Tag Archives: Dominion

Avoiding Blackouts with a Remedial Action Scheme

Under its "Remedial Action Scheme" Dominion may not have to implement rolling blackouts in the Peninsula on high-risk days.

Under its Remedial Action Scheme Dominion may not have to implement rolling blackouts in the Peninsula on high-risk days.

Two years ago Dominion Virginia Power warned of dire consequences to the Virginia Peninsula if the company could not build a 500 kV transmission line across the James River. An analysis prepared by engineering consulting firm Stantec and submitted to the U.S. Corps of Engineers left little to the imagination:

Dominion will be required to implement pre-contingency load shedding (i.e. rolling blackouts) in the [North Hampton Roads Load Area] to prevent the possibility of cascading outages impacting the reliability of the interconnected transmission system. … It is estimated that rolling blackouts would initially occur 80 days a year and would continue to increase in number as load continues to grow in the area. …

The potential exists that up to 50% of the customers in this load area could be without electricity for days or even weeks until the event which caused the failure could be fixed.

Yesterday I posted an article based on an interview with Steve Chafin, Dominion director of transmission planning and strategic initiatives, that seemed to tell a different story. While the utility still said the Peninsula will be at risk for 50 to 80 days a year after shutting down the Yorktown Power Station’s No. 1 and No. 2 generators April 15, the ability to continue running the No. 3 generator up to 29 days a year will reduce that threat to about 50 days. Only if an unplanned event knocked out a transmission line — something that has happened only six times the past ten years — on one of those days would Dominion have to shed load. While there are no guarantees, Chafin told me, “We think we can get through the summer without any rotating blackouts.”

After publishing the article, I got to thinking about the marked difference in tone. Two years ago, when Dominion was trying to push the Surry-Skiffes project through regulatory approval in the face of intense opposition by preservationists, the company was stressing how disastrous things would be if the project wasn’t built. Now that the permit review by the Army Corps of Engineers is reaching its final stages and a mitigation settlement seems imminent, Dominion is downplaying the risk.

Yesterday I asked Chafin and Le-Ha Anderson, a Dominion spokesperson, to explain the change in rhetoric. They stand by what Dominion said then, and they stand by what Dominion says now, and they say there’s a legitimate explanation.

The difference between then and now is that Dominion has set up a Remedial Action Scheme (RAS).

Dominion worries about an uncontrolled, cascading blackout emanating from the Peninsula, the most vulnerable zone in the Dominion electric system and one of the most fragile in the 13-state PJM Interconnection territory. If blackouts erupted there, Dominion’s grid models can’t predict where they would stop. The United States conceivably could experience an outage as widespread as the infamous 2003 Northeastern blackout that knocked out power to millions.

With approval from the Southeastern Electric Reliability Council and PJM Interconnection, Dominion has set up an RAS to isolate the Peninsula if an unplanned outage occurs. “We put in an automatic, specialized relay scheme,” says Chafin. “If it senses certain conditions, it will immediately drop load to 150,000 customers.” The draconian action will prevent a cascading shut-down of transmission lines emanating from the Peninsula to points beyond.

Before the Remedial Action Scheme, Dominion would have had to implement rotating blackouts on high-load days before a component failure or other disruption occurred. Because the RAS responds immediately when needed, it allows Dominion to implement blackouts after the disruption.

While implementation of the RAS under a worst-case scenario would cause a massive outage on the Peninsula, it would nip in the bud an uncontrolled blackout that could rip through the nation’s electric grid. The chances of it occurring are remote, however, and it reduces the necessity of initiating precautionary, controlled blackouts when the Peninsula region reaches peak electric load some 50 or so times a year.

“We have a responsibility to provide reliability to our customers. We have an equally important responsibility to protect the safety and integrity of the grid,” Chafin says. “The automation will help to reduce the risk on a short-term and temporary basis.”

The Remedial Action Scheme will be available until the Surry-Skiffes transmission line receives regulatory approval and construction is complete, a process that will take at least another 18 months.

“We’ve been working on a Peninsula solution for a long time,” says Anderson. “We filed in 2013, and have worked with the Corps for almost four years. This is a serious situation. … We’ve had to look at what other things we can do in the meantime. This is a temporary, short-term tool that will help get us through the most critical period.”

