Tag Archives: Dominion

Tarheel Coal Ash Data Could Inform Virginia Debate

Coal ash at the Chesterfield Power Station. Photo credit: Richmond Times-Dispatch

Last week I argued that Virginians need more information about the disposal costs and health risks associated with coal ash ponds before the General Assembly rushes ahead with a law requiring Virginia’s electric utilities to recycle and/or landfill their coal ash. Some of that data could come from the experience of Duke Energy in North Carolina as well as utilities in South Carolina, which are farther along in the process than Dominion Energy Virginia.

Travis Fain, a former Daily Press reporter who has moved on to WRAL.com, reported yesterday how Duke Energy has blasted its opponents in a regulatory filing, asserting that they leaned on “simplistic crutches,” false analysis, and a Pollyanna hindsight to argue against the company’s bid to raise electricity rates sufficient to cover its coal as clean-up costs. Duke Energy’s foes have some not-so-nice things to say about the utility, too. The bottom line for Virginia is that political and regulatory facets of the coal-ash controversy are further along in North Carolina than they are in the Old Dominion. Many of the same issues are likely to surface here, and economic data from the Tarheel State could illuminate our debate.

Writes Fain:

The company complied with existing laws and industry standards when it left wet ash in unlined pits for decades, they said. At one point “the lack of a liner was considered a feature, rather than a flaw” because soil would filter out contaminants, the company said. Impact on groundwater wasn’t initially a concern “because the ash basins were built more than a decade before the adoption of any federal or state regulation related to groundwater corrective action,” attorneys argued.

That same commission will decide now whether Duke Energy Progress shareholders or its customers will cover the majority of costs for a cleanup that has since been ordered by changes in state and federal law. Between Duke Energy Progress and its sister company, Duke Energy Carolinas, parent Duke Energy has asked for more than $1 billion a year in increases. …

“They fault the Company for not doing something that no one was doing, but at the same time washing their hands of any responsibility of paying for that which they – in 20/20 hindsight – wish the Company had done,” the utility’s brief states. …

The Attorney General’s Office referenced to a number safety reports, including an inspector who found “open cracks” and other problems in safety features at the H.F. Lee Plant in Goldsboro in 1999. That inspector returned in 2004 to note that “those same problems had not been repaired and still existed,” the Attorney General’s Office said.

If Duke had been proactive, cleanup costs “would have been far less than the costs are now and will be in the future,” the Attorney General’s Office said. …

The Public Staff also proposed that Duke Energy Progress split coal ash cleanup costs 50-50 with customers, something the company rejected.

Coal ash cleanup costs alone would add nearly $183 million a year to customer bills under Duke Energy Progress’ proposal.

Dominion has said it would cost roughly $4.5 billion to landfill all the coal ash at its Bremo, Possum Point, and Chesterfield plants. Dominion foes have charged that its estimates are inflated because the utility could reduce its costs by recycling coal ash into cement, bricks and pavers. Basically, we have a he-said, she-said situation. Although both Dominion and the Southern Environmental Law Center have hired consulting engineers, no non-aligned third party has weighed in with a judgment.

One obvious step, it seems to me, would be to compare Dominion’s situation to Duke Energy’s. Duke Energy says the cleanup will cost $183 million a year. It’s not clear how many years we’re talking about — likely 15 at least, maybe longer. If so, that implies a total cost of  between $3 billion to $4 billion. As I recall, Duke Energy has to remove more tonnage than Dominion, so its removal costs per ton are likely lower than Dominion’s estimates.

However, it is dangerous to make simplistic comparisons. Costs vary widely power station by power station, depending upon a number of factors, and direct comparisons may or may not be appropriate. Furthermore, the properties of coal ash vary, and Duke Energy’s material could be more, or less, suitable for recycling. Finally, Duke Energy has first-mover advantage in recycling its coal ash. Its coal ash will flood the Mid-Atlantic market, arguably depressing prices and making the recycling option less attractive to Dominion.

The article hardly answers all the questions one might have, but it seems clear that we are talking about disposal costs in the billions of dollars. Whether recycling/landfilling is an economical option in Virginia remains to be seen. Hopefully, the General Assembly won’t pass law in the absence of authoritative information.

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.

Virginia Wallowing in Ignorance about Coal Ash

Coal ash at the Chesterfield Power Station. Photo credit: Richmond Times-Dispatch

Sen. Amanda Chase, R-Chesterfield, has co-sponsored legislation that would require Dominion Energy to remove more than 25 million tons of coal ash from its Chesterfield, Bremo, Possum Point and Chesapeake power stations, reports the Chesterfield Observer.

Senate Bill 1398introduced by Sen. Scott Surovell, D-Fairfax, applies to any owner or operator of a “coal combustion residuals unit.” The bill specifies that any coal ash stored in an unlined pond that is located within a half-mile of a floodplain or river must be excavated and disposed of either by recycling into cement or removal to a landfill.

The concern of environmentalists, residents living near the power plants, and many elected officials is that Dominion’s proposed solution — burying the coal ash on-site and capping it with an impermeable liner — will not prevent groundwater from seeping through the pits, picking up contaminants, and migrating into rivers and streams. Reinforcing their fears are the findings of riverkeeper groups of elevated levels in nearby groundwater and surface waters of potentially toxic heavy metals found in coal ash.

A Dominion-commissioned study by AECOM, an international engineering firm, found that Dominion’s proposed bury-in-place solution would cost between $480 million to $1.7 billion (not including judicial remedies ordered for the disposal of ash at the Chesapeake plant). By contrast, the most economic solution for removing and landfilling the coal ash would run about $4.15 billion. Critics say that AECOM overstated the cost of recycling and removal.

For all that has been written about coal ash disposal, there is much that we don’t know. Given the current state of knowledge (at least the knowledge that has seeped into the public policy debate), it’s hard to see how a rational, well-informed decision can be made.

There is one thing we can say for certain: contaminants from coal ash do leak in minute quantities into the groundwater, and groundwater does make its way into rivers and streams. Beyond that, there is very little certainty. Two questions arise: Does the contamination reach levels that are hazardous to human health (generally measured in a few parts per million)? Will Dominion’s proposed remedy of capping the coal ash piles reduce the level of contamination to safer levels?

