Category Archives: Energy

Dominion Touts Economic Benefits of Pumped-Storage Project

“Technology Risks and Maturity Level of Energy Storage Technologies.” Graphic credit: Dominion 2017 Integrated Resource Plan.

A proposed pumped hydroelectric storage power station in Southwest Virginia would bring more than $576 million in economic benefits to the Commonwealth, including $320 million in economic impact for Southwest Virginia, according to a study prepared by Richmond-based Chmura Economics & Analytics and commissioned by Dominion Energy.

The hydroelectric project, proposed by Dominion Energy, would support 3,000 Virginia jobs during development and construction, including 2,000 in the coalfield region. Once in operation, the facility would produce about $37 million annually in economic impact for Southwest Virginia including $12 million annually in tax revenues for local governments in Southwest Virginia, states Dominion in a press release.

“We are very excited about the prospect of bringing another major capital investment to the coalfield region of Southwest Virginia,” said Mark Mitchell, vice president of generation construction. (Dominion already operates a hybrid coal-biomass generating plant in Wise County.) “The entire grid system will benefit from having this new generation once it comes online, and the local area will benefit from the jobs and economic benefits that will come from it.”

The Dominion press release did not address the potential impact of the pumped-storage project on Virginia rate payers. While the facility would entail a hefty up-front capital cost, it could generate electricity during periods of peak demand or, potentially, offset fluctuations in output by Dominion’s increasing fleet of utility-scale solar farms. In its 2017 Integrated Resource Plan, Dominion describes pumped storage as the most mature and economically feasible form of energy storage, adding that the “proven dispatchable technology … would complement the ongoing development of renewable solar and wind resources.”

While Dominion operates the nation’s largest pumped storage dam in Bath County, it had not indicated much interest in second major facility until this year when the General Assembly enacted a bill that encourages a Virginia utility to build a pumped-storage facility in the coalfields. The law would allow the utility to petition the State Corporation Commission to recover project costs as they are incurred rather than waiting until the project is complete. Legislators made no secret of the fact that they saw the project as a boon for the economically depressed coalfield region, and some speculated that the pumped-storage facility might be accompanied by extensive local investment in solar power.

A pumped storage facility uses gravity-fed water from an upper-level basin to a lower-level basin to power the generators during periods of peak demand, when electricity is most expensive, and uses electric power to pump the water back to the upper basin when electricity is cheap.

After examining more than 150 potential sites in far Southwest Virginia for suitable geology and topography, availability of water, proximity to electric transmission lines, impact on landowners and other factors, Dominion has selected a site in Tazewell County “for further study.” Should its in-depth, on-the-ground studies show the site to be not suitable, it has identified other candidate locations for the facility.

Another option, touted by coalfield legislators, was to use a mine cavity as a lower reservoir. Dominion has engaged Dr. Michael Karmis at Virginia Tech to evaluate the idea. “Based on information provided to Dominion Energy Virginia,” says the Dominion website, “the former Bullitt mine near the town of Appalachia was identified as a top site for evaluation and will be evaluated in the Virginia Tech study.”

The company website says that the project is “in its very early stages and the project’s final size and scope have not yet been determined.” After scrapping with landowners along the route of the proposed Atlantic Coast Pipeline, of which it is the managing partner, Dominion is “sensitive to the needs and concerns” of homeowners who might be impacted by a pumped storage facility, the website says. The company “will make every effort to keep them informed and work with them throughout the process.”

Bacon’s bottom line: While Dominion is careful to say that it has not committed to a pumped-storage project, the fact that it has commissioned a positive economic impact report suggests that it is laying the political/PR groundwork for one. Could this be a harbinger of a greater commitment by Dominion to solar and wind power in the future? Or does Dominion plan to sell electricity into wholesale markets to for purchase by other utilities with big plans for renewables? That’s another economic analysis I’d like to see.

Consumer Group Calls for Scrapping North Anna 3

 

 

 

Dominion Energy may have declared a “pause” in the development of a third nuclear unit at its North Anna Power Station, but a consumer advocacy group says that’s not good enough. It’s time to shut down the project permanently.

“Dominion needs to kill North Anna to protect rate payers,” said Irene Leech, president of the Virginia Citizens Consumer Council (VCCC). Critics have estimated that the project will cost roughly $19 billion, which would make it the most expensive power plant ever built in Virginia by a factor of ten or more. “If Dominion doesn’t do it, the SCC (State Corporation Commission) should intervene.”

Leech made her comments while introducing Dr. Mark Cooper, senior fellow for economic analysis, Institute for Energy and the Environment, at Vermont Law School, in a media conference call. Cooper, who had predicted the recent cancellation of the V.C. Summer nuclear plant in South Carolina after massive construction cost overruns, filed testimony with the SCC today on behalf of the VCCC in regards to Dominion’s 2017 Integrated Resource Plan.

“Dominion’s recently announced decision to suspend development of North Anna 3 is welcome, but long overdue and not as decisive as it should be,” Cooper said. “The Commission should order North Anna 3 removed from the IRP and refuse to allow any cost recovery associated with the development of North Anna 3 other than through the normal rate-making process, in which the utility demonstrates that it is the least cost option and useful to ratepayers.”

