Tag Archives: Dominion

Compromise Bill Ending the Rate Freeze Advances In Senate

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Tinkering with the Electricity Regulation Bill

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In yesterday’s fast-moving action in the General Assembly, bills to end the electricity rate freeze underwent several important changes. I have done no original reporting here. I’m just extracting key details from Robert Zullo’s article in today’s Richmond Times-Dispatch.

A substitute bill submitted by Del. Terry Kilgore, R-Scott:

  • Increases one-time rebates to Dominion Virginia Energy customers from $133 million to $175 million.
  • Allows the State Corporation Commission (SCC) to order refunds and lower base rates after a single triennial review instead of after two consecutive three-year reviews.
  • Allows the SCC to review 2017 earnings as part of the first review.
  • Incorporates elements from other bills that would authorize the burial of transmission lines, streamline the approval of efficiency programs, and declare solar development to be in the public interest.

The Kilgore bill still converts two-year reviews of base electric rates to three-year reviews, and it preserves Dominion’s proposal for a “reinvestment” regulatory model for modernizing the electric grid to make it more resilient from storms, more secure from cyber-attack, and better suited to renewable power, energy efficiency and microgrids.

I’m still unclear on how the reinvestment model works. David Ress with the Daily Press describes the concept this way:

Any excess profits Dominion earns would go to pay for those investments, instead of going in part to customers or justifying cuts in its base rates. … By using any excess earnings to improve the grid and install an eightfold increase in solar facilities, the company can finance those projects out of existing rates without imposing the “riders” — special surcharges — it has been using to build its newest power plants.

OK… Why does this make more sense than the pre-freeze regulatory model? What’s wrong with rebating excess earnings on “base” rates to customers, and what’s wrong with financing grid modernization through riders? There may be perfectly legitimate reasons for the changes, but the logic is not self-evident.

The reinvestment model is central to the revamping of the electricity regulatory system. Everyone would benefit from more clarity on how it would work and the thinking behind it.

Bills Would Prevent Ratepayer Refunds for Six Years, SCC Says

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Proposals to overhaul Virginia’s system for regulating electric rates would provide no opportunity for the State Corporation Commission (SCC) to order refunds to rate payers until 2024 for Appalachian Power Company and 2025 for Dominion Energy Virginia, concludes a State Corporation Commission analysis of Senate Bills 966 and 967.

The SCC conducted the analysis at the request of Sen. Chap Petersen, D-Fairfax, who has advocated a return to the regulatory system that prevailed before the 2015 enactment of a rate freeze that has resulted in hundreds of millions of dollars of excess profits for the two utilities. Dominion has worked with legislators to advance a proposal that would return $1 billion to ratepayers over 10 years and replace biennial rate reviews with triennial rate reviews.

Key impacts on rate payers can be summarized as follows, states the analysis submitted by John F. Dudley, counsel to the Commission (quoting verbatim):

  1. There will be no opportunity to consider base-rate reductions or refunds to customers for at least six years, and then only if the utility over-earns for two consecutive three-year periods, effectively extending the current base-rate freeze further into the future.
  2. There may be only a partial return of reduction in federal income taxes currently being collected in base rates.
  3. The provision in current law that allows utilities to keep more than 30% of their excess earnings is continued.
  4. The legislation allows the utilities to keep future excess earnings (i.e. customer overpayments) and, rather than return them to customers, use them for capital projects chosen by the utility. In addition the utilities can charge customers for these same projects in base rates.
  5. The legislation deems certain capital projects to be “in the public interest,” thus impacting the SCC’s authority to evaluate whether such projects are cost-effective or whether there are alternatives available at lower costs to customers. This provision could potentially result in billions of dollars of additional costs that will be charged to customers in higher rates.
  6. An amount that appears to represent the customers’ portion of prior period excess earnings is returned to customers, but the amount has not been examined in a formal proceeding to determine its accuracy.

Dominion Energy Virginia has issued the following response:

This report analyzes a work in progress [that is] subject to change. We continue to believe a reinvestment model that transforms our energy grid and significantly increases the amount of renewable energy we produce is sound policy for Virginia. We have always said all tax savings should return to customers effective Jan. 1, 2018 and be appropriately adjusted by the SCC when the final IRS rules are available. To the extent that is not clear, we would support an amendment making it so.

