Category Archives: Environment

A View from the Trenches: Ending the Freeze

by Chris Saxman

Statesmen should remember that they have been elected to persuade and to lead, and not just to accept as fixed the momentary moods and pernicious prejudices of the public.
     — Stanley Hoffman

Professor Hoffman might have been quite pleased watching yesterday’s Senate Commerce and Labor Committee as the compromise legislation on electric utility regulation, grid modernization, and energy efficiency was debated and sent to the Senate floor.

Here is Governor Ralph Northam’s press release on the legislation.

The bill – SB 966 – is being carried by Commerce and Labor Chairman Frank Wagner, R-Virginia Beach, along with Senator Dick Saslaw, R-Fairfax), who was carrying a similar bill, SB967. Saslaw’s bill was incorporated or “rolled” into SB966 at the start of the debate.

After that motion came internal committee debate and questioning of Wagner and Saslaw which helped explain the compromise bill brokered by Governor Ralph Northam and House Speaker Kirk Cox. Just hours before the committee meeting, the Governor announced that a deal, in fact, been struck.

Almost all of the committee members spoke at one point and in doing so exposed the extraordinary changes occurring in the political landscape – both in Virginia and in the U.S. Remember, that Virginia is a battleground, bellwether coming off a dramatic statewide election just three months ago. More on that later….

During the 2017 election, the issues being debated yesterday played a prominent but not decisive role.

Senator Mark Obenshain, R-Rockingham, opened the dialogue as he expressed concerns about the economic value of the significant solar investment required in the bill. The 5,000 megawatts of solar power to be added in Virginia by 2028, he thought, would be too heavy a cost to be paid by ratepayers, suggesting that this was more “social judgement’ than economic good. Obenshain expressed that perhaps the State Corporation Commission is in better position to make such decisions rather than having the General Assembly do it “on the fly.”

Saslaw explained that 5,000 megawatts equated to 1.25 million homes that would be powered by solar generation and that “nothing is free.” Saslaw said that “both” economic and social judgments were being addressed in SB966.

Senator Steve Newman, R-Campbell County, acknowledged his gratitude that the bill was “much improved in just a week” but that he, too, had economic concerns for ratepayers about the solar portions of the bill as a “giveaway too high and too great” for his support.

Senator Lionell Spruill, D-Chesapeake, questioned if the real winners of the compromise were the stockholders of Dominion or Appalachian Power while Senator Rosalyn Dance of Petersburg asked, “Who spoke for the consumers?”

Dana Wiggins of the Virginia Poverty Law Center, which had been very vocal publicly in decrying the current law written in 2015 in response to the Clean Power Plan, stated that while her organization had been part of the working group, it “still had concerns about double charging.” Later Wiggins would testify that the VPLC was neither for nor against the bill, which shocked many observers because the Center’s pre-session commentary had been so negative. Now it was neutral.

Southside Senator Bill Stanley, R-Moneta, did explore, along with Northern Neck Senator Richard Stuart, R-Westmoreland,concerns about “double charging” and “giving people their money back” as they questioned Dominion lobbyists Jack Rust and Bill Murray. Continue reading

Compromise Bill Ending the Rate Freeze Advances In Senate

Lightning show

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

Solar Power Building Momentum in Virginia

Dominion solar farm in Buckingham County.

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

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

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

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

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

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

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

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

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

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

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

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.

The Cost of Cold

Vermont on Friday. Photo credit: Washington Post

When climate gurus calculate the net cost of a warmer climate, do they assign any benefit to the reduction in extreme cold? From a Washington Post article about how Vermonters are dealing with temperatures 25 to 30 degrees below zero:

This stretch of extreme cold has taken a toll on much of the Eastern United States, bursting water mains, fracturing pipes, rendering car batteries useless. The frigid weather has turned tragic with news reports of weather-related deaths from South Carolina to North Dakota, in a storm that led to rare snow in Florida and record coastal flooding in New England. … The cold has been especially hard on people like [Todd] Alexander, who have fixed incomes or live paycheck to paycheck and cannot afford higher than normal utility bills. ..

Even with low-income heating assistance, weather like the stretch residents are enduring now has the capacity to throw the working poor over the financial edge. Heat must constantly be running to survive. Furnaces can break down. Fuel will run out more quickly than anticipated. The cold costs money.

Here in the Richmond area, I’ve heard the same quip a half-dozen times this week: Where is global warming when you really need it?

Update: Coal exports through Virginia’s ports are slowing because coal cars are freezing and need to be run through thaw sheds, reports the Virginian-Pilot.

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.

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.

Solar Projects Progress in Orange, Campbell

Speaking of Dominion Energy Virginia’s commitment to solar (see previous post)…

Apco commits to solar… Appalachian Power Co., Virginia’s second largest electric utility, has signed an agreement to purchase electricity from the 15-megawatt Depot Solar Center in Campbell County as part its shift from coal to renewables. The deal represents the utility’s first commitment to utility-scale solar.

“Appalachian Power is excited to announce the Depot Solar Center as we move forward with the diversification of our generation portfolio,” said President Chris Beam in a press release. “We are pleased that the facility will be built and operated within our service area and provide other benefits that new construction will bring to surrounding communities.”

Depot Solar was developed by Pasadena California-based Coronal Energy, which has a office in Charlottesville. The company will sell the electricity to Apco through a 20-year renewable energy purchase agreement.

Apco selected the project after issuing an RFP in January 2017. The company received 37 proposals. Depot Solar, which will connect to Apco’s grid at the company’s Rustburg substation, is expected to be operational by September 2019.

And Orange County, too… The Orange County board of supervisors approved the county’s first large-scale solar farm, voting unanimously for a special-use permit that will allow a 400-acre, 60-megawatt solar farm to be build along Route 20.

The project, which will produce enough energy to power the equivalent of 10,000 homes, is being developed by Reston-based SolUnesco, according to the Orange County Review. Among the 20 provisions attached to the permit was a requirement to obscure visibility of the facility from Route 20.

The project is expected to bring in $2.2 million to the county in machinery and tools tax revenue over the course of its 30-year life, and bring in an additional $10,000 per year in property tax revenue. Depending on the environmental permitting process, construction is expected to begin by the end of 2018 or early 2019.