While acknowledging that the nuclear plant is extremely expensive, Dominion has argued that the utility should preserve the nuclear option to cope with a worst-case regulatory scenario restricting carbon-dioxide emissions. In its integrated resource plan, the company explores six scenarios. In one of them, Plan H, Dominion would be have to cut carbon emissions 7% compared to a 2012 baseline by 2030, compelling the closure of up to four coal-fired units at its Mecklenburg and Clover power stations, and making it impossible to make up the lost base capacity with natural gas. The plan contemplates 5,760 megawatts of new solar capacity, but solar output is intrinsically variable. That would leaves nuclear as the only option when the sun didn’t shine, the company has said. The company would not need to build the nuclear plant under any other regulatory scenario.

While some observers assume that Dominion hit the pause button on North Anna 3 because of horrendous construction cost overruns at plants in South Carolina and Georgia, spokesman David Botkins says the company made the decision more than a  year ago. Regulatory uncertainty made it prudent to put the project on hold but not to spike it. The Clean Power Plan, which orders states to impose CO2 emissions on their electric utilities, is not dead. Its legality is tied up in the federal court system, and the McAuliffe administration is moving ahead with his own low-carbon plan for Virginia. The company has not made the decision to build the nuclear unit but thinks it worthwhile, after spending roughly $600 million to obtain a Combined Operating License (COL), to keep the option open.

Given the momentum of technology, Cooper argued, there is no chance of nuclear becoming economically viable. “Nuclear construction costs escalate relentlessly, driven by complexity,” he said. “Nuclear is the most expensive way imaginable to reduce carbon emissions. It’s a bad investment. I have wind, solar, and energy efficiency in hand today at a third of the cost of North Anna 3. I want to get [nuclear] off the table.”

The United States electric system is transitioning “to flexible, small-scale, renewable, distributed” energy sources like rooftop solar. Meanwhile investments in energy efficiency and demand-management strategies are holding down growth in electricity consumption, Cooper said. The ability to store large volumes of electricity in batteries will make it possible to overcome the problem of volatile energy output.

“Think about your laptop, tablet, or cell phone. Ten years ago … the battery life was an hour. Now it’s ten hours. They’re making huge progress in energy storage,” Cooper said. Meanwhile, solar + batteries can increase generating capacity in increments rather than in one a big chunk when the nuclear plant comes online. Utilities talk about solar plants sitting idle at night or under cloudy skies. Large swaths of the electrical infrastructure, such as combustion turbine plants that run only during periods of peak demand, spend much of their time idle as well. Nuclear isn’t cost competitive now, and it never will be, he said.

Putting the North Anna 3 project on hold is not an adequate response, Cooper said. The General Assembly allowed Dominion to capture $570 million from rate payers to defray the cost of obtaining the North Anna 3 operating license. That sum has economic value. Assuming rate payers could earn 3% annually on that money, the opportunity cost amounts to almost $300 million over ten years. Even with the project on hold, said Cooper, “rate payers are bearing a burden.”

Dominion thinks of the North Anna 3 option as a form of insurance policy. “As has been shown throughout history, forecasts change over time,” says a prepared Dominion statement. “Fuel diversity is a key component of any energy plan. Our customers enjoy some of the lowest rates in the United States, due in large part, to the safe, reliable, clean and dependable nuclear units at Surry and North Anna.”

“The [Combined Operating License] is good indefinitely, and, while no decision has been made to build it, we could make a decision to move forward with it if business conditions change,” said Richard Zuercher, spokesman for Dominion Energy’s nuclear power operations. “We would not do so, however, without authorization from the State Corporation Commission.”

The Long, Painful Slog to Resolving the Net Metering Debate

Graphic credit: SolaireGen

After a two-hour telephone discussion Thursday, participants in a “net metering” sub-group of the Solar Policy Collaborative Workgroup didn’t seem to agree on much other than which issues need to be resolved. But that represented progress of a sort toward promoting small-scale, distributed solar energy in Virginia by businesses, homeowners and nonprofits.

“These are very difficult and complex problems. We made a run at it last  year, and didn’t get there,” Mark Rubin, the Virginia Commonwealth University professor and mediator behind the policy collaborative, said at the beginning of the session. “From a process perspective,” he said at the end, “this has been a helpful, productive call.”

The solar policy group, which worked out compromise legislation enabling “community” solar in the 2017 session, tackled the net metering issue without success last year. Two-thirds of the way through the current year, the group still seems far from formulating a consensus on net metering. But the conference-call discussion Thursday, which included a diverse set of participants ranging from electric utilities to smaller solar developers and environmental groups, did at least illuminate the main fault lines of debate.

“Net metering” refers to the regulatory system governing how small solar power producers, usually businesses and households putting solar panels on their roofs, connect with power companies. Solar panels often produce more electricity than property owners can absorb during peak periods, and a policy question arises as to the terms and conditions under which they sell their surplus to the electric companies. Solar advocates say utilities should pay small producers the full retail rate. Utilities respond that (a) the full retail rate is higher than the wholesale price of electricity they can purchase on the open market, and (b) they should be compensated for maintaining the electric transmission and distribution grid that solar producers periodically draw upon.

Long a laggard in solar energy, Virginia now has a big pipeline of solar deals in the works, and environmentally conscious consumers soon will be able to purchase renewable energy developed by community groups and marketed and sold through the utilities. But most solar production is large scale generation in vast tracts farms owned and operated by the state’s electric utilities, Dominion Energy and Appalachian Power. Progress has been much slower for small-scale, rooftop solar for the masses.

