Category Archives: Regulation

Solar as Economic Savior for Wise County?

After Wise County coal mines close, what comes next?

After Wise County coal mines close, what comes next?

When I covered the coalfields beat for the Roanoke Times in early 1980s, Virginia coal companies employed more than 25,000. The number has dwindled to one-tenth that number today. Not only has the number of miners plummeted, but so has employment in the industries that supply them with everything from timbers, rock dust and roof bolts to heavy trucks and continuous mining machines.

Wise County, where Virginia’s coal industry took root more than a century ago, is desperately trying to diversify its economy. In an irony of ironies, it is looking to solar energy. But it has run into a regulatory tangle.

As described by the Roanoke TimesWise County has robust broadband connections, courtesy of the Virginia Tobacco Commission, which it is trying to parlay into technology investment. It has secured one big victory so far, which it hopes to build upon. The Mineral Gap Data Center, under construction at the Lonesome Pine Regional Business and Technology Park, will create 30 jobs. But many energy-hungry data-center companies are demanding renewable power, and Wise County is served by Old Dominion Power, a subsidiary of Kentucky Utilities Company, which derives only one percent of its electricity from renewables.

As it happens, a solar company wants to locate in Wise: Energix Renewable Energies, the largest renewable energy company in Israel. The company has signed a non-binding memorandum of understanding to build a 20-megawatt solar facility in Wise. Here’s the catch: Energix wants to sell excess power back to Old Dominion Power, and Old Dominion Power isn’t interested. “Our generation portfolio is meeting our customers’ needs at this time and we do not currently have the need for additional generation capacity,” the utility says, as quoted by the Times.

Now the Wise County Industrial Development Authority wants Governor Terry McAuliffe to intervene. Although it is too late for the General Assembly to introduce new bills this year, McAuliffe can propose amendments, and Wise County is asking him to propose one that would require Old Dominion to buy solar power from Energix and re-sell it to other companies in the business park. Whether McAuliffe can find a germane bill upon which to attach such an amendment, even if he were inclined to do so, is an open question.

Bacon’s bottom line: I am totally sympathetic to Wise County’s desire to diversity its economy, and building a data center/solar power industry cluster sounds like a plausible idea. Data center jobs would be highly paid by local standards, and both data centers and solar facilities would shore up the local tax base. But giving Wise County what it wants would potentially unravel Virginia’s electric utility regulatory structure. Perhaps the electric utility regulatory structure needs unraveling. But thought needs to be given to what to replaces it, and a ginning up a last-minute gubernatorial amendment is not the venue for contemplating a major overhaul.

In the meantime, there is nothing to stop Energix from selling its surplus electricity into the wholesale electricity market maintained by PJM Interconnection. Of course, the price likely would be lower. But Energix cannot reasonably expect to charge the full retail rate for electricity when it is not responsible for maintaining the electric grid that distributes the electricity.

Alternatively, a data-center company seeking to locate in Wise County could purchase renewable power from outside Wise County. For example, Amazon Web Services isn’t purchasing green energy from Loudoun County solar farms — it’s importing solar energy from the Eastern Shore. Half a loaf would be better than none.

While Wise County has a weak case in the context of the current regulatory structure, it is equally clear that the rigidity of that regulatory structure is not helping economic development there. The more instances we hear like this, the more political pressure will build to revisit Virginia’s utility regulatory framework.

Fostering the TNC Revolution

Starship robot: Now legal in Virginia.

It’s always refreshing when Republicans and Democrats in the General Assembly play well together. We don’t hear about such instances very often — reporters are drawn to conflict — but I suspect they occur more frequently than we hear about.

An illuminating instance is how legislators from the two parties collaborated to create what Sen. Jennifer McClellan, D-Richmond, calls a “comprehensive legal framework” for Transportation Network Companies (or TNCs) popularized by Uber and Lyft.

