Category Archives: Energy

Laborers Union Recruits, Trains Pipeline Workers

Pipeline worker in Oklahoma. Photo credit: Daniel Acker/Bloomberg

I’ve been critical of labor unions on many occasions, but I’m not anti-union out of general principle. Unions can play a positive role in the economy. As an example, look at the partnership between the Laborers’ International Union of North American (LIUNA) and the Virginia Community College System.

LIUNA and VCCS have signed a memorandum of understanding to recruit and train Virginians to work on the Atlantic Coast Pipeline.

Pipeline workers will train at six Virginia community colleges near the pipeline route: Dabney S. Lancaster, Blue Ridge, Piedmont, Southside Virginia, Paul D. Camp, and Tidewater. In partnership, LIUNA and the colleges will recruit, screen, and train prospective workers, according to a joint press release issued last week.

Training will provide skills necessary for a range of pipeline work, including installing environmental control devices, clearing ground, coating and installing pipe, and restoring the right of way.

“Through our partnership with Virginia’s community colleges, we intend to hire well over half of the Atlantic Coast Pipeline workforce from those who live in nearby communities,” said Dennis Martire, vice president and regional manager of LIUNA Mid-Atlantic.

“This partnership reinforces LIUNA’s commitment to recruit and train as many Virginia residents as possible to work on the Atlantic Coast Pipeline. This project is going to provide middle class wages and family health benefits to hundreds of our members across Virginia,” Martire added.

Now, I recognize that there are many outstanding issues associated with the pipeline construction — in particular, whether pipeline trenches can be dug without causing significant damage to fragile mountain terrain and water supplies. That issue will not be answered definitively until the project is complete and we can observe, not speculate, how well the job is done.

But everyone should agree about one thing: If the pipeline is to be constructed, which it is 99% certain to be despite last-ditch legal challenges, we want to make sure that the pipeline workers are well trained in their crafts and well versed in the construction plans to minimize environmental harm.

A construction company employing non-union labor would be hard-pressed to pull off the feat of screening, hiring and training thousands of construction workers in remote communities across the state. Fulfilling that critical hiring and training function is a significant value-add. Good for LIUNA.

Tinkering with the Electricity Regulation Bill

Lightning show

In yesterday’s fast-moving action in the General Assembly, bills to end the electricity rate freeze underwent several important changes. I have done no original reporting here. I’m just extracting key details from Robert Zullo’s article in today’s Richmond Times-Dispatch.

A substitute bill submitted by Del. Terry Kilgore, R-Scott:

  • Increases one-time rebates to Dominion Virginia Energy customers from $133 million to $175 million.
  • Allows the State Corporation Commission (SCC) to order refunds and lower base rates after a single triennial review instead of after two consecutive three-year reviews.
  • Allows the SCC to review 2017 earnings as part of the first review.
  • Incorporates elements from other bills that would authorize the burial of transmission lines, streamline the approval of efficiency programs, and declare solar development to be in the public interest.

The Kilgore bill still converts two-year reviews of base electric rates to three-year reviews, and it preserves Dominion’s proposal for a “reinvestment” regulatory model for modernizing the electric grid to make it more resilient from storms, more secure from cyber-attack, and better suited to renewable power, energy efficiency and microgrids.

I’m still unclear on how the reinvestment model works. David Ress with the Daily Press describes the concept this way:

Any excess profits Dominion earns would go to pay for those investments, instead of going in part to customers or justifying cuts in its base rates. … By using any excess earnings to improve the grid and install an eightfold increase in solar facilities, the company can finance those projects out of existing rates without imposing the “riders” — special surcharges — it has been using to build its newest power plants.

OK… Why does this make more sense than the pre-freeze regulatory model? What’s wrong with rebating excess earnings on “base” rates to customers, and what’s wrong with financing grid modernization through riders? There may be perfectly legitimate reasons for the changes, but the logic is not self-evident.

The reinvestment model is central to the revamping of the electricity regulatory system. Everyone would benefit from more clarity on how it would work and the thinking behind it.

Bills Would Prevent Ratepayer Refunds for Six Years, SCC Says

Lightning show

Proposals to overhaul Virginia’s system for regulating electric rates would provide no opportunity for the State Corporation Commission (SCC) to order refunds to rate payers until 2024 for Appalachian Power Company and 2025 for Dominion Energy Virginia, concludes a State Corporation Commission analysis of Senate Bills 966 and 967.

