Category Archives: Regulation

Rappahannock Water Quality Endangered by Fracking?

Rappahannock River

Rappahannock River. Image credit: American Rivers.

American Rivers has listed the Rappahannock River as the fifth “most endangered” river in the United States. The environmental group claims the river is threatened by industry interest in hydraulic fracturing (fracking) operations in the Taylorsville Basin lying thousands of feet beneath the river. The quality of drinking water of three million people in eastern Virginia are at stake.

The Rappahannock joins company with the Lower Colorado River (the most endangered), which is threatened by excess water consumption; California’s Bear River, which is imperiled by a new dam; the South Fork Skykomish River in Washington, which is jeopardized by a new hydropower project; and six other rivers. These rivers are not necessarily the most polluted. Rather, American Rivers highlights in its “America’s Most Endangered Rivers 2017” report ten rivers whose fates will be affected by the political process in the upcoming year.

The watershed of the Rappahannock, the longest free-flowing river in Virginia, encompasses all or parts of 18 counties, the report notes, and supports thriving agricultural and seafood sectors as well as recreational activity.

American Rivers is concerned that 85,000 acres in five counties along the tidal Rappahannock are leased for oil and gas exploration. Only one of the five counties has enacted a land use ordinance to protect against the impact of fracking. Last year, Governor Terry McAuliffe approved new regulations that would require baseline water testing and monitoring along with the disclosure of any chemicals used in the fracking process. The oil and gas lobby introduced legislation to weaken the regs in the 2017 General Assembly session, but the effort was beaten back. Says American Rivers:

It is clear that the threats that industrial gas development and fracking pose to the rural and agricultural communities along the Rappahannock River are not going away. The first line of defense lies with local government, which has the power to establish local protections to protect the drinking water for millions of citizens.

Last  year Prince George County amended its zoning ordinance to require hefty setbacks for gas wells, effectively making 91% of the county unavailable for drilling. But Westmoreland, Essex, Caroline, and King and Queen Counties have yet to act.

Here’s the source of concern: Gas companies must drill through the Potomac Aquifer to reach the gas in the Taylorsville Basin, which is reported to contain more than 1 trillion cubic feet of gas, equivalent to two-and-a-half times the volume of gas consumed in Virginia in a year. Fracking injects sand and chemicals under high pressure to fracture the rock sufficiently for oil and gas to flow through it. Although oil and gas companies seal off drill holes where they pass through aquifers, environmentalists claim that potentially toxic chemicals still can leak into the Potomac Aquifer and, from there, eventually into the Rappahannock River.

Bacon’s bottom line: Environmental groups are adamant that fracking represents a danger to the aquifer and water supply. The oil and gas industry is equally insistent that fracking poses minimal risk. Each side cites seemingly authoritative studies. Who knows?

The Taylorsville Basin contains maybe one-fortieth the volume of gas contained in the famed Marcellus Basin, which has transformed energy economics in the United States, but it’s nothing to sneeze at. The gas has an economic value of $2 billion to $4 billion, maybe more, depending upon the current price of natural gas. That represents a lot of economic activity for five economically depressed rural counties.

Admittedly, a billion dollars or so in local payroll and royalties won’t be much consolation if fracking ruins the water supply. But more than 8,000 wells have been hydraulically fractured in Southwest Virginia with no documented instances of surface or groundwater contamination, according to state geologist David Spears.

The McAuliffe administration made a prudent decision, it seems to me, to establish a baseline of data on Potomac Aquifer water quality and to require gas companies to disclose the chemicals they use in fracking. If chemicals used in fracking are not found in the aquifer but suddenly appear after drilling begins, it is not unreasonable to conclude that fracking created the problem. Conversely, if none of the chemicals show up in the aquifer, no harm is likely being done.

Regardless, the American Rivers report signals that the Taylorsville Basin is on the radar screen of national environmental groups. I expect they will pour considerable resources into fighting development of the basin. Linking that fight to the conservation of the treasured Rappahannock River is shrewd public relations.