Adjudicating a lawsuit filed by the Virginia Chapter of the Sierra Club against Dominion Energy Virginia for coal-ash pollution at Dominion’s Chesapeake plant, U.S. District Court Judge John Gibney found that (a) the coal ash ponds at Chesapeake did contaminate groundwater and the nearby Elizabeth River, but (b) the concentration of potentially toxic compounds was so low that it did not pose a threat to human health.

Heavy metals and other pollutants are often found naturally in groundwater, rivers and streams. Zero contaminants — the equivalent of distilled water — is neither necessary nor desirable. Some elements, such as zinc, are toxic at elevated levels but are necessary to sustain human and animal life in minute traces. The purpose of public policy should be to keep the concentration of these chemicals below the threshold at which they pose a threat to human and aquatic health — not to achieve zero contaminants.

Environmentalists have conducted tests in public waters near Dominion’s coal ash pits and have found non-safe levels of chemicals on numerous occasions. However, those tests reflect the condition of Dominion’s coal ash impoundments in their current form. Following standard industry practice, the utility buried the coal ash in multiple pits at each location and covered them with water to keep them from drying out and creating a dust problem. Rainwater falling on the water-laden pits created hydrostatic pressure that elevated the movement of water through the coal ash and increased the rate of contamination.

At each location, Dominion proposes to drain the water from the ponds, consolidate the near-dry coal ash into a single pit at each location, and cap the pit with a synthetic barrier. That barrier will prevent rainwater from reaching the coal ash and eliminate the main source of hydrostatic pressure. Also, in theory, the coal ash also will be buried above the water table, thus foreclosing the potential for groundwater to migrate through. In practice, however, as the Southern Environmental Law Center has shown from documents filed by Dominion, low-elevation portions of the Chesterfield impoundment will intersect with the water table. In other words, while most coal ash will be inert, a small portion will be exposed to the groundwater.

It should be within someone’s power to compute (a) the rate of flow of the groundwater, (b) the volume of water that will be exposed to coal ash, (c) the extent to which groundwater will pick up contaminants, (d) the volume and toxicity of groundwater that will reach rivers and streams, and (e) the resulting increase of potentially toxic chemicals in public waters. If the level of contamination in the River remains below Environmental Protection Agency thresholds, it makes little sense to spend billions of dollars to remove the material to a landfill. If the level of contamination exceeds safe levels, then action is justified.

The problem is that we don’t know the answer to the question. The Surovell-Chase bill presupposes that Dominion’s preferred, cheaper remedy would be inadequate. But we don’t know, and we can’t reach a judgment based on tests conducted during the old regulatory regime.

Environmental groups are arguing that utilities in North Carolina and South Carolina are pursuing the recycling and landfilling approach called for in the Surovell-Chase bill. If recycling/landfilling makes economic sense for them, they say, it should make sense for Virginia. That argument is buttressed by the testimony of companies offering to recycle as much as half of Dominion’s coal ash, some of it potentially at a profit to the utility.

AECOM examined four potential recycling technologies and concluded that Dominion couldn’t come close to recycling its coal ash at a profit. What the study did not do, as best I can tell, is determine whether it would be cheaper to recycle or load into a landfill. In other words, even if Dominion lost, say, $30 to $100 per ton through recycling, would that still be cheaper than trucking the coal ash to a landfill? The report did not make that calculation. Moreover, the report allows for a wide variation in costs. It makes a big difference if the cost of beneficiation (as the recycling process is called) at the Bremo station is $96 per ton or $217 per ton. Likewise, it makes a big difference if the coal ash sells for $30 a ton or $60 per ton. The AECOM discussion of recycling economics makes only the roughest of rough cuts. It does not provide enough data to make an informed decision.

The same can be said of the environmentalists who are critical of the AECOM report. We are told that Carolina utilities are recycling and landfilling their coal ash. But an obvious question arises: at what cost? The coal ash issue is even more emotional in North Carolina than in Virginia because North Carolina is where one of the nation’s worst coal ash spills occurred. Is Duke Energy under more intense judicial and political pressure to pursue the recycling/landfilling strategy to remedy its coal ash problem regardless of cost? The cost per ton of recycling/landfilling in North Carolina may be public information, but it hasn’t entered into the public discourse in Virginia.

The problem with the Surovell-Chase bill isn’t that it’s a bad bill. It’s that the public has no way of knowing whether it is a good bill or bad bill. We don’t have the data to make an informed decision. Perhaps the General Assembly should make it a priority to get that information before voting the bill up or down.

Update: Haha! Looks who’s wallowing in ignorance! Juliana Condrey informs me that SB 1398 was from the 2017 session.

Weighing the Coal Ash Options

Coal ash pit at the Chesapeake Energy Center

Meeting EPA deadlines constrains Dominion’s options for disposing of coal ash at four of its power stations.

Under Environmental Protection Agency (EPA) rules published in 2014, Dominion Virginia Energy must find a way to safely dispose of nearly 30 million tons of coal ash within 15 years. After intense controversy over how best to proceed, the General Assembly ordered Dominion to conduct a detailed study of the alternatives. That Dominion-commissioned study, written by engineering firm AECOM, was published in November.

Not surprisingly, given that Dominion has been locked in a running battle with environmentalists and community activists over coal ash disposal for about two years now, the study has settled nothing. On the one hand, AECOM affirmed that Dominion’s original plan — burying and capping the coal ash on-site — makes the most sense. On the other, the utility’s foes have attacked the study as inadequate on multiple grounds. The General Assembly will take up the issue in the 2018 session with few definitive answers.

Despite the seeming inability of the opposing sides to agree on anything, the AECOM study does illuminate the controversy. While Dominion foes criticize parts of the report, they are silent on others. Silence can be interpreted as tacit acceptance of some conclusions, or at least an unwillingness to contest them. For example, foes had long argued that the utility should transport the coal ash by truck or rail to lined landfills. AECOM contends that such a remedy would add billions of dollars to the cost of ash disposal. Since publication of the study, critics have dropped that line of attack and focused instead on the need to recycle the ash into concrete, bricks, and pavers — an approach that in theory could reduce the volume to be disposed of by half.