The SCC conducted the analysis at the request of Sen. Chap Petersen, D-Fairfax, who has advocated a return to the regulatory system that prevailed before the 2015 enactment of a rate freeze that has resulted in hundreds of millions of dollars of excess profits for the two utilities. Dominion has worked with legislators to advance a proposal that would return $1 billion to ratepayers over 10 years and replace biennial rate reviews with triennial rate reviews.

Key impacts on rate payers can be summarized as follows, states the analysis submitted by John F. Dudley, counsel to the Commission (quoting verbatim):

  1. There will be no opportunity to consider base-rate reductions or refunds to customers for at least six years, and then only if the utility over-earns for two consecutive three-year periods, effectively extending the current base-rate freeze further into the future.
  2. There may be only a partial return of reduction in federal income taxes currently being collected in base rates.
  3. The provision in current law that allows utilities to keep more than 30% of their excess earnings is continued.
  4. The legislation allows the utilities to keep future excess earnings (i.e. customer overpayments) and, rather than return them to customers, use them for capital projects chosen by the utility. In addition the utilities can charge customers for these same projects in base rates.
  5. The legislation deems certain capital projects to be “in the public interest,” thus impacting the SCC’s authority to evaluate whether such projects are cost-effective or whether there are alternatives available at lower costs to customers. This provision could potentially result in billions of dollars of additional costs that will be charged to customers in higher rates.
  6. An amount that appears to represent the customers’ portion of prior period excess earnings is returned to customers, but the amount has not been examined in a formal proceeding to determine its accuracy.

Dominion Energy Virginia has issued the following response:

This report analyzes a work in progress [that is] subject to change. We continue to believe a reinvestment model that transforms our energy grid and significantly increases the amount of renewable energy we produce is sound policy for Virginia. We have always said all tax savings should return to customers effective Jan. 1, 2018 and be appropriately adjusted by the SCC when the final IRS rules are available. To the extent that is not clear, we would support an amendment making it so.

SW Virginia to Share Pumped-Storage Tax Revenue

Sharing

Dominion Energy Virginia is studying two potential sites for a proposed $2 billion pumped storage facility in Southwest Virginia, one in Tazewell County and one in Wise County. Over and above the jobs created, the facility would generate more than $7.7 million a year in new tax revenue. Under Virginia’s current tax structure, a single county — the one where the facility is located — would garner the lion’s share of the benefits.

However, companion bills sponsored by three coalfield-area legislators would divvy up the tax revenues between seven counties and the City of Norton, reports the Coalfield Progress. Under Senate Bill 780, revenues would be allocated as follows:

  • 16% each for Tazewell and Wise Counties, with a 6% bonus for the host county.
  • 12% each for Buchanan, Lee, Russell, and Scott counties.
  • 10% for Dickenson County
  • 4% for Norton

Likewise, any direct costs to the host localities for infrastructure improvements will be allocated between the localities in the same proportion.

Bacon’s bottom line: I’m intrigued by the logic behind this proposal, especially why Tazewell and Wise went along with it. Think of it this way: Let’s assume each of those two localities have a 50% chance of winning the whole kit and caboodle. (Actually, the odds look somewhat better for Tazewell, but let’s make the assumption anyway for purposes of argument.) Under the new proposal, they are guaranteed to get at least 16% but only 22% if they are the host locality. It’s a classic bird-in-hand-versus-two-in-the-bush situation, except that it’s really a bird in hand versus five birds in the bush.

If I were a gambling man, which I’m not, and the odds were 50/50 on two horses, one with a $1 payout and one with a $5 payout, I’d bet on the second horse. But Wise and Tazewell are foregoing that approach. One might think that local leaders are calculating that sharing the revenue will unify and strengthen the region politically in the bid for its biggest economic development prospect in years. But the enabling legislation for the pumped-storage facility is already law. Unless there is something that I’m missing, which is entirely possible, it seems that Wise and Tazewell are showing remarkable forbearance. The coalfields could serve as a shining example for other Virginia regions competing for big economic development projects.

The Scandal in this Non-Scandal Is that It Appeared on the Front Page

Lamont Bagby

Fact one: Del. Lamont Bagby, D-Henrico, signed on as a co-sponsor of a bill, written with help from Dominion Energy Virginia lawyers, to end the electricity rate freeze and alter how electric utilities are regulated.

Fact two: In his day job, Bagby is director of Operations for the Peter Paul Development Center, a nonprofit that provides after-school programs and summer programs for poor children in Richmond’s East End.