Will NIMBYs Thwart SolUnesco Solar Plan?

SolUnesco CEO Francis Hodsoll addresses the Albemarle County Board of Supervisors

SolUnesco CEO Francis Hodsoll addresses the Albemarle County Board of Supervisors. Photo credit: Charlottesville Tomorrow.

Not all barriers to solar energy emanate from Richmond. Take Albemarle County, for example. The county zoning code outlaws solar farms, we learn from Charlottesville Tomorrow.

“The current zoning ordinance allows for the transmission and distribution of energy, but not the generation of energy,” said county planner Margaret Maliszewski at Wednesday’s Board of Supervisors meeting.

The issue arose because Reston-based SolUnesco wants to submit an application to develop an 11-megawatt photovoltaic solar energy generation system in southern Albemarle. “Our project is for the wholesale supply of energy that goes onto a wholesale network of transmission and distribution lines and that allows people to buy energy from our project or for a utility to buy energy directly from us,” said SolUnesco CEO Francis Hodsoll.

Albemarle Supervisors directed the planning department to study the issue. But, while the Charlottesville-Albemarle area may be home to many solar-loving greenies, don’t take it for granted that county planners will roll over for SolUnesco.

“As a member of a rural neighborhood, the first thing that comes to mind is protection of the rural areas,” said Phillip Fassieux at the board meeting. “We all love solar power, but at what cost? … “How will residents of Albemarle benefit specifically from turning over part of our rural county to its use? Will we see reductions in electricity rates?”

Everyone loves solar in theory, but opposition frequently surfaces locally when someone proposes building a solar farm near them. Others object to the idea of vast solar farms displacing agricultural uses of the land. SolUnesco’s proposed 11-megawatt solar farm, big enough to supply demand for about 2,000 households, would require between 70 and 80 acres of land. Typically, solar farms include vegetated buffer zones to screen the solar panels from view.

(Another potential objection to solar is that, given the state formula for distributing school aid, a big capital investment in solar could actually hurt a county financially. I’ll deal with that issue in a separate post.)

Bacon’s bottom line: Call me a Neanderthal, but I support private property rights. I see no justification for Albemarle County — or any county — to impose zoning restrictions prohibiting solar farms. If a property owner decides that installing solar panels represents a use of land preferable to agriculture or timber, that should be his decision to make. Counties have no business intervening unless the land use creates a nuisance to neighbors. Unlike wind turbines, solar panels create no noise, are easily hidden from view, and don’t harm wildlife. NIMBYs need to get a life.

And one more thing… The SolUnesco pitch to landowners asserts that its 25-year leases will generate above-market returns for landowners with an inflation escalator. The company assumes all costs and risks associated with developing the project — the landowner just collects checks for 25 years.

Rural Virginia is hurting. It has few resources of value in the knowledge economy. One thing it does have is land. Solar energy represents a rare opportunity for Virginia’s rural economy. There are many complex issues surrounding the integration of solar into the electric grid that need to be resolved before we see widespread deployment, but land use should not be one of them.

The Right Way to Test for Coal Ash Contaminants

A North Carolina riverkeeper inspects testing samples of coal ash taken from the Dan River.

A North Carolina riverkeeper inspects testing samples of coal ash taken from the Dan River. Photo credit: WRAL.

So, it looks like the there will be a pause in the solid-waste permitting process for Virginia coal ash. Governor Terry McAuliffe had submitted an amendment to legislation that, if approved, would require Dominion Virginia Power to compile more information on contamination around its coal ash sites and study alternative closure methods before the state issues the permits. Now Dominion has decided to go along, which means political opposition to the idea could evaporate.

“We concur that it is a prudent course of action to seek and consider an evaluation of the assessments on the appropriate closure methods based on the individual features of each site before seeking necessary solid-waste permits,” wrote Dominion CEO Thomas F. Farrell II. “Dominion finds the proposed amendments to Senate Bill 1398 to be workable, and is committed to completing the site assessments before pursuing solid waste permits regardless of the outcome of the legislation.”