The most intractable issue facing the net-metering workgroup centered on standby charges. While the impact of rooftop solar on Virginia’s electric grid is minimal now — less than 1% of the power supply — participants are looking 20 to 30 years down the road to when it could become a major contributor. If hundreds of thousands of customers generated most of their own electricity, cutting into utility revenues, other customers would be stuck with the cost of building and maintaining the distribution and transmission lines that even those with rooftop solar rely upon from time to time. To offset this erosion of market share, utilities want to charge solar businesses and households a stand-by charge amounting to several dollars per month.

Katherine Bond, Dominion’s senior policy adviser, noted that a minimum bill of $7 monthly would not cover the company’s costs.

Solar advocates and environmental groups counter that solar is cost positive — that solar has a value that benefits utilities. For example, solar panels emit no carbon dioxide emissions, thereby making it easier for states to attain regulatory goals. Also, peak solar production overlaps with peak electricity demand, reducing the need for utilities to purchase expensive, peak-load electricity on wholesale electricity markets.

These issues are all well known, as they have been hashed out in many other states. What’s not known are the particulars here in Virginia. Because each state has unique geography, solar exposure, and regulatory systems, cost-benefit numbers that might apply to California or North Carolina may not necessarily apply to Virginia.

Aaron Sutch, program director of VA SUN, expressed the view of many that he wants to see more data. “We really do appreciate a respectful dialogue,” he said. But he added, “We haven’t seen any data from the utility side on the issue of cost recovery. … This should be a data-driven process.”

Will Cleveland, a staff attorney with the Southern Environmental Law Center, agreed. “If you want stakeholder buy-in, present the data so we can see [that cost recovery] is a legitimate problem. It’s hard from an optics perspective to hear that you can’t share the data. It makes it hard for [solar] advocates to agree to any solution if the data isn’t provided.”

“I understand your point that you’d like it to be disseminated more broadly,” said Rubin, the lead mediator of the workgroup. Core members of the net metering sub-group have been exchanging detailed data. But due to the proprietary nature of the data, participants have been held to strict confidentiality. Perhaps, once a particular path forward has been chosen, it might be possible to share more detailed data, he added.

A related issue is the necessity of attributing a monetary value to the positive impact of rooftop solar.  It wasn’t clear from the discussion whether the electric utilities had any data to formulate an estimate.

The sub-group discussed other, seemingly less contentious, issues. No one voiced opposition to the proposition that anyone investing in solar energy today should be grandfathered, or protected, from changes in the law that would harm the financial return on their investment. Rubin said Virginia needs to create a “glide path” to a new system. “How do you go forward without hurting those people who have already committed to solar?”

Supremes Say General Assembly Can Order Electric Rate Freeze

Virginia Supreme Court Justice Elizabeth A. McClanahan.

In a six to one ruling, the Virginia Supreme Court ruled that the General Assembly does possess the right under the state constitution to put limits on the State Corporation Commission’s ability to regulate electric utilities. As a practical matter, that means that the multi-year freeze in base electric rates for Appalachian Power Company and Dominion Energy Virginia will stay in effect.

The Old Dominion Committee for Fair Electric rates, representing major industrial customers, the VML/VACO APCO Steering Committee, representing local government, and Karen E. Torrent, a Dominion customer, had challenged the freeze, which they claim lock in electric rates at levels that otherwise would have required potentially hundreds of millions of dollars to customers.

While giving the General Assembly “wide latitude to determine the standards” that must be used in setting rates, argued the Old Dominion lawsuit, “The Constitution reserves for the Commission — and the Commission alone — the power to set electric utility rates.

By suspending biennial reviews and prohibiting the Commission from changing base rates (except at the utility’s request, on a temporary basis,” the plaintiffs argued, state code “unconstitutionally ‘fixes the base rates that a utility will charge its customers for a period well into the future, and deprives the Commission of any power to reduce or otherwise regulate those rates.”

In an opinion written by Justice Elizabeth A. McClanahan, however, the court majority upheld the General Assembly’s primacy over the SCC. Under the 1902 Constitution of Virginia, the SCC did not enjoy constitutional authority to set rates — authority was bequeathed by the General Assembly. The 1971 constitution did provide constitutional authority to the SCC, but “subject to such criteria and other requirements as may be prescribed by law.”

The General Assembly has limited the SCC rate-setting authority at least twice before the 2015 rate freeze. In 1999, in enacting the Virginia Electric Utility Restructuring Act to introduce competition among providers of electric generation, the legislature capped base rates for electric utilities for seven years. In 2007 when the General Assembly ended the deregulation program, lawmakers required a rate hearing every two years and prescribed that the SCC could not order a rate reduction unless it found that the utility had excess earnings in two consecutive biennial reviews.

“We have repeatedly stated in other cases since the passage of the 1971 Constitution of Virginia that the Commission’s authority to regulate the rates of electric companies has been ‘delegated’ to it by the General Assembly under various legislative enactments,” McClanahan wrote.

Justice William C. Mims wrote a dissenting opinion: “I reject the premise that the rate-making authority granted to the Constitution is subordinate to the General Assembly.” The majority was wrong in this case, and it was wrong in previous cases when it upheld the same principle, he declared. “The General Assembly may impose standards and prerequisites the Commission must adhere to when exercising its power and duty to set rates. It does not mean that the General Assembly may suspend that power and duty.”

Is Dominion Generating Millions in Excess Profits? It Depends on Who’s Doing the Accounting.

The SCC says Dominion generated up to $395 million in excess revenue in 2016 under the electric rate freeze. Dominion says the SCC is inflating the numbers.