Fact three: Thomas Farrell, CEO of Dominion, agreed in June 2016 to make a $100,000 donation to a Peter Paul capital campaign in addition to his annual $5,000 donation.

Fact four: Bagby says he was unaware that Farrell had made the commitment, and Farrell says he was unaware that Bagby was employed by the charity.

Question: Is this front page news? Someone at the Richmond Times-Dispatch decided it was, for it ran on the front page of the newspaper this morning. While the article never explicitly suggests that there was a quid pro quo involving Farrell, Dominion, Bagby and the Peter Paul Development Center, the T-D‘s decision to post a detailed article on the front page of the newspaper implicitly raises the possibility — otherwise why headline the front-page story, “Dominion, its CEO donated to Henrico delegate’s charity”?

Remarkably, the newspaper offers no evidence that a deal was cut, and it doesn’t even quote anyone willing to suggest that something improper might have occurred. Indeed, deep in the story, writer Patrick Wilson provides a perfectly innocent explanation. Farrell has been donating to the charity for several years, former Dominion executive Mary Doswell serves on the board, Dominion has a practice of donating to charities where employees serve as board members, and the Dominion Energy Charitable Foundation has donated between $500 and $5,000 a year since 2014.

The article comes at a time when Dominion is under fire for spreading around campaign contributions to members of the General Assembly and exercising considerable behind-the-scenes influence in fashioning legislation. Dominion is, in fact, the largest corporate contributor to Virginia political campaigns, donating almost $8 million since 2005 (not including personal contributions by Dominion executives). And it does, in fact, field a large team of lobbyists — nine directly employed by the company and ten retained from law firms this year, according to the Virginia Public Access Project.

The Dominion Energy Charitable Foundation also plays a large role in the community, awarding about $20 million to charitable causes in Virginia and other states each year. The unstated implication of the T-D article is that Dominion might use charity to exercise back-door influence with legislators. If the implication is true, that’s a legitimate news story and the practice is fair game for public scrutiny. If it isn’t true, the story casts unjust suspicion upon Dominion and its CEO.

In fairness to T-D writer Wilson, his reporting did include facts that undermine any suggestion that anything sleazy occurred.

The article does not state when Bagby commenced employment with the charity, and the information in Bagby’s biography does not include that information. However, we know that he was elected in July 2015 to succeed former Del. Joe Morrissey. Before then, he was just an ordinary guy working in a managerial capacity for a small, nonprofit company.

Farrell, one of the Richmond area’s more prominent philanthropists, has personally given $5,000 donations to the charity since as far back as 2012, the T-D reports, so it is clear that his interest in the cause pre-dates Bagby’s elevation to political prominence. The Dominion Energy Charitable Foundation began its donations in 2014, also before Bagby’s election. Doswell, the Dominion executive, joined the board in July 2015. That happened to be the same month that Bagby won a special election to replace Morrissey, a coincidence that might delight conspiracy theorists. But I would suggest, subject to confirmation, that Doswell’s name was placed in nomination and discussed before Bagby’s electoral victory, and that her decision to join the board was entirely unrelated to the event.

Farrell did agree in June 2016 to up his commitment to Peter Paul through a two-year, $100,000 donation, after Bagby had been elected. But that donation took place long before Dominion had any thought of needing to end the rate freeze and re-write Virginia’s regulatory statutes.

Bagby says that he was unaware of the donations from Farrell and Dominion. Says the T-D: “He said his job is focused on how the money is spent, not who gives it.” His account is confirmed by the Peter Paul “leadership team” web page, which indicates that Danielle Ripperton is the charity’s director of development.

We can infer from a statement by Dominion spokesman Ryan Frazier that Bagby did not attend the July 2016 meeting in which Farrell agreed to donate the $100,000. That meeting included Executive Director Damon Jiggetts, “a second Peter Paul staff member” (probably Ripperton), and board member Justin Moore III, a lawyer and son of a former Dominion chairman.

Every piece of evidence indicates that Farrell and Dominion’s generosity to Peter Paul was entirely altruistic. Any insinuation otherwise, on the basis of the evidence presented, is insulting to Farrell, Bagby, and Dominion.

There are many issues where it is legitimate to raise questions about Dominion’s policies and practices — coal ash, the Atlantic Coast Pipeline, nuclear power, solar power, the rate freeze, Dominion’s influence in the legislature, just to name a few. We need a vibrant press to, in the immortal words of Henry Howell, keep the big boys honest. But a $100,000 donation to an East End charity is not one of those issues.