McAuliffe’s amendment would restore key provisions to a bill co-sponsored by Sens. Scott A. Surovell-D-Fairfax, and Amanda F. Chase, R-Chesterfield, whose legislative districts include Dominion’s Possum Point Power Station and Chesterfield Power Station, each of which has millions of tons of coal ash to dispose of. (See the Richmond Times-Dispatch story here.)

Dominion had originally opposed the testing and study provisions, which were stripped out by the House of Delegates. But if the power company drops its opposition to McAuliffe’s amendment, as Farrell’s letter indicates, Surovell and Chase likely will get their way.

According to the bill summary, HB 1398 will require owners of coal ash ponds (1) to identify water pollution emanating from the ponds and address corrective measures, and (2) evaluate the feasibility of “clean closure.” Clean closure would entail removing the coal ash from ponds where it has been stored to lined landfills. Dominion has estimated that the cost of landfilling could amount to $3 billion, but environmental groups have argued that the cost would be much lower if the utility recycled the material as an additive to cement and other products.

Bacon’s bottom line: Pausing the permitting process to get a better handle on what’s happening at the coal ash ponds is a good idea. Frankly, despite considerable testing by both Dominion, environmental groups and even Duke University, little can be said with certainty about the process at each of Dominion’s four sites by which groundwater migrates through the coal ash and contaminates either well water or nearby rivers and streams.

Any testing regime must be rigorous enough to provide definitive answers. The last thing we need is set of ambiguous results that Dominion and environmental groups try to spin to their advantage in another contest of P.R. and political clout. Any credible testing program should recruit outside experts, perhaps from Duke or perhaps from a Virginia university, who can identify the questions to be answered and what protocols will provide definitive answers.

Dominion has conducted tests on its property and found little evidence of contamination at Possum Point, Chesterfield and the Bremo Power Station, but a federal judge recently used Dominion data to conclude that coal ash its closed Chesapeake plant was contaminating groundwater. Testing by riverkeeper groups of groundwater and surface waters just outside of Dominion property show elevated levels of heavy metals which, at sufficient concentrations, can be toxic to aquatic life and human health. Additionally, Duke University has conducted extensive testing in North Carolina and Virginia using “forensic tracers” that have found elevated levels of heavy metals in groundwater near Bremo and Chesapeake. But other Duke tests have found that elevated levels of the carcinogen hexavalent chromium, also associated with coal ash, is endemic in piedmont groundwater and in many cases cannot be attributed to the coal combustion residue.

Complicating any analysis is the fact that trace levels of heavy metals and carcinogens are frequently found in groundwater and surface water as the result of natural processes. Levels vary depending upon local geology. The existence of trace elements of heavy metals in groundwater near coal ash ponds is not in itself proof that the heavy metals came from the coal ash. The trace elements could be ubiquitous in the area, but no one knows unless tests are conducted some distance from the power plants. Ideally, any testing regime for Dominion’s coal ash ponds should adjust for background levels of contaminants.

Another complication is ascertaining the movement of groundwater. For example, the water from several wells near Possum Point have shown elevated levels of heavy metals. It is easy to deduce from the proximity of the wells to coal ash ponds that the contaminants come from the ponds. But to demonstrate the point conclusively, one must show that the groundwater migrates from the coal ash ponds toward the wells, and not in some other direction. To make that proof, it is necessary to conduct extensive sampling and create detailed maps that mark the geographic scope and elevation (in feet above sea level) of the underground water and determine the direction of the water flow. Only if it can be documented that underground water is migrating from the coal ash pond toward the wells can one reasonably conclude that the coal ash is to blame for elevated levels of well-water contaminants. If the water is migrating away from the wells, the well-water contaminants probably have another source.