The Logic Behind the Grid Transformation Act

Katharine Bond. Photo credit: Charlottesville Tomorrow

After providing an overview of The Grid Transformation and Security Act of 2018 yesterday, I had numerous questions about the thinking behind many of the measures it proposes. So I talked to Katharine Bond, a senior policy official for Dominion Energy to get the power company’s perspective. Dominion has been a key player in drafting the three-bill package, although Bond insists that many stakeholders, not just Dominion, have had input into it.

First question: How did Dominion Energy Virginia come up with that $1 billion figure for refunding or reimbursing its customers over the next eight years. Where is that money coming from? And does it fully compensate for the over-charges that Dominion retained thanks to the rate freeze implemented in 2015?

  • Up-front refunds for over-charges. Dominion will refund rate payers $133 million up-front. That number comes from a 2016 case in which the State Corporation Commission determined that Dominion had racked up that amount in over-charges during 2015 and 2016. Dominion foes have cited a figure of $400 million in over-charges, but that doesn’t account for big expenses relating to the disposal of coal ash. Dominion had to eat those costs due to the freeze, Bond says, and no reasonable accounting would omit it from the equation.
  • Offsetting later over-charges. To compensate for over-charges incurred since the SCC hearing, Dominion has agreed to write off expenses relating to the 2013 conversion of three coal-fired power stations — in Altavista, Hopewell and Southampton — as rough compensation. An SCC-approved rider (rate adjustment clause) allowed Dominion to bill rate payers for that conversion expense. Under the Grid Transformation Act, Dominion will drop those charges from its electrical bill, which will provide $25 million in rate relief each year — amounting to $200 million over eight years, and $540 million in additional savings beyond, for a total of $740 million. Why write off the biomass plant conversions? Dominion looked over its generating fleet, Bond says. It couldn’t very close down cost recovery of the Warren gas-fired station or one of the nuclear plants, so it settled on the biomass conversions.
  • Tax breaks from Uncle Sam. The intent of the legislation is to pass on 100% of the tax savings that Dominion Energy Virginia gains from the recently enacted federal tax reform, says Bond. “We’re comfortable that there will be at least $100 million. If there are additional savings, we’ll adjust rates down again.”

Second question: What’s wrong with the pre-freeze regulatory regime? What needs fixing?

After an unsuccessful experiment with deregulation, the General Assembly enacted the current regulatory regime in 2007. Electric bills reflect a composite of three types of rates requiring SCC approval: base rates, primarily operating costs accounting for about half of electricity charges; fuel adjustment clauses, which pass through rising and falling costs of fuel; and rate adjustment clauses (also referred to as RACs or riders), which cover the capital costs of new investments such as power plants. (The so-called freeze enacted in 2015 affected only the base rates.)

That regulatory regime “fit the world of 2007, not 2018,” says Bond. In 2007, carbon regulation wasn’t on the radar, as it is today. The utility didn’t have “literally thousands of points of interconnection” with intermittent solar power producers. Meanwhile, she adds, “tolerance for outages is decreasing every year.” If the power goes off, “people can’t work from home, can’t bank from home, kids can’t do their homework.” Virginia needs to upgrade its electric grid.

Dominion spokesman David Botkins elaborates in an email: The 2007 system was set up to incentivize new power generation “because policy makers were not comfortable with Virginia being the second largest importer of electricity [behind] California at that time. … Things have changed drastically since 2007. We have adequate generation supply now but the appetite for more renewables grows as the policy makers [want] to keep reducing carbon. Renewables require a much different kind of grid system that is less outage prone and more secure.

Yeah, I get that. But why can’t the old regulatory regime accommodate the changes that are needed?

Says Botkins: “We and others believe that the reinvestment (of earnings) model … is a better way to go. Less rate fluctuation, [fewer] riders, stronger/smarter grid. 2007 was for then. 2018 is for now and the years ahead. …”

Third question: Will the Grid Transformation Act emasculate SCC regulatory powers?

Bond says no.

The bill would change the SCC from reviewing and adjusting rates every two years to every three years. To me, that seemingly would allow Dominion to over-charge customers for longer periods of time. But even a three-year review is more frequent that the practice in most states, Bond says. Moreover, this way will allow the SCC to “smooth out” base rates. Many issues involve multi-year costs like early retirement. Instead of expensing the costs all in one year, perhaps they should be expensed over two years.

Also, to protect rate payers in riders, the proposed law provides for SCC review of the front end of so-called “transformative” investments enumerated in the legislation as well as the back end. “When it comes to the big transformative investments, we don’t have a blank check,” Bond says. “We have to bring forward a plan to say, ‘Here’s what we want to invest in.’ The SCC will review it. On the back end, we have to say, ‘Here’s what we spent, and here’s how it matched up.’ They check the math. It’s a fully litigated case.” If there are over-earnings, she says, the SCC will subtract them from what the company can charge.

