Bacon's Rebellion

Democracy Thrives in Sunlight

Dominion OK with Clean Power Plan

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by

James A. Bacon
in ,

Dominion's Warren County, Va., natural gas plan.
Dominion’s Warren County, Va., natural gas plan.

Dominion Virginia Power filed an amicus brief Friday in the national lawsuit against the Clean Power Plan arguing that “compliance is feasible.”

While the brief wasn’t a full-throated endorsement of the Obama administration plan, Dominion, parent company of Dominion Virginia Power, did not join opponents in trying to derail it. The lawsuit, which challenges the constitutionality of the plan, is expected to be reviewed by the U.S. Supreme Court. In Dominion’s view, reports Travis Fain with the Daily Press, Clean Power Plan rules are consistent with the industry shift, already underway, to replace coal with natural gas and renewable fuels. The state-by-state implementation created by the plan provides considerable flexibility. Wrote Dominion:

Petitioners suggest that the impacts of the rule will result in ‘higher rates and less reliable electricity’ for consumers. Because of the key compliance flexibilities highlighted above, Dominion does not agree that the Rule will necessarily result in such disruptive effects to the power sector and its consumers.

Bacon’s translation: Yes, the plan will cost Virginians billions of dollars to implement, but it will not impact the reliability of electric power.

Reading between the lines: The Clean Power Plan will not hurt Dominion Virginia Power, which has been repositioning itself away from coal for a decade now.

Dominion Resources, parent company of the regulated utility, has committed itself to a natural gas-oriented strategy, acquiring major gas pipeline assets in western states and proposing construction of the Atlantic Coast Pipeline to markets in Virginia and North Carolina. Dominion Virginia Power also has moved aggressively to expand its portfolio of gas-fired power stations. Both the parent company and subsidiary have upped their commitment to renewable energy sources, though on a smaller scale.

Fain quotes Southern Environmental Law Center (SELC) attorney Will Cleveland as saying that much of the work of reducing carbon-dioxide emissions at Virginia power plants is either done or is underway. “For them to say it publicly, I think, is great for the rule,” Cleveland said. “In many ways, I felt I could have written this brief.”

Virginia opposition to the plan has come mainly from Republicans, who (a) don’t share the underlying premise that the nation needs to restructure its electric power industry to combat the threat of climate change, and (b) are concerned about the impact on ratepayers and Virginia’s economic competitiveness. Dominion has studiously avoided entering the partisan fray.

Update: Here is a link to the amicus brief.

— JAB

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17 responses to “Dominion OK with Clean Power Plan”

  1. LarrytheG Avatar
    LarrytheG

    re: Dominion and coal

    also reported and worth noting:

    ” War-on-coal arguments also take a hit in the brief when Dominion says it plans to keep coal-fired generation in its portfolio well into the future.

    “Compliance with the rule will not unduly disrupt these goals, provided that the compliance flexibilities … are made available to power plants subject to the rule, and states reasonably tailor their compliance plans to state circumstances.”

    also – Dominion could have remained silent on this and let it play out and not undermine the GOP position – and they clearly chose to not do that.

    why?

  2. Reed Fawell 3rd Avatar
    Reed Fawell 3rd

    Two obvious follow on questions:

    Where would Virginia be without gas, and Dominion’s wise management to date? Likely Virginia would be in trouble. Faced with building a highly unreliable system of power supply relative to the overwhelming need for reliability, and reasonable costs.

    And:

    While understanding why Dominion stays above the political fray, the fact remains that $billions of added cost imposed on Virginia residents still deserves thoughtful and impartial justification by those who govern in Richmond despite our society’s current lack of ethics that endorse spending billions of dollars of the people’s money to promote one’s ideology or reelection despite past pernicious results, or threats to our future.

  3. LarrytheG Avatar
    LarrytheG

    it’s been pointed out before – that the very cheapest power generation is what you don’t have to generate because you’ve set up a free-market pricing mechanism to replace the current “all you can use for one low price” scheme.

    Just as we do with residential water, cell phone minutes and many other things – you get a standard amount at one price and everything over that goes up in price.

    Not only would that minimize the need to use coal but it would also preserve supplies of natural gas… to last farther into the future.

    all this talk about free market principles here in BR and not a whimper from most about pricing electricity to encourage less use.