For decades, Dominion and other electric utilities had stored combustion residue from their coal-fired power plants in large pits on-site. Massive spills of coal ash into public waters, first in Tennessee and then in North Carolina, prompted the EPA to enact stricter standards for the storage of the material. A primary goal was to prevent another calamitous spill.

EPA regulations give electric companies five years plus two five-year extensions — a maximum of 15 years — to comply. Reacting quickly to the coal ash rules, Dominion proposed de-watering the ponds, consolidating the ash from separate ponds into one pit at each power station, and then capping the pits with a thick synthetic liner to prevent rain water from percolating through and picking up contaminants along the way. Arguing that Dominion’s plan would not prevent groundwater from migrating through the pits, environmental and activist groups insisted that Dominion dispose of the ash in landfills sealed from the groundwater and/or recycle the material into cement and other products.

Under orders from the General Assembly, Dominion hired AECOM to study the alternatives. AECOM contends that the on-site impoundments will limit the long-term risk of contaminating groundwater and will withstand everything from flooding and storm surges to hurricanes and earthquakes. The engineering firm found that the so-called closure-in-place option cost far less than transporting the material to landfills. And in a site-by site analysis of four Dominion power stations — Chesapeake, Bremo, Possum Point, and Chesterfield — it concluded that recycling coal ash into concrete, bricks and pavers would lengthen the process of cleaning up the ash by many years.

Environmental groups have been highly critical of the study on two broad grounds. They say the AECOM report failed to address the disposal of more than two million tons of coal ash at the Chesapeake facility. And they contend that the engineering study gave short shrift to the option of reducing the volume of coal ash at Bremo, Possum Point, and Chesterfield.

The Chesapeake Power Station

According to the AECOM report, the cost of removing 60,000 tons of material from a pit at the Chesapeake facility designated the “Bottom Ash Pond” is paltry compared to that of the other power stations. Alternatives range in cost from $10.6 million to $13.3 million, although as much as $161 million might be needed to pay for corrective measures where contaminants have leaked into surrounding waters. Dominion, says the report, has committed to recycling and removing the material from the Bottom Ash Pond.

However, the AECOM report does not address disposal of coal ash contained in the far larger pit known as the “Historic Pond.” In a statement posted on its website December 15, the Southern Environmental Law Center made the following retort to the AECOM study:

In a glaring omission, Dominion Energy’s recent coal ash assessment fails to include any information about the large, unlined coal ash ponds leaking arsenic at its Chesapeake Energy Center, contrary to the requirements of the new Virginia law passed earlier this year. Senate Bill 1398 requires Dominion to assess and evaluate its coal ash facilities to provide information to the public, legislators, and regulators about how best to close the sites. But Dominion ignored the 2.1 million tons of coal ash in the unlined surface impoundment at Chesapeake Energy Center known as the “Historic Pond,” which contains roughly two-thirds of the ash at the site.

“This is clearly an attempt by Dominion to ignore the problem with its unlined coal ash ponds,” said Senior Attorney Deborah Murray in a letter to the Virginia Department of Environmental Quality. “We can’t pretend this ash does not exist. There is no legitimate reason for Dominion to have excluded this pond from its assessment, and the Department of Environmental Quality should require Dominion to remedy this omission immediately.”

Portions of the coal ash in the historic pond lie six feet below sea level, where it is saturated by groundwater and prone to releasing potentially toxic chemical compounds. “Dominion may not pick and choose the laws with which it will comply,” added SELC attorney Nate Benforado.

The SELC statement refers to a July ruling in which U.S. District Court Judge John Gibney found that contaminants from coal ash at Chesapeake were leaking into the Elizabeth River. According to Dominion spokesman Rob Richardson, Gibney ordered Dominion to conduct water, sediment and biological monitoring around the Chesapeake Energy Center, and also to submit by March 2018 a revised solid waste permit for the removal of an additional three million tons of coal ash at the Historic Ash Pond. 

Dominion is not ignoring the wishes of the General Assembly by refusing to address those three million tons in the AECOM study, says Richardson. The Historic Ash Pond was closed nearly three decades ago, which means it is not subject to regulation under the EPA’s coal ash rules. Although Gibney found in March that traces of potentially toxic compounds had leaked into the river, the volume was so minute that there was no evidence of harm to human health.

Rather than compel Dominion to remove the coal ash, Gibney ordered the utility to propose corrective measures in an application for a solid waste permit. His ruling commanded Dominion and the Sierra Club Virginia Chapter to submit a “detailed remedial plan” that states, among other things, the timing of Dominion’s application for a permit. The Sierra Club and Dominion submitted that plan in July outlining extensive monitoring of the waters and wildlife around the Chesapeake facility, and Dominion has begun collecting the data.

The ultimate remedy at Chesapeake will be determined by Judge Gibney, not the Department of Environmental Quality, says Richardson. Therefore, the coal ash in the Historic Ash Pond needs to be considered separately from the coal ash subject to the Department of Environmental Quality.

Bremo, Chesterfield and Possum Point

While Gibney wrestles with how to dispose of coal ash at Chesapeake, the Virginia Department of Environmental Quality (DEQ) is charged with determining what to do with the much larger volumes of coal ash at Bremo, Possum Point and Chesterfield. Those power stations are storing 6.2 million tons, 4.0 million tons, and 14.9 million tons respectively. The AECOM study examines several approaches.

Closure in place. The low cost solution at each site is “closure in place” — consolidating the coal ash from multiple ponds into a pit, capping the pit with an 18-inch synthetic cover, adding a six-inch layer of soil, monitoring the groundwater, and taking “corrective measures” if groundwater toxins surpass allowable levels. The combined cost would run between $480 million and $1.7 billion for the three power stations, AECOM estimates. The main variable is how much money the company will have to spend on mitigation. AECOM’s low-cost plan would take three to five years to execute, well within the time frame mandated by EPA regulations.

