to hire more lawyers, lobbyists and experts, responded Monacell.

“We think the consumers do have an articulate voice,” as evidenced by the number of speakers at the hearing, said Norment. “And now they have an Attorney General who is serving their interests more than ever before.”

As Virginians ponder how to restructure the electric utility industry, said Wagner, the General Assembly needs to transcend the “myopic,” two-year time horizon of the SCC and adopt a longer-term perspective.

“It’s very clear that the Clean Power Plan is not moving forward,” Wagner said. “We have a degree of certainty that we didn’t have three years ago. This is the time to go back to a re-regulated environment.” Still, the General Assembly sets the broad parameters for energy policy. Solar is competitive now with every other form of electricity. Decisions must be made how best to integrate it into the grid without throwing off frequency and voltage, while also protecting the grid against a range of threats from hurricanes to cyber-sabotage, he said.

“We have huge changes coming,” said Wagner, echoing many of the same points that Dominion executives raised last month when announcing their openness to end the rate freeze.  “More electric vehicles, more batteries, more storage, more generation at the [local] level. …. We need to look a decade down the road.”

Update: An earlier version of this post said that the Committee “tabled” Petersen’s bill. In fact, committee members voted to “pass by indefinitely,” which I am informed is legislative jargon for killing the bill. I have rewritten the article to correct the mistake.

Solar Power Building Momentum in Virginia

Dominion solar farm in Buckingham County.

Dominion Energy has grown its solar fleet in Virginia and North Carolina over the past two years from near zero to nearly 1,350 megawatts in service, in construction or under development — enough to power 340,000 homes during peak sunshine. That makes Dominion sixth among owners of electric utilities, the company said in a press release issued yesterday.

In Virginia, there are 27 solar generating facilities on 4,683 acres, equating to about 444 MW of solar capacity either in operation or under development. Construction of another 300 MW of solar is planned to support a Facebook data center planned in Henrico County. The company’s long-term energy forecast calls for 5,200 megawatts of new solar generation over the next 25 years.

Nationally, parent company Dominion Energy now claims to have the sixth largest fleet of solar facilities in the country. Meanwhile, Appalachian Power, has issued RFPs for up to 10 megawatts of solar production. Virginia’s second-largest utility is leaning more on wind power to build its renewable energy portfolio.

“It’s not just about Dominion Energy meeting its clean energy goals, it’s also about helping our customers achieve theirs,” said Paul Koonce, president and CEO of Dominion Energy’s Power Generation Group. “We have a responsibility to offer the right programs, resources and solutions so our customers can make smart decisions about their energy future, and the key is we’re doing it together.”

Two years ago critics were blasting Dominion Virginia Power for its slow adoption of renewable energy. You don’t hear that much any more. Today foes contend that the utility is interested only in projects that it can own, operate, and generate profits from itself.

Working with solar companies and environmental groups, Dominion cut a “community solar” deal last year in which independent outfits would own and operate the solar farms while Dominion would own the entity that bundled the electricity generation and marketed it to consumers.

Now attacks tend to focus on charges that Dominion discourages development of rooftop solar by individuals and businesses. Virginia, critics say, needs to move to a distributed (more decentralized) grid that can accommodate thousands of small, independent contributors to the grid. A big sticking point is the level of compensation Dominion receives for the critical task of maintaining the transmission and distribution system as well as back-up capacity for when the sun doesn’t shine.

The company says it is seeking State Corporation Commission approval “for a 100 percent renewable energy option for residential and small commercial and industrial customers, as well as an option for business customers to purchase renewable generation equal to a specific portion of their energy usage.”

Dominion also has signaled its intention to modernize the electric grid to make it safer from cyber threats and to accommodate distributed contributors to the grid. “A smart energy grid,” said the press release, “will enable the company to seamlessly connect with cleaner energy resources, including private solar and other local generation sources.”