Writing in Sunday’s Richmond Times-Dispatch, McClellan detailed several bills enacted in the 2017 session with bipartisan input. If signed by the governor, the legislation will accomplish the following:

  • Lower up-front fees. TNCs will have a new option for applying for certificates. Instead of paying the existing up-front fee of $100,000 upon application, businesses can pay a $20 surcharge per record when purchasing driver transcripts. This measure will make it easier for smaller, less capitalized companies.
  • Less red tape for drivers. A requirement will be removed for TNC drivers to register personal vehicles for use as a TNC partner vehicle. State Police can recognize another state’s annual motor vehicle safety inspection in lieu of Virginia’s.
  • Brokering rides. Third-party companies will be allowed to broker TNC rides. This measure responds to a request by Richmond-area startup, UZURV, which piggybacks on Uber and Lyft by allowing passengers to reserve rides with specific drivers.
  • Robot deliveries. London-based Starship Technologies wants to make deliveries in cooler-sized robots, which can travel up to four miles (round trip) and can navigate sidewalks, shared-use paths and crosswalk. These “Electronic Personal Delivery Devices” will become legal.
  • Less red tape for property carriers. Some requirements regarding property carriers and bulk property carriers will be eliminated.

The TNC revolution will prove a fertile field for innovation, and the more Virginia does to loosen regulatory restrictions (within the bounds of protecting public safety and creating a level playing field), the more innovation we will see. Companies like Starship will set up shop in Virginia before investing in states where their service is illegal. Entrepreneurs like UZURV will spring up to build on the Uber revolution. And Virginia consumers will benefit from options they never imagined having before.

Now, if the legislature can just figure out what to do with AirBnB…

Virginia Colleges Spend Millions on Federal Regs

Federal regulations add measurably to the cost of running Virginia colleges and universities.

Federal regulations add measurably to the cost of running Virginia colleges and universities.

The University of Virginia estimates that it spends $20 million a year complying with unfunded federal mandates, just for its academic division, reports Karin Kapsidelis with the Richmond Times-Dispatch. The College of William & Mary estimates its compliance costs at $4.5 million to $6.7 million, and Virginia Commonwealth University puts the number at $13 million.

The estimates come in response to a Congressional request for information as part of a review of federal review of unfunded mandates. Higher ed institutions say the costs were likely underestimated due to the short turnaround time for providing the figures.

While universities have blamed federal regulations in the past for pushing up the cost of higher education, Virginia institutions are not necessarily eager to roll them all back. Reports Kapsidelis:

“There are rules that if no one else put them on us, we would put them on ourselves,” said Samuel E. Jones, W&M’s senior vice president for finance and administration.

“There are some requirements we might want to take a hedge clipper to and not an ax,” said Gary Nimax, U.Va.’s assistant vice president for compliance. …

“We’re just waiting to see what might change,” said Nimax. … . “The idea of having fewer regulations is an attractive one.” But U.Va. would like to see the focus on cutting “the non-value-added pieces of these requirements,” he said.

Prime offenders are the Clery Act, which requires extensive reports on campus crime statistics that run nearly 1oo pages long, and Title IX, which forbids discrimination on the basis of sex in higher ed. The initial focus on campus athletic programs under Title IX has expanded to the regulation of student sexual behavior.

Bacon’s bottom line: For purposes of comparison, the University of Virginia generates roughly $500 million a year in tuition revenue and gets another $150 million in state support. The $20 million regulatory burden amounts to 3% of those two sources of revenue. An argument can be made that federal regulations do contribute to the mushrooming costs of higher education, but insofar as universities’ priorities mirror those of the federal government — how many institutions would dismantle their Title IX bureaucracies? — it would be unrealistic to expect that deregulation would save much money.

Update: In an article about the growing self-censorship of faculty members due to fear of transgressing some politically correct taboo, the Wall Street Journal quotes Dale Carpenter, a Southern Methodist University law professor:

Universities have developed entire bureaucracies to combat the problem of discrimination and a hostile environment. Those bureaucracies are needed but the also tend to feed on their own momentum.

No Simple Answers on the Electricity Rate Freeze

Muddy water -- still waiting for an impartial analysis of the rate freeze issue.

Murky waters — Virginia still waiting for an impartial analysis of the electricity rate freeze.

Former Attorney General Ken Cuccinelli joined state Sen. J. Chapman Petersen, D-Fairfax City, down at the General Assembly yesterday to put pressure on Governor Terry McAuliffe to resurrect Petersen’s bill that would roll back a rate freeze on Dominion Virginia Power and Appalachian Power.

Petersen summarized the argument in a nutshell: “In reality, it was a refund freeze.” The 2015 legislation, enacted in response to the Obama administration’s announcement of the Clean Power Plan, he artgued, locked in place excess profits that amounted in 2015 to $300 million for Dominion and $36 million for Apco. With the election of President Trump, it appears that the Clean Power Plan is a dead letter, and the justification for the rate freeze no longer exists.