Time to Panic Over the Closing of Yorktown Units? In a Word… No

Yorktown Power Station.

Yorktown Power Station. Photo credit: Daily Press

The day, April 15, is fast approaching when Dominion Virginia Power will be compelled by federal regulations to shut down two coal-fired generating units at the Yorktown Power Station, exposing the Virginia Peninsula to the risk of blackouts.

When the Yorktown units are shuttered, the utility will have enough electric power to supply the half million-person region from the outside most of the time. But during periods of peak demand, usually during the summer, an accident knocking one of those lines out of commission will put the region only one more incident away from uncontrolled, cascading blackouts that could spread to Norfolk, Richmond and beyond. Rather than incur any chance of disaster, PJM Interconnection, the organization that controls the transmission grid for a 12-state region that includes Virginia, would “shed load” — in other words, cut off electric power to some residents and businesses on the Peninsula.

Dominion’s proposed backup, the Surry-Skiffes transmission line, remains in a state of regulatory limbo while the U.S. Army Corps of Engineers negotiates ways to mitigate the line’s impact on a near-pristine stretch of the James River near Jamestown. Even if the Corps gave Dominion a permit tomorrow, it will take 18 months — and two summers — before the line can be built.

If I were a Peninsula business or resident, I’d be wondering, is it time to panic yet? I put the questions to Dominion: How frequent will the blackouts be and how bad will they be?

The answer: The threat is real but small in any given year, and a blackout, if it occurs, is likely to be limited in scope and duration. However, while the Peninsula might skate through the next year or two without a blackout, the situation is intolerable over the long run, Dominion warns. The Peninsula is the region most exposed to blackouts in the Dominion system and possibly the most vulnerable in the entire PJM transmission grid.

“This is a serious situation,” says Steve Chafin, Dominion director of transmission planning and strategic initiatives. When three things come together — (1) temperatures are running high, (2) the Yorktown 3 unit isn’t running, and (3) an accident knocks out a transmission line or sub-station — PJM likely will have to shed load.

Assuming normal weather conditions, the Peninsula will experience between 50 and 80 “high risk” days, Chafin says. Peak consumption is likely to occur in the summer, when temperatures are highest, although a few days may occur in the winter when temperatures are extremely low.

Although the company is closing two coal-fired units, the Environmental Protection Agency will allow it to run Yorktown 3, a oil-fired unit, 8% of the time, or up to 29 days. Using Yorktown 3 as a backup will reduce the number of vulnerable days to between 20 to 50.

Transmission lines to the Peninsula have been knocked out by accidents, component malfunctions or other causes six times in the past 10 years — an average of once every 20 months. (There have been two incidents in the past 10 years in which two simultaneous outages occurred.)

To reduce the odds of such mishaps shutting down a transmission line, the utility has been increasing its patrols of electric lines, boosting sub-station inspections and running infrared scanner. “This is not a normal mode of operation,” says Chafin. “We don’t patrol our transmission lines this frequently.”

If a once-every-twenty-months line outage occurs during one of the 20 to 50 at-risk days of heavy consumption when Yorktown 3 isn’t running, the electric grid will be at risk of an uncontrolled, cascading blackout. PJM, working in coordination with Dominion, will decide whether or not to shed load.

Should it become necessary to cut electricity consumption, the goal will be to disrupt as few people as possible and spare critical infrastructure such as hospitals and water treatment plants. PJM and Dominion would continuously run contingency models to determine the best course of action.

“Our goal is to avoid the need for temporary service interruptions, but should it become necessary, we will do all we can to limit the number of customers and duration,” Chafin says. “In the end, these are temporary measures to protect the larger grid from widespread, uncontrolled outages.”

Should blackouts occur, they likely would not last all day or affect the entire Peninsula. The company would close no more circuits than needed to drop electricity consumption to within a safe range. Giving a hypothetical example, Chafin says, “We might do two or three blocks of circuits of a few thousand customers for an hour or two.”