Ivy Main, who tracks solar energy developments for the Virginia chapter of the Sierra Club, wrote in her blog, Power to the People, that she expects a raft of solar energy bills to be submitted in the 2018 session of the General Assembly. At the top of her list of wants, she would like to end the 1% cap on the amount of energy that can be supplied through net-metered distributed energy and also to remove standby charges on residential solar. She also would like to liberalize power purchase agreements (PPAs) that would allow third parties to structure deals allowing universities, schools, local governments and non-profits to take advantage of solar tax credits.

Main also calls for pilot products to test the concept of microgrids, which are appearing in other states. “Promoting microgrids as one way to keep the lights on for critical facilities and emergency shelters when the larger grid goes down,” she writes. “A microgrid combines energy sources and battery storage to enable certain buildings to ‘island’ themselves and keep the power on. Solar is a valuable component of a microgrid because it doesn’t rely on fuel supplies that can be lost or suffer interruptions.”

Virginia Wallowing in Ignorance about Coal Ash

Coal ash at the Chesterfield Power Station. Photo credit: Richmond Times-Dispatch

Sen. Amanda Chase, R-Chesterfield, has co-sponsored legislation that would require Dominion Energy to remove more than 25 million tons of coal ash from its Chesterfield, Bremo, Possum Point and Chesapeake power stations, reports the Chesterfield Observer.

Senate Bill 1398introduced by Sen. Scott Surovell, D-Fairfax, applies to any owner or operator of a “coal combustion residuals unit.” The bill specifies that any coal ash stored in an unlined pond that is located within a half-mile of a floodplain or river must be excavated and disposed of either by recycling into cement or removal to a landfill.

The concern of environmentalists, residents living near the power plants, and many elected officials is that Dominion’s proposed solution — burying the coal ash on-site and capping it with an impermeable liner — will not prevent groundwater from seeping through the pits, picking up contaminants, and migrating into rivers and streams. Reinforcing their fears are the findings of riverkeeper groups of elevated levels in nearby groundwater and surface waters of potentially toxic heavy metals found in coal ash.

A Dominion-commissioned study by AECOM, an international engineering firm, found that Dominion’s proposed bury-in-place solution would cost between $480 million to $1.7 billion (not including judicial remedies ordered for the disposal of ash at the Chesapeake plant). By contrast, the most economic solution for removing and landfilling the coal ash would run about $4.15 billion. Critics say that AECOM overstated the cost of recycling and removal.

For all that has been written about coal ash disposal, there is much that we don’t know. Given the current state of knowledge (at least the knowledge that has seeped into the public policy debate), it’s hard to see how a rational, well-informed decision can be made.

There is one thing we can say for certain: contaminants from coal ash do leak in minute quantities into the groundwater, and groundwater does make its way into rivers and streams. Beyond that, there is very little certainty. Two questions arise: Does the contamination reach levels that are hazardous to human health (generally measured in a few parts per million)? Will Dominion’s proposed remedy of capping the coal ash piles reduce the level of contamination to safer levels?

Adjudicating a lawsuit filed by the Virginia Chapter of the Sierra Club against Dominion Energy Virginia for coal-ash pollution at Dominion’s Chesapeake plant, U.S. District Court Judge John Gibney found that (a) the coal ash ponds at Chesapeake did contaminate groundwater and the nearby Elizabeth River, but (b) the concentration of potentially toxic compounds was so low that it did not pose a threat to human health.

Heavy metals and other pollutants are often found naturally in groundwater, rivers and streams. Zero contaminants — the equivalent of distilled water — is neither necessary nor desirable. Some elements, such as zinc, are toxic at elevated levels but are necessary to sustain human and animal life in minute traces. The purpose of public policy should be to keep the concentration of these chemicals below the threshold at which they pose a threat to human and aquatic health — not to achieve zero contaminants.