Depending on how you crunch the numbers, Dominion Energy Virginia (DEV) is earning between $221 million and $252 million in excess profits. Had the company not expensed nearly $174 million in coal ash clean-up costs, excess earnings would have amounted to $395 million. That’s the analysis of the State Corporation Commission in a report released last week.

The report supports the narrative that Dominion and its counterpart in western Virginia, Appalachian Power Co., negotiated a lopsided deal for themselves when they pushed for a base-rate freeze in 2015. Invoking the uncertainty created by the Obama administration’s Clean Power Plan, which would have compelled a major re-engineering of the electric power industry, power companies persuaded the General Assembly that a rate freeze would provide stability for the companies and their customers.

Now that the Clean Power Plan appears to be a dead letter under the Trump administration, critics argue, it’s time to roll back the freeze. Sen. J. Chapman Petersen, D-Fairfax, who had sought in the 2017 General Assembly session to overturn the freeze, said the SCC report confirms his claims. “It simply proves what we suspected all along,” he told the Richmond Times-Dispatch. “Everything I filed last year that was even mildly controversial will be coming back.”

I wanted perspective on the SCC numbers, so I reached out to Dominion as well as Edward L. Petrini at Christian Barton LLP, who represents large industrial and commercial electricity customers in Virginia, and to Michael Kelly, director of communications for the Virginia Attorney General’s Office. Only Dominion responded to my interview request.

I spoke with Thomas P. Wohlfarth, senior vice president of regulatory affairs. Not surprisingly, he says there is a lot less to the SCC excess-earnings numbers than meets the eye.

Accounting for coal ash expenditures. It is “ridiculous,” Wohlfarth says, to remove expenses tied to coal ash removal from the excess-earnings estimates. Dominion incurred a large liability when the Environmental Protection Agency ordered it to develop a permanent storage solution for millions of tons of coal combustion revenue accumulated over the decades. While about half the coal ash expenses qualify for recovery under a “rider” request not included in the base rate, about half of it does, he says.

“There are no circumstances under which it would be appropriate other than to record those expenses when the liability occurred,” Wohlfarth says. Referring to the SCC presentation of the excess-earnings data, he adds, “That’s the game they kind of play, trying to inflate the numbers worse than they are.”

Accounting for Return on Equity. Other accounting issues are more complicated to explain. First some background…. The key determinant in how much money electric utilities are allowed to earn before returning the surplus to ratepayers is Return on Equity (ROE), a ratio expressing earnings as a percentage of shareholder equity. The goal is to set the ROE at a level high enough to encourage power companies to invest in their utility operations — but no higher. Dominion Energy, DEV’s parent company, typically earns a corporation-wide ROE of about 14% to 15%. That includes the return on non-regulated business operations. Because regulated utilities are perceived as less risky, the SCC sets DEV’s ROE significantly lower.

The SCC calculates separate ROEs for Dominion’s generation business and its distribution business, which have different risk profiles. Here are the results based on SCC accounting:

“The combined generation and distribution earned ROE of 11.94% is above the 9.60% ROE approved by the Commission for DEV’s RACs (Rate Adjustment Clauses) during 2016 by 2.34 percentage points, or $358.2 million in revenues,” states the SCC report, “and is above the 10.0% ROE approved by the Commission in DEV’s last biennial review by 1.94 percentage points, or $297 million in revenues.”

Wohlfarth says that the SCC inflated the appearance of excess earnings by using the 9.6% ROE as the basis for its calculations. The SCC allows the company to earn a 10.7% ROE for the base rate, which applies to ongoing operations and are subject to the freeze. Why would the SCC pick the high ROE used for rate adjustment clauses rather than the low ROE used for the base rate when the freeze applies to the base rate?

An exceptional year. Another thing to consider, says Wohlfarth, is that “2016 was an anomalously good year for us.” Dominion benefited from a spike in revenue relating to the way PJM Interconnection, the regional transmission organization of which Virginia is a part, calculated its “capacity” payments. (PJM pays power companies separately for making generating capacity available, whether it is used or not, and for the electricity they actually generated.) That non-recurring revenue added $150 million in revenue.

“If you normalize for capacity revenue, we were down around 11% ROE, which doesn’t give us much of a buffer at all,” says Wohlfarth.

That leaves Dominion somewhat ahead of the game in 2016, concedes Wohlfarth, but that’s only one year. The company is still exposed to considerable downside risk in future years.

Future risks. Coal ash remains a potential liability. While Dominion has endeavored to pursue a “cap in place” strategy, environmental groups have pushed hard for Dominion to remove the coal ash and place it in synthetically lined landfills, which could be significantly more expensive. Dominion is expected to issue a report on the economics of coal ash disposal to the General Assembly later this fall.

Also, Dominion remains at risk for major weather events. In 2016, the company experienced only one hurricane remnant, but it was not an expensive one. A superstorm like Hurricane Harvey or Hurricane Irma could incur hundreds of millions of dollars in repair costs.

Yet another risk Dominion faces is plant “impairment.” The company still operates a handful of coal-burning power plants, but in an era of increased electric generation by wind, solar and gas, they are increasingly relegated to the sidelines. When natural gas is cheap and gas plants are more economical to run, coal plants are dispatched less frequently, which means they produce less revenue.

“We’ve got units that are not being dispatched very much at all,” says Wohlfarth. “It becomes difficult to keep them on the books at value. We’re not at that point right now. But it’s something we’re always reviewing.”