Update: It may be worth nothing that Dominion has contributed $4,000 to Bagby, making it his third largest contributor behind the Virginia Association of Realtors and the Virginia Legislative Black Caucus, according to the Virginia Public Access Project.

The Logic Behind the Grid Transformation Act

Katharine Bond. Photo credit: Charlottesville Tomorrow

After providing an overview of The Grid Transformation and Security Act of 2018 yesterday, I had numerous questions about the thinking behind many of the measures it proposes. So I talked to Katharine Bond, a senior policy official for Dominion Energy to get the power company’s perspective. Dominion has been a key player in drafting the three-bill package, although Bond insists that many stakeholders, not just Dominion, have had input into it.

First question: How did Dominion Energy Virginia come up with that $1 billion figure for refunding or reimbursing its customers over the next eight years. Where is that money coming from? And does it fully compensate for the over-charges that Dominion retained thanks to the rate freeze implemented in 2015?

  • Up-front refunds for over-charges. Dominion will refund rate payers $133 million up-front. That number comes from a 2016 case in which the State Corporation Commission determined that Dominion had racked up that amount in over-charges during 2015 and 2016. Dominion foes have cited a figure of $400 million in over-charges, but that doesn’t account for big expenses relating to the disposal of coal ash. Dominion had to eat those costs due to the freeze, Bond says, and no reasonable accounting would omit it from the equation.
  • Offsetting later over-charges. To compensate for over-charges incurred since the SCC hearing, Dominion has agreed to write off expenses relating to the 2013 conversion of three coal-fired power stations — in Altavista, Hopewell and Southampton — as rough compensation. An SCC-approved rider (rate adjustment clause) allowed Dominion to bill rate payers for that conversion expense. Under the Grid Transformation Act, Dominion will drop those charges from its electrical bill, which will provide $25 million in rate relief each year — amounting to $200 million over eight years, and $540 million in additional savings beyond, for a total of $740 million. Why write off the biomass plant conversions? Dominion looked over its generating fleet, Bond says. It couldn’t very close down cost recovery of the Warren gas-fired station or one of the nuclear plants, so it settled on the biomass conversions.
  • Tax breaks from Uncle Sam. The intent of the legislation is to pass on 100% of the tax savings that Dominion Energy Virginia gains from the recently enacted federal tax reform, says Bond. “We’re comfortable that there will be at least $100 million. If there are additional savings, we’ll adjust rates down again.”

Second question: What’s wrong with the pre-freeze regulatory regime? What needs fixing?

After an unsuccessful experiment with deregulation, the General Assembly enacted the current regulatory regime in 2007. Electric bills reflect a composite of three types of rates requiring SCC approval: base rates, primarily operating costs accounting for about half of electricity charges; fuel adjustment clauses, which pass through rising and falling costs of fuel; and rate adjustment clauses (also referred to as RACs or riders), which cover the capital costs of new investments such as power plants. (The so-called freeze enacted in 2015 affected only the base rates.)

That regulatory regime “fit the world of 2007, not 2018,” says Bond. In 2007, carbon regulation wasn’t on the radar, as it is today. The utility didn’t have “literally thousands of points of interconnection” with intermittent solar power producers. Meanwhile, she adds, “tolerance for outages is decreasing every year.” If the power goes off, “people can’t work from home, can’t bank from home, kids can’t do their homework.” Virginia needs to upgrade its electric grid.

Dominion spokesman David Botkins elaborates in an email: The 2007 system was set up to incentivize new power generation “because policy makers were not comfortable with Virginia being the second largest importer of electricity [behind] California at that time. … Things have changed drastically since 2007. We have adequate generation supply now but the appetite for more renewables grows as the policy makers [want] to keep reducing carbon. Renewables require a much different kind of grid system that is less outage prone and more secure.

Yeah, I get that. But why can’t the old regulatory regime accommodate the changes that are needed?

Says Botkins: “We and others believe that the reinvestment (of earnings) model … is a better way to go. Less rate fluctuation, [fewer] riders, stronger/smarter grid. 2007 was for then. 2018 is for now and the years ahead. …”

Third question: Will the Grid Transformation Act emasculate SCC regulatory powers?

Bond says no.