Dominion also would ask Peninsula customers to voluntarily conserve electricity.  “The more the conservation, the shorter the duration and the fewer people affected,” he says.

With a little luck the Peninsula might escape unscathed, Chafin says. “We’re running drills to make sure we’re ready. We think we can get through the summer without any rotating blackouts.”

Chesapeake Coal Ash Ruling — Advantage Dominion

Judge John A. Gibney Jr.

My initial reaction to Judge John A. Gibney Jr.’s ruling in Virginia’s first coal ash-related federal court case was to call it a draw. As I blogged yesterday, both the Sierra Club and Dominion Virginia Power found aspects of the judge’s order that supported their positions. But as I sort through the implications for the ongoing debate over coal ash in Virginia, I’m thinking that Dominion was the real winner in the long run.

True enough, the Sierra Club and its attorneys with the Southern Environmental Law Center (SELC) did win one important tactical victory: Gibney found that arsenic-tainted groundwater passing through the coal ash ponds at Dominion’s former Chesapeake Energy Center (CEC), did, in fact, reach the Elizabeth River in violation of the Clean Water Act.

Here’s how Seth Heald, chair of the Sierra Club’s Virginia chapter, framed that finding in a press release:

A federal court has found Dominion responsible for breaking the law and polluting the Elizabeth River. That is important for all Virginians who seek to hold the utility responsible for its mishandling of toxic coal ash. Now we must push Dominion to do the right thing and get this toxic ash out of the groundwater and away from the river, which is highly susceptible to disastrous flooding from sea-level rise and other climate-change effects.

But the judge also found that Dominion had been a “good corporate citizen,” had cooperated with Virginia’s Department of Environmental Quality (DEQ) “every step of the way,” and “should not suffer penalties for doing things that it, and the Commonwealth, thought complied with state and federal law.”

More importantly, Gibney applied what is, in effect, a cost-benefit test to any proposed remedy. While it is true that a tiny volume of leachate reaches the Elizabeth River, arsenic concentrations have been rendered harmless by dilution in the massive volume of river water. No threat to aquatic life and human health has been detectable so far. Unless evidence emerges that arsenic levels are reaching dangerous levels, he saw no justification to spend upwards of $600 million to excavate and remove the coal ash.

Gibney also found Dominion’s remedy of “monitored natural attenuation” — in effect, letting nature run its course — to be inadequate as well. He ordered Dominion to conduct more extensive monitoring of sediment, water and wildlife in and around the Chesapeake cite, and to report the results to the Sierra Club’s counsel and the DEQ. “In the event of a significant change in the amount of arsenic in the water or sediments,” Gibney wrote, “either party may move the Court for further relief.”

But Gibney’s cost-benefit test favors Dominion as the coal-ash controversy unfolds. Riverkeeper groups have opposed Dominion’s requests for solid-waste permits at its Bremo and Possum Point power stations. They argued, as the Sierra Club did in the CEC case, that evidence of contaminated groundwater migrating into nearby water bodies is grounds for removing the coal ash to lined landfills away from the water regardless of expense. But the application of Gibney’s logic to future cases would mean that demonstrating the leakage of small volumes of contamination into surface waters is not sufficient to seek a massively expensive remedy. The leakage must be on a scale to affect aquatic health and human safety.

Over a half century of burning coal at the Chesapeake power plant, Dominion accumulated 3.4 million tons of combustion residue and disposed of it in coal ponds. The ash contained high levels of arsenic — an estimated 150 tons. In 2014, samples of groundwater from ten wells around the ash landfill showed arsenic concentrations higher than 10 micrograms per liter, the groundwater protection standard set by DEQ. At one location, the judge noted, the arsenic concentration reached 1,287 micrograms per liter.

Gibney accepted the Sierra Club’s arguments that groundwater migrates from the coal ash to the surface waters of the Elizabeth River and its tributaries. In so doing, he rejected Dominion’s contentions that the groundwater was unconnected to the surrounding water bodies, and that arsenic traces found in the Elizabeth River originated from other industrial sources. Wrote the judge:

Dominion argues that because sediments move upstream and downstream with the tides, it is impossible to tell where the sediments used for the poor water samples originally came from. Although some tidal action may move sediments around, it defies logic to argue that an enormous amount of arsenic does not contribute to the arsenic in soil and water right next to it, especially given the evidence of groundwater movement from the mound outward.