According to Robert Zullo’s reporting in the Richmond Times-Dispatch, Dominion responded that the rate freeze has worked for consumers. Electricity rates are lower now than they were two years ago. Reversing the 2015 legislative deal also would un-do provisions that provided $57 million on weatherization programs for veterans and poor people, and a commitment to renewable energy that has produced nearly $1 billion in new solar energy projects.

Petersen’s bill was defeated in the Senate, but it could be revived if McAuliffe sends it back for reconsideration. The Governor has told him that he would do so if, in Petersen’s words, the senator came back to him with a plan to change the outcome from the previous bill. Describing himself as David fighting Goliath, Petersen said “I’ve done everything I could do.”

Bacon’s bottom line: It’s hard for the public to know who has the stronger case. Bits and pieces of information are floating around — each side citing the facts that supports its outcome — but no one has assembled them in a coherent format. Here are some of the key elements.

  • Refund of excess profits. Cuccinelli cites a State Corporation Commission staff finding that Dominion earned $300 million in excess profits before the freeze was enacted. In the absence of a freeze, the commission might have ruled that Dominion had to provide a refund. (Ditto for Apco which is said to have had $36 million in excess profits.) But Dominion and Apco undoubtedly would have disputed the numbers, and there is no way to know what the three commissioners would have decided.
  • Excess profits going forward. If Dominion and Apco had been charging too much before 2015, it is possible that they have been charging too much since then. Again, there is no way to know because under the terms of the legislative deal, the SCC suspended its biennial rate reviews until 2020.
  • Costs of coal ash clean-up. Dominion has said that it has eaten nearly $300 million in expenses relating to the clean-up of coal ash, an issue that was not widely known or discussed during the 2015 legislative session. There are more clean-up costs to come, and if environmentalists are successful in pressing demands to recycle and landfill the ash instead of disposing of it on site, the tab could run into the billions of dollars.
  • Clean Power Plan risk. In 2015 it was not clear how much it would cost Virginia utilities to live up to the CO2 reduction mandates in the Clean Power Plan. The SCC staff said the new rules could push electric rates 20% higher, although no one could say for sure because no one knew which of four main regulatory options Virginia would pursue. Environmentalists were pushing hard for the option that would have delivered the biggest CO2 cutbacks and also would have caused the most dramatic restructuring of power production and the electric grid. It’s not clear how big those costs would be, how much Dominion and Apco would have absorbed, or how much they could have deferred until after the rate freeze. Cuccinelli and Petersen assert that many of those costs could have been passed along to rate payers by means of Fuel Adjustment Clauses, which were not frozen, and, therefore, the utilities really weren’t taking  on any meaningful risk.

Both sides make plausible arguments. Indeed, one might say that both sides are right…. as far as they go. What we have yet to see, however, is an impartial analysis that clearly explains all the costs, benefits and risks.

Just a Thought: Instead of Extending Regs to Airbnb Rentals, Let’s Roll Back Regs on Hotels

No wonder hotels and B&Bs are worried about Airbnb competition. This room in Richmond’s Byrd Park area goes for $45 per night.

It’s totally understandable that the hotel lobby would want to tighten regulation over Airbnb rentals. As Bart Hinkle observes in a Richmond Times-Dispatch op-ed today, hotels want government to protect their market share.

The hotels put it a little differently. They want to create a “level playing field.” Said Eric Terry, president of the Virginia Restaurant, Lodging & Travel Association last year: “We welcome Airbnb , but we just think they should be subject to the same requirements that a bed-and-breakfast or a hotel has to go through.”

Remarkably, many bed-and-breakfast owners are siding with the hotels. If they have to comply with federal, state and local laws, they say, then the Airbnb renters should, too. I understand their angst. If Airbnb rentals threaten anyone, it’s the bread-and-breakfast establishments that off a similarly intimate experience, not the giant, anonymous hotel chains.

But Hinkle raises a good question: “Making it hard for people to enter the market means fewer competitors and more business for the incumbents. Why does the kneejerk response to economic innovations always seem to involve tying them down with rules applied to older business models — instead of cutting the latter some slack?”