While capping the coal pits would prevent rainwater from percolating through to the water table and picking up contaminants along the way, Dominion critics contend that closure-in-place would allow groundwater to migrate through lower levels of the ash pits. They want Dominion to remove the material to landfills with lined pits, sealing off the coal ash from any chance of groundwater contamination, as electric utilities in North Carolina and South Carolina are doing at some of their power stations in low-elevation areas.

Truck and rail. Trucking coal ash in 18- to 22-ton-capacity dump trucks to landfills miles distant from the power stations would require literally hundreds of thousands of trips on narrow roads, subjecting residential neighborhoods to traffic disruption, dust, truck emissions, and potential spills. In the case of the Possum Point station, AECOM assumes that 150 truckloads could be loaded daily, equating to a loaded truck leaving the site every three minutes, eight hours a day, five days per week. That process would take years longer than the closure-in-place alternative: nine years for Possum Point, 13 years for Bremo, and 29 years for Chesterfield. Dominion would be unable to meet the 15-year EPA deadline (which includes two five-year extensions) at Chesterfield. And the cost would approach $4.5 billion, making it billions of dollars more expensive than closure in place.

AECOM also examined the scenario of removing the coal ash by rail. That alternative was even more problematic, requiring added expense and time to build rail-loading facilities at the power stations. AECOM estimated a total cost of $7.3 billion, and the length of time to remove the coal ash as nine years for Possum Point, 13 years for Bremo, and 24 years for Chesterfield. The firm also looked at removing the coal ash by barge, but found that approach only remotely practical at Possum Point, and even there, it would cost $1.7 billion, far more than the truck and rail options for that facility.

Regional landfill. AECOM explored a fourth alternative: building a regional landfill from scratch. By reducing the distances that trucks have to travel, the regional approach would cost somewhat less than hauling the coal ash to private landfills: about $4.15 billion. But buying the land, getting the permitting and preparing the landfill would add six years to the disposal process, 21 years in all, during which the ash ponds would remain open.

From Ponds to Concrete

Coal ash is widely used in the United States as a supplement adding strength and durability to concrete and in making bricks and pavers. Recycling is regarded as environmentally benign because it encapsulates the material in a matrix that will not dissolve or release the potentially toxic heavy-metal compounds commonly found in ash.

Utilities in North Carolina and South Carolina have recycled coal combustion residue for years, and now they are ramping up their commitment in order to work down their own coal ash stockpiles. Environmentalists have suggested that Dominion consider recycling coal ash for the same reason: to cut disposal costs by reducing the volume of material to bury.

Coal ash comes in different varieties, and it often must be treated, a process referred to as beneficiation, to alter its chemical properties before it can be mixed with cement or used in other applications. At present Virginia has no beneficiation facilities. But several companies that conduct beneficiation in other states are eager to do business with Dominion.

University of New Hampshire professors Kevin Gardner and Scott Greenwood, engaged by SELC to study the coal ash issue, estimated that sufficient demand exists in Virginia for Dominion to recycle 16 million tons, more than half of its coal ash. In their report, “Beneficial Reuse of Coal Ash from Dominion Energy Coal Ash Sites,” They write:

Nationwide, coal ash is used in 75% of all concrete used for transportation projects, significantly reducing project costs. The Virginia Department of Transportation estimates that fly ash is used in 60% to 70% of all concrete used in transportation projects in the state, all of which, to the best of our knowledge, is currently fully sourced outside of the state due to the lack of beneficiation facilities operating in Virginia.

As an example of what beneficiation can accomplish, Gardner and Greenwood pointed to a beneficiation facility at the R. Paul Smith Power Plant in Maryland, which has removed 1.5 million tons from the power plant’s coal-ash landfill. The ash is expected to be mined out by 2020, allowing the area to be regraded, vegetated and closed, thus eliminating any remaining environmental risks. “As mining nears an end,” notes the report, “cement manufacturers are actively seeking similar stockpiles for continued reuse in the future.”

The economics of recycling can vary according to the properties of the coal ash and specific conditions at each power station, such as the volume to be recycled, local demand for the recycled material, and the cost of transporting the refined product to customers. None of these are insuperable barriers, says the Gardner-Greenwood report.

Representatives from the concrete industry have stated the need for high quality ash sources in the Virginia region and have indicated a willingness to set up long-term contracts for ash suppliers. Success in the mining and beneficiation of legacy ash in South Carolina has spurred the planning and planned groundbreaking for multiple new beneficiation plants in North Carolina in 2018, demonstrating economic viability. This combination of available technology, vendors with experience, a strong market and economic feasibility together make it clear the beneficial use of legacy ash from the Dominion Energy sites is possible, feasible, and given the environmental benefits, an overall preferred approach.

Not so Fast…

AECOM studied the feasibility of building coal-ash processing facilities at Bremo, Possum Point, and Chesterfield, as well as building a regional processing facility at Chesterfield. According to its calculations, costs would range as follows:

Bremo — $96 to $217 per ton
Chesterfield — $1oo to $285 per ton
Possum Point — $118 to $225

By contrast, contends AECOM, fly ash is selling on average for $30 to $60 per, on top of which Dominion would have to pay $7 to $33 per ton for transportation. In sum, the cost of beneficiation ranges from 1.5 times to nearly 5 times the market price for the ash, making it a major money loser in Virgina. Moreover, says AECOM, there is wide variability in the market, so demand for beneficiation cannot be accurately estimated. And the volume of coal ash entering the Virginia-Maryland-D.C.-North Carolina market is projected to exceed supply by 2019 as North Carolina utilities begin pushing more recycled material onto the market. Added volume from Dominion would create an even greater imbalance and depress prices.

If the decision were made to proceed with beneficiation, AECOM says, Dominion would need to conduct detailed cost and marketability discussions with beneficiation vendors to nail down firm commitments on processing rates and costs.

Coal Ash into Bricks

In a letter written to Dominion, Belden-Eco Products (BEP), developer of a process for converting fly ash (coal ash emanating from a smokestack) into bricks and pavers, corrects what President Robert W. Ittman terms “critical errors or misconceptions” in the AECOM study.