Environmentalists have conducted tests in public waters near Dominion’s coal ash pits and have found non-safe levels of chemicals on numerous occasions. However, those tests reflect the condition of Dominion’s coal ash impoundments in their current form. Following standard industry practice, the utility buried the coal ash in multiple pits at each location and covered them with water to keep them from drying out and creating a dust problem. Rainwater falling on the water-laden pits created hydrostatic pressure that elevated the movement of water through the coal ash and increased the rate of contamination.

At each location, Dominion proposes to drain the water from the ponds, consolidate the near-dry coal ash into a single pit at each location, and cap the pit with a synthetic barrier. That barrier will prevent rainwater from reaching the coal ash and eliminate the main source of hydrostatic pressure. Also, in theory, the coal ash also will be buried above the water table, thus foreclosing the potential for groundwater to migrate through. In practice, however, as the Southern Environmental Law Center has shown from documents filed by Dominion, low-elevation portions of the Chesterfield impoundment will intersect with the water table. In other words, while most coal ash will be inert, a small portion will be exposed to the groundwater.

It should be within someone’s power to compute (a) the rate of flow of the groundwater, (b) the volume of water that will be exposed to coal ash, (c) the extent to which groundwater will pick up contaminants, (d) the volume and toxicity of groundwater that will reach rivers and streams, and (e) the resulting increase of potentially toxic chemicals in public waters. If the level of contamination in the River remains below Environmental Protection Agency thresholds, it makes little sense to spend billions of dollars to remove the material to a landfill. If the level of contamination exceeds safe levels, then action is justified.

The problem is that we don’t know the answer to the question. The Surovell-Chase bill presupposes that Dominion’s preferred, cheaper remedy would be inadequate. But we don’t know, and we can’t reach a judgment based on tests conducted during the old regulatory regime.

Environmental groups are arguing that utilities in North Carolina and South Carolina are pursuing the recycling and landfilling approach called for in the Surovell-Chase bill. If recycling/landfilling makes economic sense for them, they say, it should make sense for Virginia. That argument is buttressed by the testimony of companies offering to recycle as much as half of Dominion’s coal ash, some of it potentially at a profit to the utility.

AECOM examined four potential recycling technologies and concluded that Dominion couldn’t come close to recycling its coal ash at a profit. What the study did not do, as best I can tell, is determine whether it would be cheaper to recycle or load into a landfill. In other words, even if Dominion lost, say, $30 to $100 per ton through recycling, would that still be cheaper than trucking the coal ash to a landfill? The report did not make that calculation. Moreover, the report allows for a wide variation in costs. It makes a big difference if the cost of beneficiation (as the recycling process is called) at the Bremo station is $96 per ton or $217 per ton. Likewise, it makes a big difference if the coal ash sells for $30 a ton or $60 per ton. The AECOM discussion of recycling economics makes only the roughest of rough cuts. It does not provide enough data to make an informed decision.

The same can be said of the environmentalists who are critical of the AECOM report. We are told that Carolina utilities are recycling and landfilling their coal ash. But an obvious question arises: at what cost? The coal ash issue is even more emotional in North Carolina than in Virginia because North Carolina is where one of the nation’s worst coal ash spills occurred. Is Duke Energy under more intense judicial and political pressure to pursue the recycling/landfilling strategy to remedy its coal ash problem regardless of cost? The cost per ton of recycling/landfilling in North Carolina may be public information, but it hasn’t entered into the public discourse in Virginia.

The problem with the Surovell-Chase bill isn’t that it’s a bad bill. It’s that the public has no way of knowing whether it is a good bill or bad bill. We don’t have the data to make an informed decision. Perhaps the General Assembly should make it a priority to get that information before voting the bill up or down.

Update: Haha! Looks who’s wallowing in ignorance! Juliana Condrey informs me that SB 1398 was from the 2017 session.

