Category Archives: Regulation

Northam, Cox Agree to Roll Back State Regs

Do beauty parlor employees really need a state license to shampoo hair?

Governor Ralph Northam and House of Delegates Speaker Kirk Cox announced legislation yesterday that would launch a pilot program to “remove burdensome and unnecessary regulatory requirements facing hard working Virginians.”

“We have a responsibility to constantly evaluate every regulatory requirement and policy to ensure that it is doing its job in the least restrictive way possible,” said Northam in a press release.

Added Cox: “We know that red tape hinders entrepreneurs, innovators, and small and large businesses alike from creating more of the good paying jobs that our people need. This pilot program will significantly reduce regulations in two heavily-regulated areas and lay the foundation for further efforts to reduce regulations across state government, helping our economy and making government more efficient at the same time.”

House Bill 883 creates a three-year pilot program to be administered by the Department of Planning and Budget. The program will focus on the Department of Professional and Occupational Regulation and the Department of Criminal Justice Services, with a goal of reducing or streamlining regulatory requirements, compliance costs and regulatory burdens by 25 percent.

Professional licensure requirements have come under heavy fire in recent years for restricting job opportunities for lower income Virginians, and the Northam-Cox initiative follows a number of bills taking aim at specific regulations. Reports the Richmond Times-Dispatch:

On Monday, the House passed a bill to specify that hair salon workers who only clean, style or blow dry hair do not have to get a state-issued license. It also specifies that shampooing is not among the more sensitive chemical treatments that require extra government oversight.

“We don’t need to be regulating shampoos,” said Del. Mark Keam, D-Fairfax, the bill’s sponsor. “I don’t know about you, but I don’t want big government in my hair.”

Del. Nick Freitas, R-Culpeper, brought his daughter, Ally, onto the House floor Monday as a living argument for why the state should not include hair braiding it its cosmetology regulations.

When her friend provided her with a beautiful hair braid, she decided to compensate her with a dollar,” Freitas said. “And that is when her descent into crime began.”

Bacon’s bottom line: If we can decriminalize petty traffickers in marijuana, surely we can decriminalize shampooers and hair braiders!

Occupational licensing is a good place to start the regulatory rollback. The heavy hand of government isn’t oppressing big businesses here. It’s thwarting ordinary Virginians — typically lower-income Virginians with fewer job opportunities — from entering heavily regulated occupations and earning a living. Reform should appeal to free-marketeers and social justice warriors alike.

The bipartisan backing of this legislation is encouraging. If the pilot project proves successful, perhaps the experiment would provide impetus for deregulation of other sectors of the economy.

Compromise Bill Ending the Rate Freeze Advances In Senate

Lightning show

How good is the electric-regulation compromise worked out between the governor’s office, electric utilities, consumers, and other interest groups? It’s so good, Sen. Frank Wagner, R-Virginia Beach, said today that the average homeowner will see electric rates locked in at 2009 levels “for a long time,” even as Virginia invests heavily in solar power, wind energy, energy-efficiency, and grid modernization.

While some legislators in the Senate Commerce and Labor Committee worried that the compromise legislation to end the 2015 rate freeze would allow Dominion Energy Virginia and Appalachian Power Co. to “double dip” on earnings invested in grid modernization, Wagner and Senate Minority Leader Richard L. Saslaw, D-Springfield, insisted that they would not.

“There is not an avenue for double charging,” said Wagner. The “reinvestment” model, first advanced by Dominion and subsequently backed by Apco, would plow back over-earnings into grid-modernization projects, enabling the utilities to spend “in the neighborhood of” $200 million a year without increasing rates. Customers will receive more than $1 billion in give-backs and other benefits.

Governor Ralph Northam endorsed the controversial package after a Senate subcommittee made extensive changes to the legislation earlier today. Then Commerce and Labor voted 10 to 4 in favor of the package, advancing the legislation to the full Senate. Opponents of the compromise — strange bedfellows ranging from leftist environmental and activist organizations to a large industrial user group — registered their opposition.

“The goal of that legislation should be simple,” said Northam in a press release: “Give Virginians as much of their money back as possible, restore oversight to ensure that utility companies do not overcharge ratepayers for power, and make Virginia a leader in clean energy and electrical grid modernization.”

The compromise would repeal the 2015 rate freeze, provide immediate relief to rate payers, and restore State Corporation Commission oversight of electric utilities. Dominion would issue $200 million in rate credits to consumers who were over-charged during the rate freeze, and Apco $10 million. Dominion would pass along savings from recently enacted federal tax cuts to rate payers in the form of $125 million a year in lower rates, while Apco would give back $50 million. The SCC would review electric rates every three years, which Saslaw characterized as giving the Commission, utilities and other parties a respite from biennial reviews.

The legislative package would require utilities to invest in $1 billion energy-efficiency projects over the next 10 years, while declaring it to be in the public interest for Dominion to install 5,000 megawatts of solar and wind power, and for Apco to install 200 megawatts of solar. Other favored projects include a battery-storage pilot project, a pumped-storage facility in Southwest Virginia, and extensive upgrades to the electric grid to make it more accommodating to intermittent renewable energy sources, safer from cyber attack, and more resilient in the face of severe weather.