Impairment resulting from changing economic or regulatory conditions could result in write-downs of hundreds of millions of dollars, he says. That was one of the concerns about the Clean Power Plan, which, if implemented would have put some of Dominion’s remaining coal-generating assets in jeopardy. While the Clean Power Plan is on the back burner under the Trump administration, it is not dead. The initiative is tied up in the courts. Meanwhile, the McAuliffe administration is pursuing its own restrictions on carbon-dioxide emissions.

All things considered, says Wohlfarth, and Dominion’s ROE is about where it ought to be. Revenues might be a little high in 2016, but they could well be lower in the years ahead. “It’s part of the balanced equation. … Look under the hood, and you’ll see that our rates are adequate to deal with the risks we take.”

Do Utilities and Coal Companies Run Virginia? Hardly.

Statue of Gov. Harry F. Byrd outside the Virginia state capitol building. A “traditionalistic” political culture? Maybe once upon a time, but not anymore.

Vivian Thomson argues that utilities and coal companies dominate Virginia’s energy policy. Her simplistic view ignores the reality that environmentalists wield significant power now.

Vivian E. Thomson has a big beef with state government. The University of Virginia environmental sciences professor contends that the political system in the Old Dominion is rigged in favor of the electric utilities and fossil fuel industries against selfless crusaders, such as herself, fighting for the public interest. She persists in this belief even though the State Air Pollution Control Board, of which she was a member in the early 2000s, prevailed in the two major controversies she describes in her book, “Climate Capitulation: An Insider’s Account of State Power in a Coal Nation.”

In that book, she lists three factors that allow “entrenched business elites” to exercise “undue power” in the making of air pollution policy through legislative and administrative processes:

(1) campaign contributions that, in the energy and natural resources sector, are dominated by one electric utility and coal interests, (2) a reactive, part-time legislature that has virtually no independent analytical capacity, and (3) a traditionalistic political culture.

Thomson’s view of Virginia’s political economy is widely shared among environmentalists and left-of-center activists and politicians. A friend of mine, a professor of environmental law whose opinion I respect, gave the book fulsome praise. Accordingly, Thomson’s thesis deserves a thoughtful response, and that’s what I will endeavor to provide in this post.

Although Thomson provides nuggets of genuine insight, her analysis of Virginia’s political economy is as one-sided as her chronicle of the regulatory controversies in which she was embroiled. (See my critique of her book in “Rogue Board“). She focuses exclusively on how corporations exercise power and influence in Virginia while ignoring the increasing clout of its opponents, who have won numerous victories in the realm of politics, public opinion and the law. Yes, corporations have clout. But so do their foes. Sometimes Big Business gets its way. Often, it doesn’t.

I will start by addressing Thomson’s comments about the part-time legislature, which have considerable merit, move to the meaningless characterization of Virginia as having a “traditionalist” political culture, and close with a discussion of the role of campaign contributions in Virginia politics.

Asymmetry of information. The disparity in political power issues not just from business campaign donations, Thomson argues, but from an asymmetry in information. Virginia has a part-time citizen legislature, and legislators have tiny staffs. As a practical matter, senators and delegates in the General Assembly are reliant upon the expertise of state employees and outsiders such as lobbyists.

Writes Thomson:

Virginia’s legislature is designed to be a part-time body, with the notion that citizens serving as representatives can remain closely attuned to their constituents’ needs and preferences. … [But] even the most dedicated legislators cannot be independently well informed if they have small staffs, low pay, and short sessions.

Less professionalized legislatures are handicapped when it comes to analysis of complicated technical issues such as those commonly encountered in the environmental and public-health policy arenas. When Virginia’s legislators need information they turn to lobbyists or to the executive branch. Companies take advantage of their ongoing relationships with state civil servants and lawmakers to get deals that favor their interests. Large companies are especially well positioned to push for light-handed regulation, since they can expend considerable resources on attorneys and consultants to fight limits they do not like. …

In the environmental policy arena, power flows to those who can collect and interpret complicated scientific, legal, and economic information. The question is, who will provide legislators that information and how will we know who those sources are?

Thomson makes a valid point. Part-time legislators cannot possibly master the infinite complexities of topics as varied as health care, transportation, state-local governance, fiscal issues, K-12 education, higher education, energy and the environment. As a consequence, Virginia lawmakers do rely heavily upon the expertise offered by state employees and lobbyists, many of whom have long memories and deep knowledge, not only of the pros and cons of issues, but of the long legislative and regulatory histories behind the controversies.

She errs, however, in supposing that only corporations and industry groups play the game. The Virginia Public Access Project (VPAP) database lists 72 organizations employing lobbyists on issues relating to “energy.” Dominion Energy. with five lobbyists, had one of the largest profiles in the General Assembly. But, then, the Southern Environmental Law Center (SELC) also listed five lobbyists.

Perusing the VPAP database, I identified seven other environmental organizations with registered lobbyists addressing energy issues: Appalachian Voices, the Chesapeake Climate Action Network, the Nature Conservancy, the Piedmont Environmental Council, the Sierra Club-Virginia Chapter, the Virginia Conservation Network, and the Virginia League of Conservation Voters.

They were way outnumbered by business lobbyists, but the business lobbyists were a fractured group. The largest number by far represented businesses with an interest in alternate energy sources (wind, solar, biomass, nuclear) or energy efficiency. A significant number represented industrial consumers of energy. Depending on the issue, any of these interest groups might align themselves with the electric utilities one day or the environmentalists the next. 