Polar Vortex II Brings Gas Curtailments, Price Spikes

Virginia’s climate has been setting record low temperatures in the past few days, and state newspapers have been full of stories about poor people shivering in the cold, traffic accidents caused by black ice, and the defects of Virginia Department of Transportation snow removal. But I have seen nothing about the impact of the deep freeze on business and industry. That’s not to say that no one has written about it, rather to say that the topic hasn’t surfaced in any of the newspapers and Internet news feeds that I peruse every day.

Here follows the untold story. Or at least part of the untold story. I publish here a communication from Aaron Ruby, spokesman for Dominion Energy and the Atlantic Coast Pipeline, who notes that the bitter cold caused a spike in natural gas prices and curtailment of service to major industrial customers. Bottom line: The disruptive Polar Vortex of 2014 was not a fluke. As the economy grows and natural gas supplies become even more constrained, we can expect more of the same in the future.

I fully acknowledge that Ruby’s remarks represent a corporate point of view and that there may be other ways to spin the economic repercussions of the recent cold wave. But, to be perfectly frank, given my other commitments, I don’t have time to flesh out a fully reported article. Instead, I post Ruby’s remarks with the idea of letting readers respond in the comments.

As our region recovers from the recent cold spell, I wanted to draw your attention to the significant challenges it posed for consumers who depend on natural gas for electricity, home heating and power for their businesses. The extreme cold and spikes in natural gas usage across the Mid-Atlantic over the last two weeks demonstrated in dramatic fashion the real and urgent need for the Atlantic Coast Pipeline.

Severely limited capacity on the pipelines serving Virginia and North Carolina forced some utilities to curtail service to major industrial customers and raised consumer prices to historic highs. The reason is simple: our region’s pipelines are too constrained, and we don’t have enough access to lower-cost supplies from the Appalachian region. In response to urgent requests from utilities, we proposed the Atlantic Coast Pipeline more than three years ago to relieve those constraints and bring these lower-cost supplies to consumers in Virginia and North Carolina. The Atlantic Coast Pipeline would significantly lower the risk of this kind of volatility in the future.

Virginia Natural Gas, which serves homes and businesses in the Hampton Roads region of Virginia, reported service interruptions to 11 major industrial customers over the last two weeks, some lasting for as long as 4 days. Piedmont Natural Gas, which serves homes and businesses in North Carolina, reported that it too interrupted service to several industrial customers. In fact, Piedmont alerted federal regulators this week that it urgently needs new infrastructure by the end of 2019 to serve customers’ growing needs.

Constraints on the Transco pipeline in Virginia and North Carolina also sent natural gas prices soaring from $3 per dekatherm in late December to an all-time record high of $175 at the end of last week. Those higher costs will ultimately be reflected in higher electric and natural gas bills for consumers. Dominion Energy Virginia relied on the Transco pipeline for about 75 percent of its natural gas supply during the cold spell, while public utilities in North Carolina depended on this single pipeline for 100 percent of the state’s supply. Transco is currently the only natural gas transmission pipeline serving all of North Carolina, leaving the state particularly vulnerable to shortages and price volatility.

In contrast, prices in the Appalachian region where the Atlantic Coast Pipeline would originate remained low, trading between $4 and $6 per dekatherm during the cold spell. The problem is we don’t have the pipeline infrastructure to deliver these lower-cost supplies to consumers in Virginia and North Carolina. While we’re still calculating the impact, having access to a lower-cost source would have saved consumers in our region hundreds of millions of dollars in fuel costs over just the last couple weeks.

We’ve said for a long time that the pipelines serving our region are stretched too thin and cannot handle the coldest winter days. Our economy isn’t going to grow if we have to curtail our industries whenever it gets cold, or if consumer prices skyrocket when our pipelines are overstrained.

New infrastructure is the only way to solve these challenges. The Atlantic Coast Pipeline will open up access to lower-cost supplies in Virginia and North Carolina – access we currently do not have – and it will make service more reliable for consumers, especially when they need it the most on the coldest winter days.