The rise of critiques on Yelp and other online venues arguably provide superior consumer protection than rules that regulators could devise. Writes Hinkle: “If you had a bad experience at a B&B a couple of decades ago, you might be able to warn a few friends. Today you can warn the entire planet.” Some rules are reasonable — everyone should pay the same tax. But perhaps it is time to revisit the old regulations and see if some are even needed anymore.

Prince William Supervisors Demand Coal Ash Studies

Prince William County Board of Supervisors Chair Corey Stewart speaking at the coal ash public hearing.

Four members of the Prince William County board of supervisors appeared at a public hearing last night to express concerns about Dominion Virginia Power’s plan to pursue the “closure in place” option for disposing the coal ash at its Possum Point Power Station.

The Department of Environmental Quality (DEQ) held the hearing as part of its evaluation of Dominion’s request for a solid waste permit. More than a hundred citizens appeared at the hearing at Potomac High School, frequently erupting into jeers and cheers throughout the evening.

Describing the coal ash disposal as “the most important environmental issue facing our county in decades,” Woodbridge Supervisor Frank Principi called upon DEQ to engage in intensive information gathering before issuing a permit. His request, repeated by numerous citizens, echoes legislation backed by Sen. Scott Surovell, D-Mount Vernon, that would require owners of coal ash ponds to assess closure options and demonstrate their long-term safety before DEQ grants a permit.

Specifically, Principi asked the DEQ to release the data for testing water quality at Pond D, where the coal ash is being consolidated and capped with a synthetic liner, and release test results from a surface water sampling plan. Further, he demanded that DEQ conduct an alternatives analysis to see if recycling and landfilling coal ash would be safer.

Principi also said he wants to see documentation of measures to prevent a “catastrophic failure” of Dominion’s cap-in-place proposal. “Nobody here wants to repeat the mistakes of Buffalo Creek, Kingston or Dan River,” he said, citing three notorious examples of coal ash spills.

Board Chairman Corey Stewart, a Republican candidate for governor, appeared midway through the hearing and ramped up the rhetoric. It was unacceptable to leave four million tons of coal ash in place, he said, especially given Dominion’s track record of dealing with the County. “Dominion has been less than honest with Prince William County. Dominion lies. You have to be very skeptical of what they tell you.”

Dominion did not respond to the criticisms leveled against it. Cathy Taylor, Dominion’s senior environmental officer, delivered prepared remarks at the beginning of the hearing that repeated the company’s talking points.

Coal ash has been stored safely at Possum Point since 1948, Taylor said, but new EPA regulations require the company to close the ponds permanently. The company is de-watering the coal ponds now. The company has made proactive improvements to the dewatering process to “make the system better, more effective,” and it is posting water-quality testing results “so neighbors know that Quantico Creek is being protected.”

When the de-watering is complete, the next phase will be consolidating the coal ash from five ponds into the 64-acre Pond D. Under the requested solid waste permit, Dominion would cover the pond with “a high-density polyethelene cap to prevent rainwater or any moisture from coming into contact with the ash; a drainage layer designed to drain water away from the cap; then 24 inches of soil and vegetation.”

The company has already installed a monitoring network of 24 wells around the coal ash ponds, Taylor said. “If groundwater monitoring indicates that further action is needed, then both state and federal requirements mandates that additional measures will be put int place.” Pond D will be inspected on a regular basis to maintain integrity of the cover system, she added, and a professional dam-safety engineer will inspect the facility once a year.

While citizen comments were overwhelmingly opposed to Dominion’s plan, two women opposed the alternative of trucking coal ash to a landfill. Possum Point Road is a narrow, winding, two-lane road not constructed for truck traffic, said Eileen Thrall, who lives on the road. She is worried about congestion and the potential for traffic accidents.

Greg Buppert, an attorney with the Southern Environmental Law Center (SELC), warned that Pond D “will not have two basic features that all modern landfills are required to have in Virginia to protect groundwater: a synthetic liner under the ash and a leachate collection system.”

Recent monitoring shows that heavy metals emanating from coal ash at Pond D are getting into the groundwater, Buppert said. “Will Dominion’s closure plan stop this pollution? The answer is that we don’t know. Dominion is required to demonstrate that groundwater is not in contact with the ash at Possum Point. But the company won’t provide that information until October 2018, at which point the cap-in-place construction could be complete.”

“Is Dominion’s plan the best solution for dealing with the coal as at Possum Point? Again we don’t know,” he said. “DEQ and Dominion should not rush forward to cap ash at Pond D  at Possum Point before assessing the full range of alternatives for dealing with this legacy waste.”