BEP’s patented process creates a superior ceramic brick that could be sold profitably into the $3.5 billion-a-year brick and paver market. The company asserts that its solution — building its facility close to Dominion’s ash ponds and shipping its products to market by rail or barge — would cost less than either landfilling or cap-in-place. The company says that it can generate far more than the $30 to $60 estimated by AECOM from a ton of fly ash — more like $119 to $214 per ton.

“BEP’s bricks would generate a positive income for Dominion of $1 to $55 per ton of fly ash over the course of the project,” states the letter. Partnering with BEP would generate $10 million in Net Present Value for Dominion over the life of the plant, a 7% internal rate of return.

However, the BEP letter does not address a critical issue raised in the AECOM study. AECOM estimated that installing a brick plant with a throughput of 300,000 to 550,000 tons per year — similar to the 500,000 figure cited in the BEP letter — it would take 30 to 53 years to excavate the coal ash ponds at Chesterfield. Dominion is required to devise a solution that removes the ash within 15 years.

Conclusions

A key factor driving Dominion’s decision to bury the coal ash in place is the necessity of finishing the clean-up within 15 years. Solutions that require making big capital investments with long permitting and construction lead-times won’t accomplish that aim. As a legal matter, Dominion must comply with the rules established by the Environmental Protection Agency (EPA) and administered by Virginia’s Department of Environmental Quality. The point of the regulations, after all, is to prevent another coal ash spill that could result in environmental damage on a scale far more calamitous than the slow leaking of contamination through groundwater migrating through the coal ash ponds.

While recycling may not be a viable option at Dominion’s Chesterfield plant, it might work elsewhere. The AECOM study indicates that it would take only 11 to 17 years to excavate the ash pond at Possum Point using the Belden technology, and even fewer years using other technologies. Perhaps different solutions for each of Dominion’s four power stations could be cobbled together that recycles some of the coal ash, caps some in place, and trucks some to landfills off-site. Such a variegated solution would not be entirely satisfying to either Dominion or its foes, but it could reduce the potential environmental hazards without running up the tab by billions of dollars.

Dominion Energy to Acquire SCANA Corp. in $14.6 Billion Deal

SCANA halted work on the V.C. Summer Nuclear Power Station in July. Photo Credit: Post & Courier

Dominion Virginia Energy has agreed to acquire the troubled Cayce, S.C.-based SCANA Corp. for $14.6 billion in cash and stock, the two companies announced today. The deal is contingent upon numerous regulatory approvals and preservation of a South Carolina state law that allows the company to recover customer payments for two unfinished nuclear reactors costing $9 billion.

Delays, cost overruns and ultimately the abandonment of the V.C. Summer Nuclear Power Station in Fairfield County, S.C., left SCANA with a massive liability that has roiled South Carolina politics for the past year. According to the Post & Courier, South Carolina regulators and lawmakers are considering whether customers of SCG&E, a SCANA subsidiary, should continue to pay $37 million monthly for work done on a power plant that will never be completed.

The Dominion acquisition would stabilize the utility’s finances. The Richmond-based energy company has promised to make a $1.3 billion payment upon completion of the merger worth $1,000 to the average residential electric customer, reduce current electric rates by 5%, and write off $1.7 billion in V.C. Summer assets. The write-off would make it possible for rate payers to meet the remaining obligations on the nuclear plant in 20 years instead of 50 to 60 years.

Preliminary response in South Carolina to the deal was cautiously positive but noncommital. Gov. Henry McMaster praised the sale offer as “progress,” reported the Post & Courier. “This sounds like a better deal for ratepayers,” said state Rep. Micah Caskey, a Republican critic of SCANA. “But is this the best deal? I don’t know.”

The transaction will have no direct impact on Virginia rate payers. SCANA will be treated as a wholly owned subsidiary of Dominion Energy, comparable to Dominion Virginia Energy. There will be no co-mingling of assets, and both will answer to their own state regulatory bodies.

However, the deal does have implications for the proposed Atlantic Coast Pipeline.

“SCANA is a natural fit for Dominion Energy,” said Dominion CEO Thomas Farrell in a press release. “Our current operations in the Carolinas — the Dominion Energy Carolina Gas Transmission, Dominion Energy North Carolina and the Atlantic Coast Pipeline — complement SCANA’s, SCE&G’s and PSNC Energy’s operations. This combination can open new expansion opportunities as we seek to meet the energy needs of people and industry in the Southeast.”

If the merger goes through, observes the Dominion press release, Dominion Energy and its subsidiaries would have a natural gas pipeline network totaling 106,400 miles and would operate one of the nation’s largest natural gas storage system with 1 trillion cubic feet of capacity.

As currently envisioned, the Atlantic Coast Pipeline would terminate in North Carolina just north of the South Carolina border. Back in October, Dominion confirmed that it might extend the ACP south of the border, although it noted that such a project would have have to run the complete federal and state regulatory gamut to gain approval.

Bacon’s bottom line: Any such expansion should end widespread speculation that Dominion’s secret motive in building the pipeline is to ship natural gas to its soon-to-open Cove Point facility in Maryland for export. Clearly, Dominion is eyeing southern markets. According to the Post & Courier, the company plans to buy a $180 million natural-gas power plant in South Carolina to make up for some of the electricity the nuclear plant was expected to produce. The newspaper did not speculate whether that plant might be supplied by gas from the ACP or from competing pipelines. In either case, South Carolinians undoubtedly will experience the same debate over gas vs. renewables as we have seen in Virginia.

Roll Back Rate Freeze, Says Haner

Steve Haner, a frequent contributor to this blog, says it is time for the General Assembly to un-do the freeze on base electric rates in Virginia.

A lobbyist representing the Southern Poverty Law Center, Haner lays out the case in a Richmond Times-Dispatch op-ed:  Return to the regulatory approach before the 2015 rate freeze, put the State Corporation Commission back in charge of reviewing rates and setting profit (return on equity), and order power companies to return excess profits on a timely basis to rate payers.