The greatest source of concern was the mechanism by which Dominion and Apco would reinvest excess earnings — no surprise, considering how complex and difficult to understand it is. Under current law, the utilities are allowed to earn 9% return on investment on their assets, with provisions for keeping an extra 30% over over-earnings as an incentive to invest in productivity and efficiency. The SCC reviews the books every two years, and requires utilities to return excess revenues to rate payers. Under the new law, instead of returning 70% over-earnings to rate payers, the utilities would have to reinvest 100% (including the 30% they would normally be allowed to keep) into renewables and grid modernization. None of those reinvestments could be used to trigger a rate increase during the life of the legislation.

“The technology is here,” said Wagner. “The question is, is Virginia going to embrace it?”

For some legislators, claims that the legislation would encourage billions of dollars in new investment while guaranteeing that that rates would not increase seemed too good to be true.

“This is a lot to digest real quickly,” said Sen. Mark Obenshain, R-Harrisonburg. If solar is so economical, why does the General Assembly need to declare it to be in the public interest — why not just let utilities make their own best decisions? “If we’re making a social judgment, let’s not dress it up” as a great deal for rate payers, he said.

“When I look at this bill, it appears that any costs that you have with any of these new facilities with solar or wind, or grid transformation, could still be charged back a second time,” said Sen. Bill Stanley, R-Moneta. “There will be an ability to double charge for these projects.”

One charge would be incurred when rate payers are denied a rebate for over-earnings. Utilities would reinvest the over-earnings in grid modernization projects, adding the capital to the rate base upon which the utilities are entitled to earn a profit. Earning a rate of return on that investment constitutes a second charge to rate payers. But the utilities counter that were they not allowed to invest the over-earnings, they would recoup the investment through a “rider,” or rate adjustment clause. In the end, they say, it all equals out.

While the bill advances goals for which environmentalists and activists have been fighting for years — more solar; more wind; more energy-efficiency; a smart, distributed grid; more rooftop solar — several groups opposed the legislation. The Virginia Chapter of the Sierra Club, Appalachian Voices, and the Chesapeake Climate Action Network cited concern about the double-dipping issue as reason for their opposition. Ironically, the Virginia Poverty Law Center, representing poor energy consumers, declared itself neutral on the bill.

But the line-up of speakers in favor of the bill was considerably longer. Environmental groups supporting the compromise included the Natural Resources Defense Council and the Virginia League of Conservation Voters. Alternative energy groups such as Apex Energy, the Alliance for Industrial Efficiency, Virginians for Clean Energy, and the Virginia Offshore Development Authority registered their approval. Prominent business groups such as the Virginia Chamber of Commerce and the Virginia Manufacturers Association, signed on as well.

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.

E-Lofts and the Recycling of Old Office Properties

Fairfax County has more than 18 million square feet of vacant office space, with little hope of filling it in the foreseeable future. Having already enacted  zoning changes to make it easier to convert empty buildings in industrial and mixed-use areas to other uses, the county now is considering a proposal to do the same for buildings in suburban neighborhoods. Summarizes a county description of the proposed change:

This could give these offices new life as apartments, schools, co-working spaces, maker spaces or food incubators. As an example, a former, five-story brick office building across from the Seven Corners Shopping Center was converted into Bailey’s Upper Elementary, the county’s first “high rise” school. …

More recently, the board approved the conversion of a 10-story office building at 5600 Columbia Pike into flexible live-work units. The building stood empty for about four years, and it will put the 173,000- square foot building back into use in an innovative way that meets market demands.

The county’s Office Building Repositioning and Repurposing Work Group is particularly enamored with the potential for converting office space into “e-lofts” — highly flexible spaces within a building that can be used as apartments or small offices.

Bacon’s bottom line: Rigid, obsolete zoning codes across the state are hindering the ability of the real estate sector to adapt to changing market conditions. Zoning codes arising from the post-World War II era of rapid suburbanization are hopelessly antiquated and self-defeating today. Aging office and industrial parks are emptying out. Unless we want them to resemble the ghost malls of the retail sector, we must give property owners the flexibility to re-purpose their assets in line with market demand.

The Fairfax initiatives represent a positive step forward. If people want to convert an old office or industrial building into apartment housing, why not let them? E-lofts sound like an especially promising idea. A similar evolution is taking place in Scotts Addition in Richmond. That light-industrial district is rapidly transitioning to mixed offices, restaurants, and apartment buildings. People are perfectly happy to live in the neighborhood despite the continued presence of light-manufacturing activity.

The only problem with the Fairfax proposal is that it doesn’t go far enough. The county should encourage the wholesale recycling of antiquated office properties by permitting greater densities and the construction of new buildings, not just the re-purposing of individual buildings. Zoning codes slow the process of adaptation to a snail’s pace. Time to open up the process and turn loose the animal spirits!

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.

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

Sen. Chap Peterson. Photo credit: Associated Press

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

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

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

Sen. Frank Wagner. Photo credit: Helment2Helmet

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

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

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

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

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

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

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

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

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

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

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

Solar Power Building Momentum in Virginia

Dominion solar farm in Buckingham County.

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

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

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

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

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

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

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

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

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

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

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