Prince William County has well-established authority to regulate landfills within its borders, Buppert said. Given the sentiments expressed by county supervisors at the hearing, he said, county intervention is a real possibility.

Dams in Virginia: How Many Are Deficient?

Location of Virginia's 2,919 known dams.

Location of Virginia’s 2,919 known dams. Map source: U.S. Army Corps of Engineers, National Inventory of Dams

Speaking of deficient bridges (see previous post), how about deficient dams? The potentially disastrous erosion around the Oroville dam in California, which prompted the evacuation of 188,000 people living down river earlier this week, prompted two correspondents to raise the issue with Bacon’s Rebellion.

John Butcher passed along an article noting that the Oroville dam is symptomatic of rampant neglect and deferred maintenance across the country. Writes the Peak Prosperity website:

The points of failure in Oroville’s infrastructure were identified many years ago, and the cost of making the needed repairs was quite small — around $6 million. But for short-sighted reasons, the repairs were not funded; and now the bill to fix the resultant damage will likely be on the order of magnitude of over $200 million. Which does not factor in the environmental carnage being caused by flooding downstream ecosystems with high-sediment water or the costs involved with evacuating the 200,000 residents living nearby the dam. …

Oroville is one of the best-managed and maintained dams in the country. If it still suffered from too much deferred maintenance, imagine how vulnerable the country’s thousands and thousands of smaller dams are. Trillions of dollars are needed to bring our national dams up to satisfactory status. How much else is needed for the country’s roads, rail systems, waterworks, power grids, etc?

The Smith Mountain Lake dam, owned and operated by Appalachian Power Co., rises 235 feet from its floor.

So, what do we know about the dams in Virginia? Steve Nash sent me a link to the U.S. Army Corps of Engineers National Inventory of Dams. That database identifies 2,919 structures in Virginia, mostly small (less than 50 feet high), mostly earthen, and mostly privately owned. Eighty-four dams date back to the 19th century, but a large majority were completed in the 1950s, 1960s, and 1970s.

Here’s the worrisome part: the Corps classified 468 dams as having “high” hazard potential and another 551 as having “significant” hazard potential, with another 612 undetermined. The classification of “high” hazard potential does not mean that there is a high likelihood of failure; rather, it means that failure , if it occurred, would probably cause “loss of life or serious economic damage.”

However, 2,035 of Virginia’s dams, like California’s Oroville, are made of earth, which is especially vulnerable to erosion.

According to the Virginia Department of Conservation and Recreation, which regulates dam safety in Virginia, dams must be inspected periodically by licensed professionals. If a dam has a deficiency but does not pose imminent danger, the state may issue a Conditional Operation and Maintenance Certificate, during which time the owner is to correct the deficiency. It’s not clear what happens if the owner fails to correct the deficiency. Small loans and grants are available to help cover the cost.

Presumably, within the bowels of the Virginia bureaucracy, there is documentation that would allow the public to determine which high-hazard dams, if any, are in deficient condition. Where are they are located and who owns them? If I lived downstream from one, I sure would like to know.

If any Bacon’s Rebellion reader would be willing to root around the state archives to unearth this information, please contact me at jabacon[at]baconsrebellion.com.

The Legislative Logic of Proton Therapy

Proton therapy delivers precise doses of radiation, resulting in fewer side effects and less damage to surrounding tissues.

Proton therapy delivers precise doses of radiation, resulting in fewer side effects and less damage to surrounding tissues.

I just love it when legislators tell insurance companies whose services they should insure. Lawmakers are obviously so much more qualified to judge the efficacy of different medical treatments — why shouldn’t we trust their judgment?

Pardon my snark. A bill has passed the House of Delegates and moved to the state Senate that would forbid insurance companies from holding proton therapy to a higher standard of clinical evidence than other radiation treatments.

Del. David Yancey, R-Newport News, submitted the bill on behalf of Hampton University (HU), which just happens to have a Proton Therapy Institute. HU complains that the procedure is still treated as experimental despite decades of research, explains Travis Fain with the Daily Press.

To tug at legislators’ heart strings, the bill’s supporters brought in Carolyn Lambert, wife of Benjamin Lambert, who served in the Senate more than 20 years and died in 2014. The Lamberts’ son is fighting prostate cancer now. Speaking in a halting voice, she said, the insurers “have abandoned him.”