The impression one gets from studying the list is that the legislature is open to a cacophony of voices on energy issues which no single company, trade association or environmental group could possibly dominate. No one has a monopoly on information. Continue reading

Pipelines and “Environmental Justice”

“Environmental Justice” has been a much bigger rallying cry in the pipeline controversies out west than here in Virginia.

As I was perusing the federal court ruling on the Sierra Club vs. FERC lawsuit (see previous post), I encountered a realm of administrative law with which I was entirely unfamiliar: environmental justice. I’d heard of the concept, of course; I just didn’t realize that it had insinuated itself into environmental impact statements (EISs) for pipelines, transmission lines, and the like.

The majority opinion explained the relevance of the concept this way: “The principle of environmental justice encourages agencies to consider whether the projects they sanction will have a ‘disproportionately high and adverse’ impact on low-income and predominantly minority communities.”

In this particular instance, involving the EIS for the Southeast Markets Pipeline Project, the Sierra Club argued that FERC had failed to adequately take the principle into account. According to the EIS, 83.7% of the pipeline complex’s proposed routes would cross through, or within one mile of, environmental-justice communities.

However, an adverse impact on a minority/low-income community is not necessarily a deal killer. FERC, the court opined, simply must “take a hard look” at the effect on minority/low income areas when drafting an environmental impact statement, and disclose relevant information to the public. And that the commission did. FERC concluded that feasible alternative routes would affect a comparable percentage of environmental-justice populations, the court said. “FERC’s decision to directly compare the proposed alternatives to one another, rather than to some broader population, was reasonable under the circumstances.”

“Environmental justice” has been a rallying cry out west, most prominently in the Dakota Access Pipeline controversy. We don’t hear much of it in Virginia, but I was curious: How does the proposed Atlantic Coast Pipeline rate according to environmental justice criteria?

Here are the numbers, as extracted from the ACP environmental impact statement: In Virginia the percentage of minorities census tracts within one mile of the ACP pipeline and related facilities varies from 0.2% to 100%. In ten of the 63 census tracts, the percentage of minority population is meaningfully greater than that of the county in which it is located. But in 53 tracts, it is not. In other words, it appears that minorities are less impacted than whites.

Likewise, 11.5% of all Virginians live below the poverty line. Thirty-four of 63 census tracts in Virginia within a one-mile radius of ACP facilities have a higher percentage of persons living below the poverty line. In other words, despite the fact that pipelines don’t run through urban areas and suburbs where incomes tend to be highest, but through rural areas where incomes are lower, only 54% of the census tracts affected by the pipeline have a higher poverty rate.

The primary adverse impacts on environmental-justice communities would be temporary increases in dust, noise and traffic from construction work. But, according to the ACP environmental impact statement, “these impacts would occur along the entire pipeline route and in areas with a variety of socio-economic backgrounds.”

These numbers undoubtedly explain why pipeline opponents have not made environmental justice an issue here in Virginia.

It’s not as if the engineers working for Dominion Energy, the managing partner of the pipeline, were especially socially conscious. Rather, in selecting a route, they were threading the needle between national parks, the Appalachian Trail, conservation easements, and other environmental, historical and cultural assets, any one of which could have spiked the project. That the pipeline had so little impact on minorities and low-income Virginians was the luck of the draw.

Sometimes infrastructure projects like highways, natural gas pipelines and electric transmission lines will disproportionately affect minorities and the poor, as it happened with the Southeast Markets Pipeline Project, and sometimes they won’t. Route selection is driven mainly by geography, terrain, market considerations, and economics; the socioeconomic impact is incidental and random.

For all practical purposes, the closest thing to a social-justice issue in Virginia is landowner rights — justice for the propertied class. Are landowners getting fair compensation for the loss of value to their land? That’s a fair question, but if it doesn’t affect the poor and minorities disproportionately, it’s not a matter of “social justice.”

Federal Pipeline Ruling a Big Deal… Or Maybe Not

Construction of the Sabal Trail Pipeline, part of the Southeast Markets Pipeline Project, in Florida. Photo credit: Orlando Sentinel.

Environmentalists notched a win yesterday when the U.S. Court of Appeals in the District of Columbia issued a ruling finding that the Federal Energy Regulatory Commission (FERC) had failed to properly take into account the impact of greenhouse gas emissions on climate change when approving the Southeast Markets Pipeline Project more than a year ago.

“Today, the D.C. Circuit rejected FERC’s excuses for refusing to fully consider the effects of this dirty and dangerous pipeline,” said Staff Attorney Elly Benson with the Sierra Club, the plaintiff, in a prepared statement. “Even though this pipeline is intended to deliver fracked gas to Florida power plants, FERC maintained that it could ignore the greenhouse gas pollution from burning the gas. … Today’s decision requires FERC to fulfill its duties to the public, rather than merely serve as a rubber stamp for corporate polluters’ attempts to construct dangerous and unnecessary fracked gas pipelines.”

Could this spell Doomsville for the Atlantic Coast Pipeline and Mountain Valley Pipeline here in Virginia?

Probably not. I asked for a response from Kate Addleson, director of the Sierra Club Virginia Chapter. She was tied up in meetings today so she couldn’t talk, but she forwarded me the national Sierra Club press release. That document did not speculate whether the D.C. federal court ruling would apply to other pipeline projects.

Also, Dominion Energy, managing partner of the ACP, has reviewed the ruling and concluded that it does not apply. “We … don’t believe it will have any impact on the ACP,” said spokesman Aaron Ruby. When reviewing the Southeast Markets Pipeline Project, FERC did not ask what the pipeline complex meant for greenhouse gas emissions. But in the 18 months since approving that project, federal regulators have become more attuned to climate-change impact, and FERC did examine the issue in the environmental impact statement it wrote for the ACP.