While the evidence shows that Dominion does discharge some arsenic into nearby surface waters, Gibney reasoned, “it does not show how much.”

The Court cannot determine how much groundwater reaches the surface waters, or how much arsenic goes from the CEC to the surrounding waters. .. What the Court does know, however, is that the discharge poses no threat to health or the environment. All tests of the surface waters surrounding the CEC have been well below the water quality criteria for arsenic….. The CEC is surrounded by an enormous body of water, and even a large arsenic discharge would amount to a drop in the bucket.

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Dominion, SELC Spin Coal Ash Ruling as Victory

Dominion Virginia Power and the Southern Environmental Law Center (SELC) are both declaring victory after a ruling by a federal judge regarding Dominion’s disposal of coal ash at its retired Chesapeake Energy Center.

U.S. District Court Judge John A. Gibney ruled today that the coal ash ponds are contaminating the Elizabeth River with arsenic and that the process of “natural attenuation,” or letting nature take its course, is a “completely ineffective solution,” says a press release issued by the SELC, which represented the plaintiff, the Sierra Club.

“The judge agreed with the Sierra Club’s experts, and rejected the testimony of Dominion experts who said arsenic does not reach the Elizabeth River,” said the statement.

But Dominion found much to celebrate in Gibney’s ruling as well. “The court has confirmed that there has been no threat to health or the environment resulting from the coal ash stored at its former Chesapeake Energy Center,” said a Dominion statement. “The court noted there has been ‘no evidence that shows any injury … has occurred to health or the environment.”

Furthermore, the ruling noted that Dominion had abided by all permits and “should not suffer penalties for doing things that it, and the Commonwealth, thought complied with state and federal law.” Accordingly, the court imposed no penalties on Dominion.

That’s the breaking news. I’ll try to have more tomorrow regarding the implications of the ruling for coal ash controversies at Dominion’s Bremo, Possums Point and Chesterfield power stations.

Why So Long to Decide about Surry-Skiffes?

View of a Dominion transmission line crossing the James in Newport News downstream from the proposed Surry-Skiffes project.

View of a Dominion transmission line crossing the James in Newport News downstream from the proposed Surry-Skiffes project. Photo credit: Daily News.

Tick, tock! The April 15 deadline is fast approaching for when Dominion Virginia Power will have to shut down its Yorktown One and Two coal-fired units, leaving the Virginia Peninsula vulnerable to blackouts. That risk will hang over the region, home to a half million people, for a year-and-a-half or more — for however long it takes to gain regulatory approval for a solution and then build a replacement source of electric power,

The question every Virginian should ask: What is going on inside the U.S. Army Corps of Engineers? What is taking so long to make a decision, either yea or nay? Whatever the final outcome, it’s hard to avoid the conclusion that the regulatory process is badly broken.

Dominion has known for several years that it would have to replace the capacity of the Yorktown units. It conducted an alternatives analysis, and then considered running a transmission line down the spine of the Peninsula before scotching the idea because the line would cross too many wetlands, subdivisions and Indian lands. Then the utility settled on building a 500 kV transmission line across the James River near Jamestown. PJM Interconnection, the organization that runs the multi-state electric grid that includes Virginia, has repeatedly confirmed that that the Surry-Skiffes Creek route selected by Dominion is the most cost effective. Dominion obtained State Corporation Commission approval for the project in 2013 and survived a Virginia Supreme Court challenge.  The Environmental Protection Agency has given Dominion two one-year extensions on the operation of the Yorktown power stations.

The final regulatory hurdle was gaining a permit from the Norfolk office of the Army Corps of Engineers, which has to balance the economic justification of the project against environmental and conservation considerations. By August 2013, when Dominion submitted a revised permit request, the proposal had stirred up intense resistance from citizens and conservation groups on the grounds that the Surry-Skiffes line’s high steel towers would ruin views of a historically sacred stretch of river, which has remained largely unspoiled since English settlers landed at Jamestown.