Insurance lobbyists counter that they use blind studies to make coverage decisions, and that proton therapy makes the cut in some cases, such as pediatric and skull cancers, but not in others. “The bottom line is we don’t evaluate them differently,” said Doug Gray, executive director of the Virginia Association of Health Plans.

The Senate Commerce and Labor Committee passed the bill on what appeared to be a unanimous voice vote, reports Fain. Sen. John Cosgrove, R-Chesapeake, a motioned “as a cancer survivor” to send the bill to the floor.

Bacon’s bottom line: This illustrates the worst of everything about the way the General Assembly works. Anecdotal information and sentimentality demolish reason and empirical evidence. The legislature is well on its way to passing a law that could well nudge the cost of insurance policies higher. The prostate cancer of Sen. Lambert’s son is a tragedy. What we will never see is the tragedy of the “third man,” the invisible victim for whom the cost of medical insurance will be put just out of reach.

Virginia Is for Lovers, Not Lobbyists

by Christopher Mitchell

Pop quiz: Should the state create or remove barriers to broadband investment in rural Virginia? Trick question. The answer depends very much on who you are – an incumbent telephone company or someone living every day with poor connectivity.

If you happen to be a big telephone company like CenturyLink or Frontier, you have already taken action. You wrote a bill to effectively prevent competition, laundered it through the state telephone lobbying trade organization, and had it sponsored by Del. Byron, R-Forest, in the General Assembly. That was after securing tens of millions of dollars from the federal government to offer an Internet service so slow it isn’t even considered broadband anymore. Government is working pretty well for you.

If you are a business or resident in the year 2017 without high quality Internet access, you should be banging someone’s door down – maybe an elected official, telephone/electric co-op, or your neighbor to organize a solution. You need more investment, not more barriers. Government isn’t working quite as well for you.

Rural Virginia is not alone. Small towns and farming communities across America are recognizing that they have to take action. The big cable and telephone companies are not going to build the networks rural America needs to retain and attract businesses. The federal government was essential in bringing electricity and basic phone service to everyone. But when it came to broadband, the big telephone companies had a plan to obstruct and prevent and plenty of influence in D.C.

When the Federal Communications Commission set up the Connect America Fund, they began giving billions of dollars to the big telephone companies in return for practically nothing. By 2020, these companies have to deliver a connection doesn’t even qualify as broadband. CenturyLink advertises 1000/1000 Mbps in many urban areas but gets big subsidies to deliver 10/1 Mbps in rural areas. Rural America has been sold out.

If you are a big cable or telephone company, you have a lot of influence in the federal and state capitals. But at the local level, your elected officials are more accountable to you because their decisions have a more immediate impact on their constituents’ lives.

Remember that as the General Assembly considers a bill from the telephone company lobbyists to limit your local governments from building networks. Places like Danville, Martinsville, and the Roanoke Valley have thoroughly upset the big cable and telephone companies by investing in new fiber-optic networks and opening them to any Internet Service Provider that wanted to compete for subscribers.

Danville and Martinsville have been doing this for years, with incredible results. The job gains are remarkable, particularly in areas hard hit by the decline of tobacco and manufacturing. Consider Danville, where the network was started with a loan from the electric utility. The network has made money every year for the community while also enriching the tax base. Existing businesses have become more competitive, new businesses came to town, and the community attracted more foreign direct investment.

They also created something else – a good example for communities that need better access. But the big monopolies are striking back using their strongest asset – lobbying. Virginia is already one of the 20 states that limit local authority to build networks. Now the state could make it even harder or impossible for communities to make these investments.

Consider the shareholders of CenturyLink and Frontier. They demand a good return on their investment. In return for some federal subsidies, they will invest the bare minimum in Virginia’s small towns. They count on the lack of choice in the market (i.e. monopoly power) to protect them from the frustration of local businesses and residents.

Local governments also have to listen to their shareholders – the businesses and residents that demand better Internet access to do business, get a quality education, and even enjoy modern entertainment. Local leaders actually live in these communities, unlike the executives or shareholders from the big companies.

If all of Virginia is to thrive, local governments must be free to invest in the modern infrastructure that their local businesses and residents need. Where existing providers meet that need, the local businesses and residents aren’t going to demand a municipal solution. But that decision should be made locally, not by powerful lobbyists swaying the legislature.