The bill would change the SCC from reviewing and adjusting rates every two years to every three years. To me, that seemingly would allow Dominion to over-charge customers for longer periods of time. But even a three-year review is more frequent that the practice in most states, Bond says. Moreover, this way will allow the SCC to “smooth out” base rates. Many issues involve multi-year costs like early retirement. Instead of expensing the costs all in one year, perhaps they should be expensed over two years.

Also, to protect rate payers in riders, the proposed law provides for SCC review of the front end of so-called “transformative” investments enumerated in the legislation as well as the back end. “When it comes to the big transformative investments, we don’t have a blank check,” Bond says. “We have to bring forward a plan to say, ‘Here’s what we want to invest in.’ The SCC will review it. On the back end, we have to say, ‘Here’s what we spent, and here’s how it matched up.’ They check the math. It’s a fully litigated case.” If there are over-earnings, she says, the SCC will subtract them from what the company can charge.

The Great Grid Grab

Who gets what from a Dominion-backed legislative package overhauling Virginia’s electric grid? At this point, there are more questions than answers.

Last week lawmakers friendly to Dominion Energy Virginia introduced sweeping legislation, The Grid Transformation and Security Act of 2018, which would increase investment in Virginia’s electric grid with the goals of increasing renewable energy, reducing power outages, and guarding against cyber-sabotage. Backers say the three-bill package also would restore rate-setting oversight by the State Corporation Commission after three years of a rate freeze, and return a cumulative $1 billion in refunds and rate reductions to customers over eight years.

The response from some of Dominion’s traditional foes was negative. Critics suggested that the legislation would neuter the SCC’s oversight powers even while nominally restoring them, thus allowing the utility to keep hundreds of millions of dollars due the rate payers.

“This bill is bad policy and dangerous, giving Dominion even more power over our lives and our future,” responded Tom Cormons, executive director of Appalachian Voices, a group that has helped lead the fight against Dominion’s Atlantic Coast Pipeline project, in a press release. “For far too long, the legislature has gone along with the monopoly’s plans, and it’s high time for our elected representatives to finally say ‘no’ to Dominion.”

In a Washington Post op-ed, Stephen D. Haner, a lobbyist representing the Virginia Poverty Law Center (and a frequent contributor to this blog), described the proposals as a “preemptive attack” on the SCC’s independence. “The outcome Virginia consumers should be hoping for is a return to full SCC authority and an almost immediate rate case to review the earnings during the recent regulatory holiday.”

However, environmental groups such as the Virginia Chapter of the Sierra Club, the Southern Environmental Law Center, and the Chesapeake Climate Action Network, which have combated Dominion over the pipeline, solar power, and coal ash disposal, have refrained so far from blasting the bill — at least in official statements. By packing environmental desiderata such as renewable power, energy conservation, electric vehicles, energy storage systems and microgrids into the bill, Dominion may have disarmed some of its critics.

The most comprehensive description of the package comes from Dominion. The summary that follows comes from an “overview” prepared by the company’s communications team.

Refunds and rate reductions. Refunds and rate reductions for rate payers  totaling more than $1 billion over the next eight years include:

  • $133 million in one-time credits.
  • $740 million in rate reductions achieved through elimination of the biomass rider and other riders.
  • $100 million annually from lower taxes resulting from the recently enacted federal tax reform.

State Corporation Commission oversight. The legislation restores SCC review of Dominion base rates but reviews base rates every three years instead of every two years, as it did before the freeze. The bill also adds SCC reviews before and after grid transformation investments are undertaken.

The legislation will reduce future riders (also called RACs, or Rate Adjustment Clauses), which are surcharges for new projects. States the Dominion summary: Before future riders can be added for new investments, the SCC will determine if there were overearnings. If there are overearnings, SCC will use them to offset the cost of future riders.

Grid transformation investments

The package allows for investments to build a more sustainable and resilient grid. These investments, summarizes the Dominion outline, aim to “reduce outages or restoration times, secure energy assets, enhance tools available to customers, and increase investments in renewable generation.” The investments can be grouped as follows:

Reliability investments

  • Automatically reporting of outages when they occur.
  • Prediction of certain outages before they occur so crews can be dispatched to equipment nearing failure.
  • Isolation of outages so fewer customers are impacted.
  • Reduction of voltage fluctuations to improve power quality for industrial and other customers.
  • Dispatch of crews more precisely to restore power more quickly.
  • Automated routing and restoration of service.
  • Better integration of renewable generation.
  • Installation of energy storage systems and microgrids
  • Strategic undergrounding of outage-prone lines.

Security investments Continue reading

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.