Adding another layer of complexity to the analysis is estimating how much contamination the groundwater picks up while migrating through coal ash. Dominion maintains that its coal ash pits do not come into contact with the water table; the deepest part of the ponds have a higher elevation than the underground water table. However, using Dominion’s own maps, the Southern Environmental Law Center (SELC) contends that the bottom reaches of the coal ash ponds at Bremo and Chesterfield intersect with the water table. If the SELC is right, groundwater that migrates through a portion of the coal ash could pick up contaminants along the way.

The question then arises, how long must the water be in contact with the coal ash in order to pick up trace metals? That is a function of the chemistry of the coal ash, how tightly or loosely the metals are bound to inert materials, and the speed of water migration, which depends upon the permeability of the clays and rocks. If the groundwater comes into contact with only a small percentage of the coal ash for a short time, the leeching of heavy metals could well be minimal.

If it can be demonstrated that measurable levels of metals leach into the groundwater, another question must be answered: What volume of contaminants, and how rapidly, does the groundwater feed into surrounding rivers and streams? While U.S. District Court Judge John A. Gibney Jr. found that Dominion’s Chesapeake Coal ash ponds did contaminate the groundwater and that the groundwater did reach the Elizabeth River in violation of the Clean Water Act, he also found no damages because the contaminants were so diluted by the massive water volume of the river that aquatic and human health were unaffected. Continue reading

Fix the Broken Regulatory Process

There must be a better way for federal agencies to review infrastructure mega-projects.

A few days ago, I asked why, after three-and-a-half years, the U.S. Army Corps of Engineers has yet to give a yea or nay on Dominion Virginia Power’s permit request for the Surry-Skiffes Creek transmission line. The issue I’m raising isn’t what the Army Corps decides but how long it takes to reach a decision. Because of the interminable time spent pondering the permit application, citizens and businesses on the Virginia Peninsula will be at risk of blackouts this year and next, if not longer.

Today, the Richmond Times-Dispatch highlights the frustrations expressed by Diane Leopold, CEO of Dominion Transmission (DT), sister company of Dominion Virginia Power and managing partner of the proposed $5 billion Atlantic Coast Pipeline (ACP).

“To make these beneficial investments we need certainty from federal agencies. Not a rubber stamp, but a rational path forward with clear processes, reasonable schedules and reasonable decisions,” said Leopold in testimony to the U.S. Senate Committee on Energy and Natural Resources.

The pipeline requires more than 18 major federal permits and authorizations from the Federal Energy Regulatory Commission, the U.S. Army Corps of Engineers, the National Parks Service, the U.S. Forest Service, the Environmental Protection Agency and the U.S. Fish and Wildlife Service. The most visible hang-up at the moment, as judged by Robert Zullo’s article in the T-D, appears to be with the Forest Service.

Dominion says it will use state-of-the-art technology and best practices that will minimize the risk of landslides and erosion on steep mountain slopes. But environmentalists claim that Dominion is under-estimating the landslide risk, and it appears that the Forest Service shares their concerns. Dominion is convinced that it’s right, and its foes are equally persuaded that they’re right. The debate will never be settled by having one side back down.

Why does this have to be so hard?

Instead of a time-consuming bureaucratic battle, why not just specify the desired erosion-and-sediment-control outcomes and require the pipeline to meet them? A reasonable approach would entail careful monitoring of land crossed by the pipeline to detect landslides and other forms of erosion — a cost that ACP would have to absorb. All monitoring data would be made available to the public so government agencies and environmental groups could inspect them to ensure the pipeline was fulfilling its responsibilities. ACP would be required to pay the full cost of restoring mountain slopes and compensate nearby landowners or water authorities for any damages. Perhaps ACP would be required to maintain insurance or post a bond sufficient to guarantee the damages are covered.

There should be one debate over the standards appropriate to steep mountain slopes, and those standards should apply to everyone who wants to build an interstate pipeline in comparable terrain. The purpose of regulation should not be to prescribe how pipelines do their jobs but to ensure that they achieve the desired outcomes. Finally, the review process should not require months and months of review. It should take no more than a week or two to ascertain that the pipeline applicant has the financial wherewithal to live up to its commitments.