According to a 2017 SCC staff review of Dominion Energy Virginia’s books, the utility would have had to return between $133 million and $177 million to rate payers, Haner says. On top of that, the public likely would be paying lower bills today. Dominion disputes the numbers, but argues that only a full evidentiary hearing before the SCC’s three judges would settle the issue.

Dominion acknowledges that its return on equity has been higher than normally allowed and that the time for ending the freeze has come. The utility proposes a measure — still vague at this point — that would plow back excess earnings into modernizing the electric grid in order to advance the goals of increased renewable energy and improved cyber-security.

Writes Haner:

The costs of modernizing the grid, of dealing with coal ash, of encouraging energy efficiency and meeting any new state air regulations are actually very strong reasons to return to the SCC-managed process.

Those are all future costs, irrelevant to whether Dominion earned excess profits in the past. The decisions over how to pay for those, over how many years, and with what profit margin for the company — all of those decisions can and should be made by the State Corporation Commission as well.

Bacon’s bottom line: General Assembly debate will take place against a political backdrop far more hostile to the power companies than in the past, as many new elected senators and delegates refused to take campaign contributions from Dominion and, indeed, have expressed hostility to the corporation.

Haner has traditionally represented electricity consumers, and his main focus has been on rates. We also can expect a push from environmentalists and progressives to set tighter standards for coal ash clean-up and to topple obstacles to rooftop and community solar generation, among other issues.

It remains to be seen whether Virginia’s other utilities, primarily Appalachian Power Co., and the state’s electric cooperatives, will present a unified front with Dominion. For utility watchers, 2018 will be an interesting legislative session.

Update: I have amended this post to clarify a statement that read, “Dominion acknowledges that its rates have been high.” What I meant to convey is that Dominion has repeatedly acknowledged that the base rate freeze allowed it to generate profits above its allowed Return on Equity over the past two years (although always in the context that it was still at risk of reversing those gains should a hurricane or other major weather event strike). Spokesman Rayhan Daudani reminds me that Dominion’s typical bill is 14.9% below the national average. I have posted his full response in the comments.

What If… Dominion Pursued a Solar+Smart Grid Strategy?

After proposing an end to the freeze on base electricity rates and a reinvestment of excess profits into modernization of the electric grid, Dominion Energy Virginia has produced an ad touting renewable energy and the smart grid.

What if more of the energy we used came from renewable resources?

What if the electric grid could detect, fix and even prevent power outages?

What if our grid were less vulnerable, more secure?

What if all these “what ifs” became a reality?

Well, they are. At Dominion Energy, we’re completely transforming our power grid and the way we think about energy to move from “what if” to “what’s next?”

The ad appears on Youtube. I don’ t know if Dominion has purchased any air time yet. (Hat tip: Steve Haner.)

Bacon’s bottom line: As I read the tea leaves, Dominion’s push to modernize the electric grid may represent more than a tactical bid to shore up short-term profits and may reflect a deeper change in strategic thinking about the shift in the relative advantage of solar versus other sources of electric power.

Critics have asserted that the 2015 rate freeze has allowed Dominion to retain hundreds of millions of dollars in profits that it otherwise would have had to reimburse to rate payers. Dominion’s response was to concede that, yes, it has enjoyed higher profitability since the freeze but that critics over-emphasized the amount and under-emphasized the risks the company faced from absorbing the cost of massive weather events and regulatory burdens such as coal ash disposal.

Thus, it came as a surprise two weeks ago when Dominion executive Mark O. Webb announced that it was time to “transition away from the rate freeze as the outlines of state carbon regulation have become more clear and the need and the opportunity to reinvest in grid transformation becomes more pressing.” He proposed plowing back surplus profits into investments in the electric grid, which are needed to maintain reliability as more solar generation comes online and also to guard against cyber-security threats.

There is more at stake than a couple hundred million dollars (depending on whose estimate you believe) in excess profits. A bolstered commitment to solar energy and the smart grid would affect billions of dollars of future investment. Only a couple of years ago, emphasizing the difficulty of integrating intermittent renewable energy sources into the electric grid, the utility saw only a modest future for solar. In its 2017 Integrated Resource Plan, however, Dominion outlined a long-term future in which 5,200 megawatts of electric capacity would be produced by solar  — the  equivalent of four or five state-of-the-art natural gas power stations. Could Webb’s comments indicate a willingness by Dominion to tilt even more aggressively toward solar?

The major source of demand growth in Dominion’s service territory is coming from data centers, and leading data-center companies are committed to the use of green energy (either solar or wind). At the same time, the pooling of electricity through PJM Interconnection, the interstate transmission organization of which Virginia is a part, makes it easier to balance electric output and loads at the macro level of the high-voltage transmission grid, while smart-grid technology is making it easier to handle power fluctuations at the level of the lower-voltage distribution grid.

As an organization, Dominion Energy Virginia has two overriding imperatives — its public service mission of keeping the lights on, and its obligation to shareholders to maximize profits. The path to increasing profits has been to invest in new capital-intensive projects that generate a regulated rate of return on shareholder equity. It makes no difference to shareholders whether Dominion invests in gas-fired power stations, extending the life of its nuclear units, utility-scale solar, building new transmission lines, building pumped-storage dams, or upgrading the IQ of its transmission and distribution lines.

In a nod to the changing political climate in Virginia, Webb’s remarks and the new ad suggest that Dominion Energy Virginia is leaning more toward a growth formula of solar+smart grid. Such a view is bolstered by the utility’s pursuit of a pumped-storage facility in Southwest Virginia, which could provide an offset to the variability of solar output.

Dominion Energy Virginia’s strategy as a regulated utility must be viewed, however, in the context of the fact that parent company Dominion Energy has committed heavily to natural gas as an energy source of the future in Virginia and North Carolina, and potentially even in South Carolina. Insofar as gas-fired combustion turbines can be quickly ramped up and down in response to fluctuations in solar power, Dominion can claim that gas is a natural complement to solar. How all these moving parts — solar, smart grid, gas, pumped storage, pipelines, and massive sunk investments in coal and nuclear — come together is not yet clear. I would not be surprised if Dominion’s senior executives are still thinking it through.