The Great Grid Grab

Who gets what from a Dominion-backed legislative package overhauling Virginia’s electric grid? At this point, there are more questions than answers.

Last week lawmakers friendly to Dominion Energy Virginia introduced sweeping legislation, The Grid Transformation and Security Act of 2018, which would increase investment in Virginia’s electric grid with the goals of increasing renewable energy, reducing power outages, and guarding against cyber-sabotage. Backers say the three-bill package also would restore rate-setting oversight by the State Corporation Commission after three years of a rate freeze, and return a cumulative $1 billion in refunds and rate reductions to customers over eight years.

The response from some of Dominion’s traditional foes was negative. Critics suggested that the legislation would neuter the SCC’s oversight powers even while nominally restoring them, thus allowing the utility to keep hundreds of millions of dollars due the rate payers.

“This bill is bad policy and dangerous, giving Dominion even more power over our lives and our future,” responded Tom Cormons, executive director of Appalachian Voices, a group that has helped lead the fight against Dominion’s Atlantic Coast Pipeline project, in a press release. “For far too long, the legislature has gone along with the monopoly’s plans, and it’s high time for our elected representatives to finally say ‘no’ to Dominion.”

In a Washington Post op-ed, Stephen D. Haner, a lobbyist representing the Virginia Poverty Law Center (and a frequent contributor to this blog), described the proposals as a “preemptive attack” on the SCC’s independence. “The outcome Virginia consumers should be hoping for is a return to full SCC authority and an almost immediate rate case to review the earnings during the recent regulatory holiday.”

However, environmental groups such as the Virginia Chapter of the Sierra Club, the Southern Environmental Law Center, and the Chesapeake Climate Action Network, which have combated Dominion over the pipeline, solar power, and coal ash disposal, have refrained so far from blasting the bill — at least in official statements. By packing environmental desiderata such as renewable power, energy conservation, electric vehicles, energy storage systems and microgrids into the bill, Dominion may have disarmed some of its critics.

The most comprehensive description of the package comes from Dominion. The summary that follows comes from an “overview” prepared by the company’s communications team.

Refunds and rate reductions. Refunds and rate reductions for rate payers  totaling more than $1 billion over the next eight years include:

  • $133 million in one-time credits.
  • $740 million in rate reductions achieved through elimination of the biomass rider and other riders.
  • $100 million annually from lower taxes resulting from the recently enacted federal tax reform.

State Corporation Commission oversight. The legislation restores SCC review of Dominion base rates but reviews base rates every three years instead of every two years, as it did before the freeze. The bill also adds SCC reviews before and after grid transformation investments are undertaken.

The legislation will reduce future riders (also called RACs, or Rate Adjustment Clauses), which are surcharges for new projects. States the Dominion summary: Before future riders can be added for new investments, the SCC will determine if there were overearnings. If there are overearnings, SCC will use them to offset the cost of future riders.

Grid transformation investments

The package allows for investments to build a more sustainable and resilient grid. These investments, summarizes the Dominion outline, aim to “reduce outages or restoration times, secure energy assets, enhance tools available to customers, and increase investments in renewable generation.” The investments can be grouped as follows:

Reliability investments

  • Automatically reporting of outages when they occur.
  • Prediction of certain outages before they occur so crews can be dispatched to equipment nearing failure.
  • Isolation of outages so fewer customers are impacted.
  • Reduction of voltage fluctuations to improve power quality for industrial and other customers.
  • Dispatch of crews more precisely to restore power more quickly.
  • Automated routing and restoration of service.
  • Better integration of renewable generation.
  • Installation of energy storage systems and microgrids
  • Strategic undergrounding of outage-prone lines.

Security investments Continue reading

Dispatches from the Front

by Stephen D. Haner     

I promised you updates, dispatches from the front lines as the General Assembly once again deals with legislation proposed by our largest monopoly power company. It is my intention this game is played out in the open. Here is my version of Bacon Bits:

(1) President Donald Trump and Congressional Republicans are about to cut your electric bill and Dominion want to take credit. You will search in vain for Trump’s name in the talking points or news releases. You hear about $1 billion in savings to consumers and an actual cut in the rates – it’s the mostly the federal corporate tax cut, which an early State Corporation Commission estimate put at $165 million annually. Dominion can give it back in advance because we pay the taxes in advance and the cash goes in a fund for taxes.