Dominion Energy to Acquire SCANA Corp. in $14.6 Billion Deal

SCANA halted work on the V.C. Summer Nuclear Power Station in July. Photo Credit: Post & Courier

Dominion Virginia Energy has agreed to acquire the troubled Cayce, S.C.-based SCANA Corp. for $14.6 billion in cash and stock, the two companies announced today. The deal is contingent upon numerous regulatory approvals and preservation of a South Carolina state law that allows the company to recover customer payments for two unfinished nuclear reactors costing $9 billion.

Delays, cost overruns and ultimately the abandonment of the V.C. Summer Nuclear Power Station in Fairfield County, S.C., left SCANA with a massive liability that has roiled South Carolina politics for the past year. According to the Post & Courier, South Carolina regulators and lawmakers are considering whether customers of SCG&E, a SCANA subsidiary, should continue to pay $37 million monthly for work done on a power plant that will never be completed.

The Dominion acquisition would stabilize the utility’s finances. The Richmond-based energy company has promised to make a $1.3 billion payment upon completion of the merger worth $1,000 to the average residential electric customer, reduce current electric rates by 5%, and write off $1.7 billion in V.C. Summer assets. The write-off would make it possible for rate payers to meet the remaining obligations on the nuclear plant in 20 years instead of 50 to 60 years.

Preliminary response in South Carolina to the deal was cautiously positive but noncommital. Gov. Henry McMaster praised the sale offer as “progress,” reported the Post & Courier. “This sounds like a better deal for ratepayers,” said state Rep. Micah Caskey, a Republican critic of SCANA. “But is this the best deal? I don’t know.”

The transaction will have no direct impact on Virginia rate payers. SCANA will be treated as a wholly owned subsidiary of Dominion Energy, comparable to Dominion Virginia Energy. There will be no co-mingling of assets, and both will answer to their own state regulatory bodies.

However, the deal does have implications for the proposed Atlantic Coast Pipeline.

“SCANA is a natural fit for Dominion Energy,” said Dominion CEO Thomas Farrell in a press release. “Our current operations in the Carolinas — the Dominion Energy Carolina Gas Transmission, Dominion Energy North Carolina and the Atlantic Coast Pipeline — complement SCANA’s, SCE&G’s and PSNC Energy’s operations. This combination can open new expansion opportunities as we seek to meet the energy needs of people and industry in the Southeast.”

If the merger goes through, observes the Dominion press release, Dominion Energy and its subsidiaries would have a natural gas pipeline network totaling 106,400 miles and would operate one of the nation’s largest natural gas storage system with 1 trillion cubic feet of capacity.

As currently envisioned, the Atlantic Coast Pipeline would terminate in North Carolina just north of the South Carolina border. Back in October, Dominion confirmed that it might extend the ACP south of the border, although it noted that such a project would have have to run the complete federal and state regulatory gamut to gain approval.

Bacon’s bottom line: Any such expansion should end widespread speculation that Dominion’s secret motive in building the pipeline is to ship natural gas to its soon-to-open Cove Point facility in Maryland for export. Clearly, Dominion is eyeing southern markets. According to the Post & Courier, the company plans to buy a $180 million natural-gas power plant in South Carolina to make up for some of the electricity the nuclear plant was expected to produce. The newspaper did not speculate whether that plant might be supplied by gas from the ACP or from competing pipelines. In either case, South Carolinians undoubtedly will experience the same debate over gas vs. renewables as we have seen in Virginia.

Electric Plant Construction Costs Getting Cheaper

Graphic credit: Ars Technica

As everyone knows, the cost of renewable energy is getting cheaper all the time. But so are the costs of competing energy sources such as natural gas and nuclear.