For three-and-a-half years, the Corps has solicited public input, held public hearings, examined alternative solutions, and considered Dominion proposals — $85 million worth — to mitigate the loss of historical and cultural resources. (See the Corp’s regulatory time-line here.) All this time Dominion has been sounding the warning that after April 15 the Peninsula would be at risk of region-wide blackouts.

For roughly 60 days a year, during periods of peak electric load, the electric lines bringing in power from outside the region would be running at close to peak capacity. The system would be only one unplanned outage of a transmission line away from a crisis. National electric reliability standards require Dominion to maintain enough redundancy in the system to withstand two simultaneous contingencies. Rather than risk a cascading blackout like the one that knocked out electric power for 50 million Americans and Canadians in the infamous 2003 blackout, PJM would order Dominion to “shed load” to eliminate the risk. During hot summer months or cold winter months, controlled blackouts could become a frequent event on the Peninsula.

There is no question that the Army Corps has a hard decision to make with Surry-Skiffes — whether to risk economically disruptive blackouts until a new solution can be found or to mar an irreplaceable historical treasure. But the longer it waits, the longer it puts the region at risk. If it gives the OK tomorrow, it would still take Dominion a year and a half to build the transmission line. If the corps declines to issue the permit, the utility will take even longer to devise an alternative, gain the necessary permits and build whatever needs to be built. Either way, the interminable decision-making process has put the Peninsula economy at risk.

The scandal here is not the necessity of obtaining Army Corps approval. The country needs a mechanism to evaluate the merits of giant infrastructure projects against the harm they might pose to communities. The scandal is the length of time it takes to reach that decision. Three-and-a-half years is way too long. The system is broken. It needs to be fixed.

Peninsula Still Needs Surry-Skiffes Project, Says PJM

View from the Surry nuclear power station of where the proposed Surry-Skiffes transmission line would cross the James River.

View from the Surry nuclear power station of where the proposed Surry-Skiffes transmission line would cross the James River.

PJM Interconnection may have lowered its forecasts for peak electricity load on the Virginia Peninsula, but the regional transmission organization still contends that the proposed Surry-Skiffes Creek high-voltage transmission line is still needed to avoid the risk of blackouts.

“It is PJM’s determination that the current Skiffes Creek 500 kV project remains the most effective and efficient solution to address the identified reliability criteria violations,” wrote Steven R. Herling, PJM vice president-planning, to the Norfolk district commander of the U.S. Army Corps of Engineers earlier this month.

Dominion Virginia Power, which must obtain a permit from the Corps before it can commence construction, has encountered stiff opposition to the project. Preservationists say the highly visible power line will disrupt views of the James River little changed since the first English settlers arrived more than 400 years ago.

The project was precipitated by federal clean-air regulations that compels Dominion to shut down two of its aging, coal-fired generators at the Yorktown Power Station. Those units are scheduled to go offline next month, eliminating a major source of electric power on the Peninsula. The region is served by multiple transmission lines that can meet electric power demand under routine conditions. But the Peninsula grid lacks the redundancy to meet federal reliability guidelines designed to prevent another cascading blackout like the one that plunged 55 million in the Northeast and Canada into darkness.

Dominion selected the Surry-Skiffes route after examining numerous alternatives. Foes charged that the utility considered only a narrow range of options. Instead of building a 500 kV line across the James, it could have met reliability standards through a combination of measures: upgrade of existing lines, solar power, energy efficiency, demand-response, greater reliance upon the oil-powered Yorktown 3 unit, and/or building a less obtrusive, lower-voltage line across the James. Arguing that the 500 kV line was overkill, they also argued that Dominion forecasts for electricity demand were unrealistically high.

In October 2016, the National Trust for Historic Preservation, which has named the James River as one of the nation’s 11 most endangered historic places, published an alternatives report prepared by Richard D. Tabors, a consultant and former MIT professor. Using Dominion data and the same simulation model as PJM, Tabors outlined four alternatives.

Summary of four alternative scenarios prepared by Tabors Caramanis Rudkevich.