  4. TomH Avatar
    TomH

    Larry has raised a salient point. Dominion’s (and many other utilities’) response to the clean power plan will not provide the cleanest or the cheapest method of meeting the CPP goals.

    Utilities are very aware of their requirement to provide reliable service and take it very seriously. But both utility executives and policymakers seem less concerned with the effect on state economies and ratepayer’s bills.

    Our climate goals, grid reliability, and affordable rates would be much better served by an effective program of energy efficiency, and distributed renewable generation. Energy efficiency provides 24/7 capacity at a lower cost and with zero emissions, which is far superior to what is offered by gas-fired baseload plants. More jobs are created too and every ratepayer benefits by lowering the peak load.

    Distributed solar provides greater grid reliability and resiliency (with appropriate upgrades) and lower customer costs. Utilities prefer large central station solar because they get paid for it and get a substantial return (11-14%) for building the associated transmission.

    I am not putting all of the blame on the utilities for this. They are attempting to meet their social obligations (reliable power) in a way that best serves their shareholders. This is a failure of will in creating a sensible long-term energy policy that is good for both the utilities and the ratepayers.

    Dominion is using the CPP as justification for doing exactly what it wants to do – build huge amounts of expensive, long-lasting infrastructure that locks in a substantial rate of return (11 – 14%). Once these projects are in the ground (power plants and pipelines) they have a steady stream of income. By choosing to rate-base the power plants rather than operate as a merchant generator, they are asking the ratepayer to take the risk and to pay a higher cost for fuel (transport) to use Dominion’s own pipeline rather than lower cost alternatives.

    From a utility CEO’s point of view (who is rewarded by the shareholders) this is a very effective strategy. It deals with the current pressure on revenues from lower electricity use by moving more into the gas business which will be needed to produce electricity. Using the CPP as the reason this must be done makes gaining the necessary approvals that much easier – because it can be said to be in the national interest.

    But if we more closely examine the issues, we see that we might not be getting what is being advertised. Several recent studies are showing that the greenhouse gas situation it not necessarily benefited by an increased use of natural gas. It is true that natural gas fired combined-cycle plants emit about 60% of the CO2 of comparable coal plants, but the drilling and transmission (VOC’s from compressor stations) of the gas release amounts of very potent greenhouse gases that many believe might make the net effect on GHG’s about the same. Leaks in gas distribution pipelines are a big issue too, but that is not related to power production.

    We are also blinded by the near-term low cost of natural gas caused by our loose money policies that created over production in shale gas fields, especially the Marcellus, because drillers cannot afford to decrease production to bring it in line with demand and stabilize the price. With a faulty price indicator there is a rush to build infrastructure (pipelines, power plants and LNG facilities) to take advantage of what investors hope will be a long-term phenomenon.

    But what if it is not? Geophysicists and geologist have analyzed the structure of the shale gas plays and expect that we should see a peak in production from the Marcellus in 2018 – 2020. In fact, the Marcellus production has declined this year, but that is due more to declines in drilling rig counts and bankruptcies. More gas can be obtained, but only at higher prices.

    Australia has already experienced this rush to capitalize on their low-cost natural gas. Industries were switched from coal to gas and LNG was exported to Asia. This caused domestic natural gas prices to increase by 300-400%. Factories were switched back to coal or shut down. And home owner’s utility bills skyrocketed. We are on that same path.

    Let’s say gas prices double over the next ten years. Fuel is half of the cost of energy from a combined-cycle plant, so the wholesale price of energy from this relatively new plant goes up by 50%. In the meantime, solar prices (currently equivalent to gas-fired plants) are expected to go down by 50% in the next five years, even more over the next ten years. Will PJM prefer daytime energy from solar over gas-fired plants? It will always have zero marginal cost. The combined-cycle plant predicted for an 80% capacity factor now runs just 60% of the time. Where does Dominion make up its shortfall in its return on investment? From the ratepayer, of course. The Atlantic Coast Pipeline, now running below its expected capacity, faces financial difficulty. No such problem would be encountered if existing pipelines had been used instead. Businesses and their employers relocate to those states that had the foresight to create a more modern energy system and have a vibrant economy and affordable rates.