“Based on its analysis, FERC concluded that the ACP would not significantly contribute to climate change and could potentially offset some regional greenhouse gas emissions since much of the gas will be used to replace higher-emitting coal plants,” Ruby said.

While acknowledging that gas-fired plants generate less carbon dioxide per unit of energy than coal, environmentalists contend that gas-fired plants provide no net improvement when one considers the full life-cycle of gas production. Life-cycle analysis counts natural gas leaks from the production, collection and transportation of gas burned in the gas-fired power plants. Methane, a main component of natural gas, has a far greater greenhouse effect than carbon dioxide.

However, FERC rejected life-cycle analysis. Federal law, said the ACP environmental impact statement, “does not .. require us to engage in speculative analyses or provide information that will not meaningful inform the decision-making process. Even if we were to find a sufficient connected relationship between the proposed project and upstream development or downstream end-use, it would still be difficult to meaningfully consider these impacts, primarily because emission estimates would be largely influenced by assumptions rather than direct parameters about the project.”

Federal rule-making moves much slower than environmentalist thinking. When the Obama administration acted to decarbonize the U.S. economy in order to ward off climate change, official government policy allowed a large role for both natural gas and nuclear power. Many environmental organizations now disapprove of both energy sources, preferring renewable power like wind and solar instead. In the past half year, the Trump administration has positioned itself as a champion of fossil fuels. The D.C. Court of Appeals ruling may represent the legal high water mark for environmentalists for the foreseeable future.

Rogue Board

In “Climate of Capitulation,” former Air Board member Vivian Thomson argues unpersuasively that state government favors energy over the environment.

In 2005 Mirant Corporation operated a 482-megawatt coal-fired power plant in Alexandria. The facility was 60 years old, and it was dirty, emitting almost twice the allowed limits of nitrogen oxide (NOx). Due to its proximity to Reagan Washington National Airport, the plant had unusually low smokestacks, which meant that NOx, sulfur dioxide and particulates settled nearby. A Harvard University health study contended that installing Best Available Control technology at Mirant would avoid about 40 deaths, 43 hospital admissions, and 3,000 asthma attacks each year. In August of that year, the Warner administration ordered the plant shut down.

Mirant complied, but within a few weeks, citing an order from the U.S. Department of Energy, it reopened the facility. Conflict between Mirant on the one hand and environmentalists and citizens of Alexandria on the other raged for years. Warner’s successor, Governor Tim Kaine, tried to find a solution acceptable to all, and in 2006 the Department of Environmental Quality (DEQ) negotiated a permit that would reduce the local impact on Alexandrians by increasing the height of the pollution plume and dispersing emissions over a wider area. But the State Air Pollution Control Board, a majority of whose members sided with the opposition, voted 3 to 2 against it. Later, in 2008, the company agreed to merge smokestacks to lift the plume, accept the Board’s sulfur dioxide limits, and invest $34 million to reduce particulate emissions. The Air Board approved that permit, but Mirant’s owner, GenOn, ended up closing the plant before undertaking the improvements.

Vivian E. Thomson, an environmental science professor at the University of Virginia, recounts the Mirant episode in her recently published book, “Climate of Capitulation: An Insider’s Account of State Power in a Coal Nation.” Mirant’s ability to keep the Alexandria plant opened, she argues, was just one of many examples of how the energy lobby exercise power in Virginia and other states at the expense of the environment and citizens’ health.

Officials in the Kaine administration undermined and opposed the Board’s work, she asserts. The General Assembly interfered with Board decisions and enacted a law to expand the board from five to seven members for the purpose of diluting the power of the three activist board members, one of whom was Thomson herself. Resistance to the board’s policing of the environment reflected “cozy relationships” between regulators and businesses and Virginia’s “corrupt” environmental policy-making process, she says.

Vivian E. Thomson

Thomson details three major controversies in which she participated: the Mirant closing, the approval of Dominion Energy’s hybrid energy plant in Wise County, and the regulation of dust from coal trucks. Distressed by the way energy interests evaded her brand of environmental justice, Thomson describes a “climate of capitulation” — a system that shows “favoritism toward private interests and an inclination to maintain the status quo.”

By avoiding inflammatory rhetoric and maintaining a flat, academic style, Thomson strives to come across in the book as a reasoned observer of the political process. She doesn’t insult her opponents, she doesn’t engage in conspiracy theorizing, and she avoids a strident tone. But she never concedes that environmental regulation involves trade-offs with jobs, electric rates or electric reliability. In her analysis, protecting the environment and public health are not merely important goals, but the only goals worth considering.

Indeed, Thomson’s inability to acknowledge any perspective other than her own gives proof to the assessment of Kaine’s secretary of the environment, Preston Bryant, that the State Air Pollution Control Board was indeed a “rogue board.”

The Mirant controversy. Thomson’s blinkered view comes through most clearly in her recitation of the Mirant controversy. She never explains why the Department of Energy (DOE) issued an emergency order to reopen the Mirant plant after the Warner administration shut it down. The facility, as I discovered only by querying the Web, was one of three power plants supplying electricity to Washington, D.C. Pepco, the city’s utility, was planning to shut down one of the other three, the Potomac River Generating Station, for environmental reasons and it needed to upgrade a transmission line and substation feeding electricity to the capital from the outside. To avoid the risk of outages, the D.C. Public Service Commission petitioned federal authorities to keep the Mirant plant open until Pepco managed to complete the improvements. The DOE complied. Thomson deemed none of this background to be worthy of mention. Without it, the early behavior of Mirant and the Kaine administration are all but incomprehensible. 