Tabors recommended upgrading existing 115 kV and 230 kV power lines feeding the Peninsula, getting greater use out of the Yorktown No. 3 oil-based generator, dropping load at selected feeders, and building new transmission lines, preferably along existing rights of way. Each scenario, states the report, “is generally less costly and can be implemented in a shorter period of time.”

Since publication of the Tabors report, PJM has backed off its earlier load forecasts. Reports David Ress with the Daily Press:

The latest PJM forecasts … suggest peak load demand during the summer would grow at an annual rate of 4 percent though 2027, to reach a total of 20,501 megawatts.

That’s 1,755 megawatts less than PJM’s forecast a year ago, nearly an 8 percent decline. Last year, Dominion’s summer peak was 19,539 megawatts.

But in Herling’s letter to the Corps, PJM stuck to its guns on the larger point, that the Surry-Skiffes line presented the optimum solution to the Peninsula’s needs. “PJM staff has reviewed the proposed alternatives and found that none of them resolved the identified reliability criteria violations that are being addressed by the Surry-Skiffes 500 kV project,” wrote Herling.

There are multiple, inter-related reliability violations, said the PJM planner.

Solving for a single violation does not address the panoply of reliability violations that are designed to be addressed through the Skiffes Creek project. For example, the continued operation of the Yorktown 3 generator as proposed by Dr. Tabors would not address thermal overload and voltage violations on the 230 kV and 115 kV bulk electric system that were identified by PJM. In addition, Dr. Tabors’ reliance on the Yorktown 3 generator as a solution ignores the significant environmental operating restrictions and limitations on plant operations associated with that plant.

Subsequent studies have re-confirmed the need for the Surry-Skiffes project even considering PJM’s updated load forecasts, Herling wrote.

Has Rate Freeze Benefited Virginia Customers?

There's no evidence that the electricity rate freeze has hurt Virginians.

Rate freeze —

Are the electric power companies ripping off rate payers under the guise of a rate freeze? Some think so. The electric utility industry came under fire during the 2017 General Assembly session when Sen. Chap Petersen, D-Fairfax, submitted a bill to un-do the freeze in base electric rates enacted in the 2015 session. Although his bill never made it through the General Assembly, Petersen has appealed to Governor Terry McAuliffe to implement it as an amendment.

In an op-ed piece published in the Richmond Times-Dispatch this morning Mark Webb, Dominion’s senior vice president for corporate affairs, argued that the freeze is working as designed and is a good deal for rate payers.

Legislators wanted to protect customers from a potential price hike tied to environmental costs. Since then a Dominion residential customer has paid $1,100 less per year for electricity than those in the Mid-Atlantic.

Were the rates frozen after big increases? Not at all. Dominion residential rates are only about 4 percent higher than they were in 2008. Don’t you wish that was the case with your other household expenses?”

Meanwhile, the reliability of service has improved, Webb writes, and industrial rates have declined 16% over the same period. Virginia’s lower electric rates are significantly lower than Maryland’s and Washington, D.C.’s. Maryland residential customers pay 25% higher rates than Dominion customers, while industrial customers pay 49% more. D.C. residents and industrial customers pay an even bigger premium.

Dominion’s lower rates have been an economic boon for Northern Virginia, Webb says. “No wonder large electric users such as data centers overwhelmingly locate in Virginia instead of D.C. or Maryland.”

(Webb’s op-ed made no mention of the neighboring state of North Carolina, however, where the average electric rate is lower — 10.29 per kilowatt hour in December 2016 compared to 10.72 cents in Virginia.)

Webb then goes one step further, contending that the General Assembly’s re-regulation of electric power energy in 2008 has worked out well for Virginians, too. “Since Virginia’s landmark legislation reregulated utilities a decade ago,” he writes, “electric rates have been remarkably stable and well below the national and regional averages.”

Bacon’s bottom line: I was curious. What are the numbers? How have electricity rates fared compared to national averages (a) since reregulation and (b) since the rate freeze? I checked data compiled by the U.S. Energy Information Administration for “Average Retail Prices for Electricity” for answers.

Between 2008 and 2016, the average residential rate per kilowatt hour for retail customers nationally increased 11.7%, significantly higher than the 4% rate for Dominion customers that Webb cites. So, Dominion has out-performed the national average since reregulation. But rate-freeze critics have not disputed the fact.