Integral Molten Salt Reactor (IMSR) nuclear power technology, which uses molten salt as a cost-effective means to dissipate heat, is making its way through the regulatory hoops in Canada, according to The Next Big Future. Proponents claim that IMSR plants will be so much simpler and less expensive to build than conventional nuclear plants that they can be financed by conventional means. Construction time will be four years instead of eight; construction costs less than $1 billion compared to $6 billion. The levelized cost of electricity (which includes construction, financing, and fuel costs), advocates say, will be less that of super-efficient combined-cycle natural gas plants.

I know nothing about this technology or the claims made on its behalf, so I cannot say if they are credible or not. The larger point is that the nuclear industry is not static, and that new nuclear technologies have the potential to be game changers.

Meanwhile, says Ars Technica, the cost of building natural gas generators dropped 28 percent between 2013 and 2015, as super-efficient combined cycle plants came on line. Lower construction costs combined with technologies that capture more heat from a BTU of gas as well as vast and inexpensive supplies of of the fuel from the Marcellus and Utica shale basins have made natural gas more competitive economically than anyone expected only a few years ago.

Bacon’s bottom line: The energy industry is highly competitive and highly innovative. Refining and processing technologies under development could even revitalize the fortunes of the coal industry. The dynamism of the energy sector makes it difficult to make long-term predictions about the comparative economics of gas, coal, nuclear, wind, solar, and hydro with any degree of confidence. When we ponder the regulatory future of Virginia’s electricity industry, we should design a system that is nimble, adaptable, and does not lock the state into a particular energy path.

Roll Back Rate Freeze, Says Haner

Steve Haner, a frequent contributor to this blog, says it is time for the General Assembly to un-do the freeze on base electric rates in Virginia.

A lobbyist representing the Southern Poverty Law Center, Haner lays out the case in a Richmond Times-Dispatch op-ed:  Return to the regulatory approach before the 2015 rate freeze, put the State Corporation Commission back in charge of reviewing rates and setting profit (return on equity), and order power companies to return excess profits on a timely basis to rate payers.

According to a 2017 SCC staff review of Dominion Energy Virginia’s books, the utility would have had to return between $133 million and $177 million to rate payers, Haner says. On top of that, the public likely would be paying lower bills today. Dominion disputes the numbers, but argues that only a full evidentiary hearing before the SCC’s three judges would settle the issue.

Dominion acknowledges that its return on equity has been higher than normally allowed and that the time for ending the freeze has come. The utility proposes a measure — still vague at this point — that would plow back excess earnings into modernizing the electric grid in order to advance the goals of increased renewable energy and improved cyber-security.

Writes Haner:

The costs of modernizing the grid, of dealing with coal ash, of encouraging energy efficiency and meeting any new state air regulations are actually very strong reasons to return to the SCC-managed process.

Those are all future costs, irrelevant to whether Dominion earned excess profits in the past. The decisions over how to pay for those, over how many years, and with what profit margin for the company — all of those decisions can and should be made by the State Corporation Commission as well.

Bacon’s bottom line: General Assembly debate will take place against a political backdrop far more hostile to the power companies than in the past, as many new elected senators and delegates refused to take campaign contributions from Dominion and, indeed, have expressed hostility to the corporation.

Haner has traditionally represented electricity consumers, and his main focus has been on rates. We also can expect a push from environmentalists and progressives to set tighter standards for coal ash clean-up and to topple obstacles to rooftop and community solar generation, among other issues.

It remains to be seen whether Virginia’s other utilities, primarily Appalachian Power Co., and the state’s electric cooperatives, will present a unified front with Dominion. For utility watchers, 2018 will be an interesting legislative session.

Update: I have amended this post to clarify a statement that read, “Dominion acknowledges that its rates have been high.” What I meant to convey is that Dominion has repeatedly acknowledged that the base rate freeze allowed it to generate profits above its allowed Return on Equity over the past two years (although always in the context that it was still at risk of reversing those gains should a hurricane or other major weather event strike). Spokesman Rayhan Daudani reminds me that Dominion’s typical bill is 14.9% below the national average. I have posted his full response in the comments.