The controversy persisted after Pepco completed its grid upgrade in July 2007. As Mirant struggled to stay in operation — operating mainly as a peaker plant only during the hottest and coldest days — Mark Rubin, a gubernatorial aide, brainstormed possible solutions to the problem. Eventually, he worked out a settlement, which the Air Board accepted. But in the end, the aging plant was beyond saving as natural gas began displacing coal in the energy marketplace. GenOn shut it down permanently.

Let’s recap. Governor Warner ordered the Mirant plant closed. The federal government ordered it reopened to ensure a reliable supply of electricity to Washington, D.C. through July 2007. The Kaine administration sought a compromise to allow the plant to continue operating beyond that date while also addressing environmental concerns. Protracted negotiations resulted in a deal that the Air Board approved. This is an example of Virginia politicians capitulating to energy interests?

The Hybrid Energy Center controversy. A parallel controversy in Wise County in which the Kaine administration did not accede to the air board’s wishes provides another alleged instance of state government caving in to the energy sector. In this case, the villain was the electric utility now known as Dominion Energy.

In 2005 Dominion had proposed building a $1.5 billion “hybrid” energy plant that burned coal, coal waste and waste wood. Dominion and its supporters billed it as a boon to economic development — 800 construction jobs, 75 post-construction jobs, 300 coal mining jobs, and $5 million yearly in new tax revenues for a county with a $44 million budget. As a bonus, the Virginia City Hybrid Energy Center would consume waste coal that was polluting regional streams and rivers. But activist groups protested that the project would perpetuate the environmentally destructive practice of mountaintop removal, generate air pollution that would harm nearby forests, and emit carbon-dioxide that contributed to global warming.

Dominion submitted the first part of its application for air pollution permits in the summer of 2006, and a second part in early 2007. The first governed sulfur dioxide and particulates, the second mercury and other toxics. The status of state and federal regulation of toxics and greenhouse gases was in flux at this time, with widely diverging views on how to deal with the pollution issues. Long story short, the Air Board hewed to interpretations different than those of the General Assembly and the Kaine administration, and took an adversarial view in the proceedings. Continue reading

A 40-Year Lease on Life for Transmission Tower Foundations

James River transmission-line towers near Newport News sporting new foundations. Photo credits: Dominion Energy.

In 1968 Dominion Energy Virginia erected a series of 18 towers across the James River to carry two transmission lines from south of the river to points in Newport News. The company built the tower foundations with marine-grade, corrosion-resistant steel that was billed to last for decades. By the 1990s, however, it was evident that the steel foundations were eroding. If they deteriorated sufficiently, one of the towers would collapse, putting the Virginia Peninsula at risk of disruption to its electric service.

The utility encapsulated the steel “H pile” foundations with a fiberglass jacket under the waterline and with a putty-like compound above in the hope of preventing further corrosion. The fix didn’t work. A 2013 inspection revealed rust still eating away at the foundation.

“While the 2013 inspection revealed we had a corrosion problem, further investigation found that we had a bigger problem than we thought,” says Mark Allen, Dominion’s director of transmission construction. There was no way of knowing precisely when, he says, but “eventually the towers would have collapsed.”

One remedy would be to build parallel towers and power lines, but that option would cost $50 million. It would be far preferable to repair the foundations in place. But Dominion could not take a chance of knocking the transmission line out of commission by cutting out the bad steel beneath the water and replacing it with good. In 2013, Dominion was under orders to close the two main coal-fired boilers at its Yorktown plant and was struggling to gain regulatory permission to build a new transmission line upriver near Jamestown. There were only two sets of transmission lines serving the Virginia Peninsula, so taking down the Surry-Winchester and Chuckatuck-Newport News lines would have left the entire region vulnerable to blackouts.

Dominion’s engineering staff came up with a solution that wound up costing rate payers only $25 million. The story was chronicled by local media but never given attention elsewhere in the state. When the project garnered recognition by the Southeastern Electric Exchange earlier this year, Bacon’s Rebellion thought it worth re-telling as an example of the trials and tribulations of maintaining an electric transmission grid.

Previous efforts to protect the H piles had not stopped the corrosion.

No one had tackled a job like this before. The foundations of the 18 towers varied in depth between four feet near the riverbanks to 40 feet near the navigation channel, and the company had to cap the foundations to about 15 feet above the waterline, says Allen. The company also had to maneuver around restrictions on time and location due to protections for osprey and cormorant nests on multiple towers, a peregrine falcon nest on the nearby James River Bridge, and fish migrations from Feb. 15 to June 30, not to mention weather conditions.

Divers entered the water, which was so dark at times that they couldn’t see their hands in front of their faces, to install clips on the side of each H pile. To these clips they fastened rebar cages. Around the rebar cages, the construction contractor put in an epoxy-fiberglass jacket to facilitate the pouring of a “cementitous grout” that would become the new foundations for the towers. The design, which fully shielded the old “H-pile” foundations from the concrete caps above water to four feet below the water line, eliminated the need to cut out existing steel below the water surface.

“We were able to use what was there,” says Allen, who commends the creativity of the engineering team. “Instead of an H pile supporting the tower, we have a rebar cage and concrete encapsulation.”

The retrofit, which was completed in 2015, should last another 40 years.