Christopher Mitchell is the Director of the Community Broadband Networks Initiative at the Institute for Local Self-Reliance in Minneapolis. He is on Twitter @communitynets.

McAuliffe Reverses, Now Opposes Electric Rate Freeze

Governor Terry McAuliffe

Governor Terry McAuliffe said yesterday that he supports legislation that would cancel the freeze in base electric rates on Dominion Virginia Power and Appalachian Power if President Trump kills the Clean Power Plan. The endorsement came a little late for state Sen. J. Chapman Petersen, D-Fairfax City, whose bill to roll back the freeze was killed in a Senate committee in January in a 12 to 2 vote.

Taxpayers “are entitled to the lowest, most efficient rate that we can deliver to them,” McAuliffe said on the John Fredericks Show, which broadcasts in Hampton Roads, Richmond, Lynchburg, Danville and Franklin. “If Chap Petersen can get me a bill on my desk, I’d sign it. Let me be clear.”

“There’s a better chance of me starting for the Redskins as quarterback,” said Petersen, as quoted by the Richmond Times-Dispatch. “Governor, you’re going to need to send down the legislation.”

In 2015 The General Assembly passed a bill freezing base electric rates, which McAuliffe signed, after the Obama administration had rolled out the Clean Power Plan requiring Virginia’s electric utilities to significantly reduce CO2 emissions. The State Corporation Commission staff had estimated that the legislation could push electric rates 20% higher. With a stated goal of providing rate stability in uncertain times, the legislation locked base rates in place for six years.

Environmentalists were critical of the bill from the beginning, arguing that the Clean Power would increase rates only marginally. Then industrial customers contended that Dominion had been overcharging customers before the law went into effect, and the law locked in rates at excessively high levels. Moreover, they charged, the electric companies weren’t even taking on a major risk: If the Clean Power Plan had forced them to retire coal plants and build new generating facilities, they would have been able to pass on the cost through a Rate Adjustment Clause, which wasn’t affected.

Dominion has argued that the law also provided for annual, instead of biennial, review of power companies’ Integrated Resource Plans, making the planning process more transparent. As part of the legislative compromise, the company also upped its financial commitment to its Energy Share energy-efficiency plan for low-income homeowners.

Furthermore, Bill Murray, Dominion’s managing director of public policy, said last week, the company has taken $296 million in write-offs for the past two years for expenses relating to the closure of its coal ash ponds. The freeze prevents the company from recovering those costs. “Those are costs we are absorbing.”

Bacon’s bottom line: McAuliffe’s support for reversing the freeze is a day late and a dollar short. As a practical matter, Petersen’s bill cannot be resurrected. Reversing the freeze without understanding the emerging regulatory context may not make sense anyway. The Trump administration has made clear its intention to kill the Clean Power Plan. We Virginians need a clearer idea of what kind of energy policy we want going forward. Simply rolling back the freeze doesn’t inform that debate.

Solar power is the potential game changer. The cost of generating solar energy continues to decline, and so does the cost of battery storage, which will help offset the intermittent nature of solar generation. No one disagrees with those propositions, but many questions remain open. How rapidly are solar prices declining? When will solar become economically competitive with natural gas in Virginia? That depends in large measure what happens to natural gas prices. Will they rise from currently low levels, and, if so, by how much?

Another big question is how much solar can Dominion, Appalachian Power and Virgina’s electric co-ops absorb without undermining the reliability of the electric grid. A related set of questions revolves around how much retail competition regulators should allow, how to guarantee the integrity of the grid if electric utilities lose market to independent solar operators, and how rate payers will be impacted if utilities experience a decrease in consumption.

One more pressing matter: What’s the role of nuclear in a post-Clean Power Plan world? While it still may make economic sense to renew the licenses for Dominion’s existing nuclear power plants, building a third unit at North Anna guesstimated to be $18 billion probably does not. Dominion wanted to maintain that option as an insurance policy, at a cost of hundreds of millions of dollars in engineering and permitting expenses, to protect against the most onerous of the Clean Power Plan regulatory scenarios. In a Trump presidency, that scenario looks highly unlikely. Should Dominion scrap North Anna 3?

If Virginians want to unfreeze the freeze, we need to recognize that no regulatory action takes place in a vacuum. Rather than dealing with each of these issues piece-meal we should settle them in a comprehensive way.