A more pertinent question is what has happened to electricity rates since July 2015 when the freeze went into effect. As critics have noted, base rates cover only ongoing operating costs, not the cost of fuel, which is adjusted through fuel adjustment clauses, or the cost of new capital projects, which is incorporated into the rate structure through rate adjustment clauses. In theory, overall rates can climb higher while base rates stay locked in place.

But that has not happened. Between July 2015 and December 2016 (the most recent month available), the average price of electricity in Virginia decreased 8% to 10.72 cents per kilowatt hour. That compares to a 5.9% decline in electric rates nationally between July 2015 and November 2016, according to the Energy Information Administration.

Out-performing the national average since mid-2015 would seem to buttress Dominion’s case, but it still doesn’t end the argument. Former Attorney General Ken Cuccinelli has argued that the rate freeze locks into place hundreds of millions of dollars in excess profits, with the implication that if Virginia electricity rates would be even lower if they hadn’t been frozen. Webb side-stepped that issue in his op-ed piece, and the EIA numbers don’t address it.

Will “Home Grown” Renewables Spur Virginia’s Economy?

Which creates more jobs? Solar and wind…

Walton Shepherd, a staff attorney for the Natural Resources Defense Council (NRDC), has made an economic-development argument for renewable energy sources over natural gas in Virginia’s energy policy. Sandy Hausman with WVTF Public Radio quotes him as follows:

Renewable energy and energy efficiency are basically homegrown resources. If Virginia wants to produce its own power and not send dollars out of state for things like natural gas that we actually have to import, we can tap those resources right here in Virginia and keep those dollars local.

… or gas-fired power plants?

Shepherd says that Virginia should cut carbon emissions by 30%, and the state should reject any request by Dominion Virginia Power to build any new natural gas burning plants. Using similar logic, environmentalists also have argued that construction of the proposed Atlantic Coast Pipeline and Mountain Valley Pipeline, both of which would transport natural gas, is unnecessary and not in the public interest.

Shepherd raises a point worth examining: Do “home grown” energy sources like solar, wind and energy conservation create more taxable, job-creating economic activity than building pipelines and gas-fired power stations? The answer seems intuitively obvious — wind and sunshine are abundant and free here in the Old Dominion, while natural gas imported from outside the state represents a drain on Virginia’s economy.

But the truth of the matter is far from clear. The point of this post is not to settle the matter — I don’t have the data or analytical tools to do that — merely to warn against making simplistic assumptions.

Cost of capital. First, the cost of fuel is only one part of the cost of generating electricity. Two other inputs are manpower and, most important, capital. Shepherd’s argument (as filtered through Public Radio) does not consider the cost of capital. At present, solar panels and wind turbines are more expensive per unit of electricity generated than the turbines, boilers and pollution-control devices it takes to burn natural gas. Higher costs translate into higher electric rates, which come out of the pockets of businesses and rate payers, which diminishes the money they have to spend in the local economy.

Direct job creation. Once installed, solar, wind and gas facilities require employees to maintain and operate them. A billion-dollar gas power station requires only a few dozen employees to operate. A solar farm requires little more than periodic inspections to ensure everything is working properly and landscapers to keep down the grass. (Wind will be a niche player in Virginia, so I don’t give it much consideration here.) I haven’t seen an objective analysis that compares the employment levels (and payroll) of solar farms vs. gas plants. Either way, the numbers are tiny compared to the capital investment expended.

Indirect job creation. Solar farms and gas plants also have indirect, spin-off effects. For instance, corporations dedicated to green energy policies want to buy renewable energy. A case in point is Amazon Web Services, which has committed to run its Northern Virginia data centers on solar. The availability of green energy makes such companies more willing to invest in Virginia, although it is difficult to say how critical the criteria is in their location decisions.

On the other side of the argument, gas backers say that new gas-fired power stations will support construction of the Atlantic Coast Pipeline, which in turn will supply gas to industrial customers along the pipeline route and allow communities to compete for energy-intensive manufacturing prospects for the first time.