Wouldn’t such an arrangement work better for everyone?

A Prosecution or Persecution of Pawn Brokers?

Pawn brokers under the gun. Fredericksburg’s All-Star Pawn & Gold does a good business in pawned guns.

The Virginia Attorney General’s office has extracted settlements from two Fredericksburg-area pawnbrokers for allegedly charging illegal interest and fees. Spotsylvania Pawnking LLC and Stafford-based All-Star Pawn & Gold will provide more than $62,000 in refunds to more than 1,000 customers to resolve the allegations.

The two pawn shops also paid the Attorney General’s office a total of $12,600 reimbursement for expenses, costs and attorney’s fees.

“In recent years we have seen a rash of pawnbrokers around Virginia skirting laws and overcharging consumers,” said Attorney General Mark Herring in a press release about the settlement. “If you’re considering using a pawn shop or other small dollar loan lender, you should always closely review the terms and know your rights before signing anything that might result in even more money coming out of your pocket.”

The press release provided no details about what the pawn shops charged in interest and fees. But in a previous press release, Herring accused B&B Pawnbrokers, Inc., also of Fredericksburg, of “predatory lending.” B&B, Herring charged, had made automobile title loans without a license, charged an illegal 10% monthly “processing fee” on all pawnbroker loans, and exceeded state limits on allowable interest rates and other charges.

The settlements are part of a larger initiative in which the AG’s office has partnered with the federal Consumer Financial Protection Bureau to enforce state and federal consumer finance statutes.

Bacon’s bottom line: Let me be 100% clear about one thing up front. Pawn shops, like any other business, should not cheat their customers. They must obey their contractual commitments, and they must obey the law. If they break either, they pay the price. Very simple.

That said, I’m always a little suspicious about campaigns against “predatory” lenders. The crusade against pawn shops reminds me of the crackdown on payday lenders motivated by a misguided effort to help the poor. In the case of payday lenders, the real offense typically is not cheating customers but lending money on terms that offend the consciences of do-gooders and social justice warriors. Is that what’s happening here with Virginia’s pawn shop prosecutions? I don’t know. I’m just raising the question.

The fact that Pawnking and All Star Pawn & Gold settled the case does not inspire confidence. Maybe they’re guilty as charged — or maybe they didn’t want to fight prosecutors with deep pockets.

Pawnking’s settlement provides a restitution averaging $67.29 per client, and so does All Star’s. Yup, exactly the same amount. That makes it sound like a cookie-cutter restitution. One must ask, is there any relationship between the restitution offered and the alleged harm done? According to the press release, customers who received loans between Sept. 13, 2014, and Nov. 12, 2015, can contact the companies directly. Why isn’t the AG’s office dispensing the checks? Does the AG’s office even know the identities of the presumed victims?

Pawn shops fill an important function in the economy. Most poor people do not have checking accounts, and those who do are required to maintain minimum balances and are punished for overdrafts. For the most part, they live in a cash-only society. When they run short, they don’t have savings accounts or credit cards to fall back on. Here’s the sales pitch on the All Star website:

If you’ve found yourself needing some quick cash recently and if you’ve been turned down for a personal loan, consider heading to All-Star Pawn & Gold.

All-Star Pawn & Gold offers collateral-based loans, meaning the loan is secured by something of value. You bring in something you own, and if we are interested, we will offer you the loan. The pawnbroker, All-Star Pawn & Gold, then keeps your item until you repay the loan.

You will receive a pawn ticket. Don’t lose this! Not only is it the receipt for your loan, but it also summarizes the terms of your pawn loan: fees, expiration date, description of your item, etc. …

If you don’t return to make payments on your pawn loan All-Star Pawn & Gold keeps your item. There are no other consequences: no collection action and no [effect] on your credit report.

Continue reading

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.