It is true that because of the 2015 legislation creating a regulation holiday the SCC lacked the power to order Dominion to pass along the tax savings to customers. But all around the country other utilities are doing just that, and the Federal Energy Regulatory Commission is working on making it mandatory.  Also Dominion had already announced a similar rate cut down in South Carolina if it takes over SCANA, and with the same genesis – the federal tax cut.  This was coming without any legislation. It is not a concession on their part.

( 2) Where are the bills? As of my drafting this on Sunday morning, only the main House bill has been introduced and posted on the legislative database. Senators Richard Saslaw, D-Fairfax, Frank Wagner, R-Virginia Beach, and Steve Newman, R-Forest, have all said they put in bills at the Friday deadline, but none of them are posted. Dominion has seen the bills, has been talking to legislators about the bills, has talking points in circulation about the bills –but those of who wish to dispute them are hampered by not seeing the actual text. It might be the same as the House bill, it might not.

Apparently in this hyper-computerized age the Senate bills were introduced on paper and need to be keyed in. The way it was done 20 years ago (but is still allowed.) Why? I submit to give them yet another huge head start in the rapid race that is Virginia’s legislature. It is possible the Senate bills could be in the Senate Commerce and Labor Committee on Monday afternoon, and the public and the skeptics have not seen them. Dominion has a platoon of lobbyists and skids greased with money, but they leave no advantage untaken.

(3) Dominion tends to fill its basket with eggs – multiple bills from multiple friendly sponsors, with elements of their ultimate bill sprinkled about. Bills are put in mainly as placeholders, as potential vehicles for a substitute or for amendments. Senator Glen Sturtevant, R-Midlothian, has a bill dealing making it harder for the SCC to challenge the cost of underground lines, for example, and Senator Ben Chafin, R-Lebanon, has a bill dealing with how the SCC views capital structure when it sets rates. Notice that they also set out long, long sections of the Code provisions involved in every other aspect of this – these are vehicles, little legislative Uber cars waiting just in case one of the main bills breaks down.

Stephen D. Haner, principal of Black Walnut Strategies, is a Richmond-based lobbyist. In the debate over energy policy, he represents the Virginia Poverty Law Center.

Dominion Closes Nine Obsolete Generating Units

The Bremo Power Station on the James River opened as a coal-fired power plant in 1931. Units 3 and 4 were converted to gas in 2003. Now they will revert to cold reserve storage.

As Dominion Energy Virginia continues to adapt its generating fleet to the realities of cheaper solar and abundant natural gas, the utility has decided to mothball nine of its older, less efficient power-generating units — all but one of them either coal-fired or converted from coal to gas. Because the units rarely run, they provide only one percent of the company’s current generation, reports the Associated Press.

As part of a month-long review of its power generation group initiated to increase its competitive position in the energy market, Dominion also decided to eliminate about 390 positions, including about 100 from its nuclear operations. The company expects many employees will be reassigned to other operations.

“When we look at the time, the materials, the people, when we look at the thermal inefficiency of these plants, and we look at the advancement of renewables, we look at continued gas-fired build, we just think this is a progressive step we can take to ensure that our fleet remain competitive,” said Paul Koonce, president and CEO of the power generation division.

In technical language, Dominion is putting the nine units in “cold reserve storage,” in which they are drained of oil and water, provided minimal staffing to ensure that they remain safe, and are capable of being restarted in about six months if market conditions warrant. Dominion will maintain all environmental permits and continue to pay local taxes.

Most of the units — those at the Bremo, Chesterfield, and Possum Point power stations — were commissioned in the 1950s and early 1960s. One, a combined-cycle gas unit at the Bellemeade power station was constructed in 1990. All told, they were capable of producing 1,200 megawatts of electricity, roughly comparable to a new, state-of-the-art gas-fired power plant.

In a handout, Dominion said the shutdowns reflected the changing economics of electric power industry:

  • Economics. Natural gas prices remain historically low, and forecasts call for supplies to remain plentiful. Gas and renewables have displaced coal and older, smaller gas units. And the cost to build large-scale solar has dropped 90% in the past six years.
  • Public policy. Virginia is considering policies that would mandate a 3% annual reduction in carbon-dioxide emissions over ten years, which would rule out running the older, inefficient power units even as a backup.
  • Technology. Energy efficiencies such as LEDs, EnergyStar appliances, and LEED certification are impacting demand across PJM Interconnection, which administers wholesale energy markets for a multi-state region. New round-the-clock generation technologies, such as those in the new Greensville County power station, are significantly more efficient than older-generation gas units.

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.