Energy efficiency. Greenies such as Shepherd tout the advantages of energy efficiency. Whether weatherizing the houses of the poor or installing state-of-the-art controls for office HVAC systems, investments in energy efficiency can create jobs and build businesses. (My wife used to work for a company that makes a software platform for building automation systems. That Henrico-based firm employs a lot of  highly paid engineers.) Energy conservation programs come in many forms — from upgrading heat pumps to replacing old, energy-hogging refrigerators — and each one offers a different payback. On one extreme, the market-driven building automation business offers demonstrable savings and requires no government support. On the other hand, programs that eke out marginal improvements in appliance efficiency typically require subsidies from taxpayers or rate payers.

Subsidized conservation programs may create local jobs, but if the same sum of money were invested elsewhere, they might create just as many jobs, perhaps more. Americans normally trust the free market to allocate capital the most efficiently. When government policy overrides market dynamics via subsidies, it’s much harder to make the case that job creation will be maximized. Continue reading

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.

Corey Stewart Defines Himself through the Fights He Picks

Corey Stewart (left) appeared last week with Jason Kessler, a conservative blogger-activist, after Kessler petitioned to remove the vice mayor of Charlottesville, Wes Bellamy, from office.

Corey Stewart (left) appeared last week with Jason Kessler, a conservative blogger-activist, after Kessler petitioned to remove the vice mayor of Charlottesville, Wes Bellamy, from office. Photo credit: Richmond Times-Dispatch.

I met Corey Stewart, Republican candidate for governor, for the first time last night and interviewed him outside a public hearing about coal ash disposal. The Prince William County board chairman came across as a genial guy. But he’s not one to run away from a fight. Indeed, he’s more likely to be the first one to charge into the fray.

With Ed Gillespie as the perceived front-runner in the Republican race, Stewart evidently has decided that the best way to get attention and define himself as a tribune of the people is to pick the right fights. That strategy certainly was on display last night when he lambasted Dominion Virginia Power to the cheers of many in the audience for its closure-in-place proposal for dealing with coal ash at its Possum Point Power Station.

“Dominion has been less than honest with Prince William County,” Stewart said. Then, referring to a series of local controversies over the impact of coal ash on surface and ground water, he said, “Dominion lies. You have to be very skeptical of what they tell you.”

I wasn’t paying attention to Virginia politics in 1973 when Democratic candidate Henry Howell took on Dominion’s predecessor company, vowing to “keep the big boys honest.” But I can’t imagine that he was any more blunt in his denunciation. The issue back then was electric rates, not the environment, but Howell nearly rode the slogan to victory.

Stewart is best known for his hard line approach to illegal immigration. His campaign website boasts that under his leadership, Prince William County turned over 7,500 criminal illegal aliens for deportation. He says he will work “side-by-side with the Trump administration” to oppose amnesty and sanctuary cities in Virginia.

Along similar lines, he has aligned himself with a far-right group in Charlottesville to protest, among other things, City Council’s decision to remove a statue of Robert E. Lee from the public square. Mobbed last week by counter-protesters who drowned out his words, Stewart reportedly handled himself with aplomb. But his views seem pitched to the same kind of disaffected white working- and middle-class voters who voted for Donald Trump, for whom he acted as Virginia campaign chairman. Just wait until next week, he told me. He’ll be back in Charlottesville.

Stewart also joined conservative activist-blogger Jason Kessler in calling for the removal of Charlottesville Vice Mayor Wes Bellamy from office. Bellamy had posted misogynistic, homophobic and anti-white comments on Twitter before his election to Charlottesville City Council in 2015.

I asked Stewart to elaborate upon his view of Dominion. He said it’s wrong for a monopoly utility to insert itself so deeply into the political and regulatory process. “This is what happens when every member of the General Assembly is taking thousands of dollars from Dominion. DEQ (the Department of Environmental Quality) rubber-stamps every thing Dominion wants.”

If he becomes governor, Stewart said, “Heads are going to roll” — starting with the chief of DEQ, David Paylor. Then, alluding to Denver Riggleman, one of his three Republican rivals for the governorship who also has campaigned against Dominion, he quipped, “I’ll put Riggleman in there.”