Water Board Gives Atlantic Coast Pipeline Conditional Approval

In a 4 to 3 vote, the State Water Control Board gave a provisional water-quality certification for the Atlantic Coast Pipeline today, but added a big condition reports WHSV television: The permit won’t take effect until several additional studies are reviewed and approved by the Department of Environmental Quality.

Dominion Energy, managing partner of the ACP, is evaluating the additional conditions and will issue a response later today.

In the meantime, environmental groups were cautiously approving of the decision.

Said Peter Anderson, Virginia Program Manager of Appalachian Voices: “We are somewhat encouraged by the depth and scope of the board’s discussion about several critical issues today and their apparent recognition of the thousands of citizen voices they’ve heard from over the years, but we are disappointed they did not deny this deficient certification and remand it back to the Department of Environmental Quality for a thorough analysis.”

“We particularly commend members Roberta Kellam, Nissa Dean and Robert Wayland who cast the three dissenting votes,” he added.

Said Mike Tidwell, Executive Director of the Chesapeake Climate Action Network: 

In a setback for notorious polluter Dominion Energy, the Virginia State Water Control Board today sided with landowners and environmentalists in calling for more rigorous and comprehensive review of the controversial Atlantic Coast Pipeline. After being ignored for years by Governor Terry McAuliffe and Dominion, the voices of everyday Virginians were finally heard and we will work tirelessly to make sure all the facts can come to the table. CCAN and our allies have argued all along that any science-based and transparent review of all the harmful impacts of the ACP can only result in official and final denial of Dominion’s radical pipeline for fracked gas.

And Chesapeake Bay Foundation Assistant Director Peggy Sanner:

We are pleased that the Water Control Board refused to allow the pipeline project to proceed until threats from pollution are more thoroughly examined. This was the right decision. Thanks to the Board for its careful consideration of this vital matter. Building the pipeline without this information would disturb waterways across Virginia and increase pollution to local rivers, streams, and the Chesapeake Bay. We will continue working to make sure the pipeline is held to the strictest environmental standards possible.

Update: Dominion spokesman Aaron Ruby said the following:

Today the Virginia State Water Control Board approved the state water quality certification for the Atlantic Coast Pipeline, a very significant milestone for the project and another major step toward final approval.

The Board reached its decision after the most thorough environmental review of any infrastructure project in Virginia history. After more than three years of exhaustive study by state agencies and extensive public input, the Board concluded that the project will preserve Virginia’s water quality under stringent state standards.

The Board approved several conditions to strengthen water quality protections and require other state approvals before the certification takes effect. We will work closely with the Virginia Department of Environmental Quality to complete all remaining approvals in a timely manner and ensure we meet all conditions of the certification.

At every stage of the project we’ve taken great care to meet the highest standards for the protection of water quality. In many cases, we’ve gone above and beyond regulatory requirements and adopted some of the most protective measures ever used by the industry. State and federal inspectors will carefully monitor our work throughout construction to ensure strict compliance with the law. The protective measures we’ve put in place and the regulatory oversight we’re receiving should assure all Virginians that the pipeline will be built safely and in a way that preserves the state’s water quality.

We commend the Board members and DEQ staff for the years of hard work and careful study they’ve dedicated to reviewing the project. We also appreciate the thoughtful and constructive input provided by members of the public. This has been a rigorous and transparent process, and everyone’s voice has been heard. The process has resulted in more environmental protection and higher water quality standards than any other project of this kind.

ACP Foes, Supporters Contend in ACP Environmental Hearing

After issuing a water-quality certification for the Mountain Valley Pipeline last week, the State Water Control Board held a public hearing today to consider a comparable certification for the Atlantic Coast Pipeline (ACP). Public comment this morning tended to focus on the question of whether new Department of Environmental Quality (DEQ) rules designed to cover pipeline construction in mountainous “uplands” are up to the task of protecting water quality.

Two hundred or more pipeline foes packed the Trinity Family Life Center in Henrico County to voice their support of speakers critical of the proposed 605-mile natural gas pipeline, mainly on the grounds that it will threaten water quality in mountainous western Virginia communities. But many of the speakers, including state legislators, retired employees of Dominion Energy (managing partner of the pipeline), and others expressed support for the project which they said will promote economic development in eastern Virginia.

Even with speakers limited to three minutes at the podium, the hearing was expected to last into the evening, and the water board was not expected to vote until tomorrow.

Opponents hammered home the argument that DEQ’s regulations were inadequate to protect water quality in steep mountainous terrain with landslide-prone slopes and complex karst geology with sinkholes and underground rivers. In particular, they charged, the Board relied upon ACP erosion-control plans that have not been seen yet to prevent sediment from fouling streams and underground drinking water.

A major sub-theme of those hostile to the pipeline was distrust of the regulatory process, which, given the approval of the MVP project last week, showed every sign of going against the pipeline foes. Typical was Cabell Smith, a Nelson County resident, who said that the regulations provided “no assurance” that water quality standards will be maintained under a “corrupt corporate and political system.”

Some insisted that democracy itself was under assault. Richard Averett, a landowner in the path of the ACP, called the pipeline an “unprecedented threat to eminent domain” and a “threat to democracy.” The pipeline, he said, will scuttle his plans to build a five-star boutique resort in the Rockfish Valley. In an impassioned speech that brought pipeline foes to their feet, he faulted “a corrupt governor more interested in mining the pockets of his pals and future donors than protecting the rights of citizens.”

DEQ devised the certification for upland water quality out of a concern that the existing regulatory framework did not address the unique problems encountered along the proposed pipeline route, said Melanie Davenport, DEQ’s water permitting division director. The U.S. Army Corps of Engineers regulates wetlands and streams, while a different set of regulations governs erosion & sediment controls. The 401 water quality certification, she said, fills the gaps.

DEQ acknowledges that the digging of trenches and laying of pipeline on steep, erosion-prone slopes can create problems that pipeline construction does not pose in flatland and hill country. Sediment-generating erosion is particularly problematic in karst terrain when underground water flows are out-of-sight and difficult to track. Therefore, said Davenport, the commonwealth decided to add an additional certification.

According to Davenport, conditions attached to the ACP water-quality certificate provide, among other features:

  • A prohibition against the removal of riparian buffers within 50 feet of surface waters.
  • A narrower construction right of way, 75 feet instead of 125 feet, as pipeline construction nears water and stream crossings.
  • Additional protections to accommodate karst terrain, including the use of dye-tracing studies to update karst maps.
  • Tougher conditions on the withdrawal of surface waters.
  • Tougher conditions on the release of water used in hydrostatic tests (conducted to measure the integrity of pipeline joints and seams).
  • Implementation of water quality monitoring plans to track erosion during and after construction.
  • Spill-prevention plans

A point made repeatedly by pro-pipeline speakers is that the DEQ regulations provide “added layers of protection” to water quality.

Sen. Frank Wagner, R-Virginia Beach, Del. Roxanne Robinson, R-Chesterfield, and Del. Buddy Fowler, R-Ashland, all spoke in favor of certifying the pipeline. Wagner said that added gas-transportation capacity is especially critical for economic growth in Hampton Roads, where some 100 large customers were called upon to curtail their natural gas consumption during the intense cold of the polar vortex a few years ago. The tight gas supply will make it difficult to recruit any energy-intensive industry to the region, he said.

“There is not enough upstream capacity today to serve existing customers and new customers,” confirmed Jim Kibler, president of Virginia Natural Gas, which serves Hampton Roads. Other than the ACP, he said, “We’re out of options for South Hampton Roads.”

“Our city and region need the supply of natural gas from the pipeline,” said Edwin C. Daly, assistant city manager of the city of Emporia in Southside.

Technology has advanced to the point where the ACP will be “the safest pipeline ever built,” said Paul McCormick with the International Union of Operating Engineers.

While a handful of critics disputed the positive economic impact of the pipeline, most pipeline foes focused on the negative impact on water quality.

Tina Smusz, representing the Virginia chapter of Physicians for Social Responsibility, called DEQ’s regulatory approach a “flawed framework” that ignores the impact of water-born toxins that could pose “grave health threats.” Toxins buried in sediments along stream banks could be exposed by erosion and make their way into local water supplies, she said. DEQ should get predictive data on toxin release before granting certification, she said. While DEQ proposes to monitor water quality and execute contingency plans should problems arise, that’s an inadequate after-the-fact solution, she added. Continue reading

Digging into Your Electric Bill

Apco = Appalachian Power Co. DEV = Dominion Energy Virginia. Source: State Corporation Commission.

Monthly electric bills for a typical Virginia household (using 1,000 kilowatt hours) increased by $48.64 for Appalachian Power Co. customers over the past 10 years, and $26.61 for Dominion Energy Virginia customers. Those numbers come from a presentation by Kimberly B. Pate, director of the division of utility accounting at the State Corporation Commission, at a hearing last week of the Commission for Electric Utility Regulation.

The cost to Apco of cleaning emissions from its coal-fired power plants, which accounted for three-quarters of its generation in 2007, pushed up electric rates much faster than it did for Dominion, which relied on coal for only 36% of its output. Apco’s rates, which were lower than Dominion’s for decades, are now almost at parity.

For policy geeks, it is helpful to plumb beneath the surface of those numbers to see what forces drove the cost increases. Pate looked at the three categories of rates, which, when combined, create the overall rate: base rates, which encompass mainly operating costs; the fuel rate; and RACs, or rate adjustment clauses that pay for capital projects like new transmission lines or power plants.

Over the past decade Apco experienced a 75% increase in its fuel rate, as seen above. However, because fuel is a modest portion of the overall cost, that increase added only $9.89 to the typical household’s monthly fuel bill. For Dominion, which benefited from declining natural gas prices over the decade, the rise in fuel prices was modest indeed, only 7%, and it added only $1.51 to customers’ monthly bill.

Base rates, the rates that were frozen by 2015 legislation, are the biggest component of overall electric rates. A 50% increase in Apco base rates added $25.75 to the monthly bill, making it the driver of its higher electric rates. By contrast, a mere 10% increase in Dominion base rates added $7.03.


RACs have been a major contributor to higher costs for both utilities. By adding four additional rate “riders” since 2007, Apco pumped up its average household bill by $13.00. Dominion added 11 rate riders, accounting for $18.07 in new expense passed on to rate payers.

Understanding how electricity rates are constructed illuminates corporate strategy.

For example, Dominion is facing potential multibillion-dollar liabilities to safely dispose of the coal ash at four of its power stations. Some of the costs are rolled into the base rate and some can be passed along to rate payers in the form of a rider. If the rate base stays frozen, those costs cannot be passed along to ratepayers, and shareholders will take a hit. Last month Dominion released a study showing a range of alternatives for burying the coal ash; one option, creating a central landfill to accommodate the material from the three largest coal-ash sources, could cost more than $4 billion. It’s not clear from an accounting perspective how much of that liability would be assigned to the base rate and how much could be passed through to rate payers. But, if Dominion were compelled to bury its coal ash in lined landfills, the utility potentially could take a body blow to the bottom line. Could coal ash liabilities have factored into Dominion’s suggestion last week that it was time to end the freeze? It’s a question worth asking.

Another example: Both Dominion and Apco are bringing more renewable sources, mainly solar and wind, into their electric generating portfolios. Renewables have high up-front capital costs (which would be recouped through a Rate Adjustment Clause), modest operating costs (recouped through base rates), and zero fuel costs (addressed by the Fuel Adjustment Clauses). Integrating renewables into the fuel mix would push electric rates higher initially but be almost immune to prices increases in the future.

Bacon’s bottom line: Different categories of cost have differential impacts on Apco and Dominion and their customers, depending upon their fuel mixes and upon how those costs are treated from an accounting point of view. Apco and Dominion make it their business to understand how those costs flow through to their bottom lines, and they adjust their corporate strategies accordingly. To defend the public interest, state officials need to understand the factors that drive their actions as well.