    We have three of these new gas-fired combined cycle units coming in service from 2014-2019. The next is due in 2022. If we are serious about climate change and affordable energy, we might be better served by seriously evaluating some additional alternatives and not just accepting the solutions that best serve the shareholders. It is not necessary to have just one winner in this process.

  5. LarrytheG Avatar
    LarrytheG

    I thought TomH commentary – excellent and makes me wonder if a utility is an investor-owned monopoly – how would we balance the competing interests of investors versus rate payers?

    Dominion obviously believes that delivering reliable power at a competitive price ( as compared to other utilities) is meeting it’s mission and responsibility.

    But it does not see it’s responsibility as reducing the demand for electricity or rewarding those who would conserve.

    the business model essentially requires each ratepayer to pay their “share” regardless of whether they want to conserve or not.

    it really don”t matter if I find ways to reduce my consumption – I still owe for the sunk capital costs… so conservation is a direct casualty of that business model.

  6. TomH Avatar
    TomH

    Larry, you’ve got it right. But Dominion is just using the rules as they currently exist to its best advantage. That is what most companies do. And those rules currently hurt Dominion if the load declines. That is why they are so opposed to significant energy efficiency initiatives and third-party generation. It reduces their revenues.

    The organization in Virginia that is charged with balancing the interests of the utilities with the interests of the ratepayers is the State Corporation Commission. They don’t seem terribly inclined to depart from the business as usual approach but they are also hampered by the GA and deals made with the Governor.

    In states where a modern energy policy is evolving, such as New York, the policymakers led the way. The governor hired the former COO of PJM as the head of the state Public Service Commission (the utility regulator) and pushed legislation through the state legislature to support the new energy vision and fund research and development activities to test new ideas and attract innovative businesses to the state. Conversations with the utilities were open and collaborative and once they saw that their interests were being considered in a way that they could prosper in the new environment, they got on board.

    I don’t see any willingness on the part of any leaders in Virginia to move in this direction. And since the policies seem to originate with Dominion and are ratified by the legislature which is quite different from most other states; it is unlikely that we will see much movement in this direction. Unfortunately, this foot dragging could well cause Dominion financial damage in the long run, as well as the ratepayers and the overall state economy.

  7. TomH Avatar
    TomH

    It is a puzzle to me why this is not a strong bi-partisan issue. The democrats could champion the environmental improvement and lower costs to the ratepayers. The republicans could emphasize the economic benefits to the state, more jobs, and a more open market with less government interference. Healthy utilities being fairly paid to maintain a robust and reliable grid are at the center of the plan. Everybody wins. Maybe that is why nothing is being done. Perhaps our politics have sunk so low that we accept only one winner or none at all.

  8. TomH Avatar
    TomH

    Sorry to keep harping on this, but these issues are important. And many intelligent people see this from an ordinary business perspective and say that as a business Dominion should be allowed to go in the direction that it considers to be the best. In an ordinary business, this is what we encourage. But monopolies that serve the public interest are different animals.

    If a business overbuilds its capacity based on its best vision of the future, but is wrong. Its costs will be higher and its profits are penalized or it must raise prices which might cause customers to look elsewhere. That’s fair enough. But what if a regulated company overbuilds capacity to its own advantage at greater cost to its customers? Where can they go when the regulated company is in control of both the electric and gas supply? And that company has promoted policies that diminish customer choices for alternatives such as energy efficiency, or third-party providers.

    It is supposed to be the regulator that also looks forward through a slightly different lens to foresee solutions that meet the needs of both the utility and the ratepayer. And for the politicians and policymakers to create an environment that creates choices and gives the proper signals to the regulated utility to make decisions that are good for shareholders and ratepayers.

    Monopolies are given special advantages in return for serving the greater public good. In today’s age of huge utility holding companies, unregulated parent companies use their regulated subsidiaries to gain the advantage of a monopoly without having to be governed by regulators. They gain the advantages without paying the cost and therefore skew the intended balance.

  9. LarrytheG Avatar
    LarrytheG

    I think in Va… most folks are satisfied with Dominion and the Dems do not want to get labeled as fringe greenies!

  10. TBill Avatar
    TBill

    I do not believe the recent Dominion action represents a change of policy. Dominion has been previously listed as a utility supporting CPP. Why?…I don’t know.

    It is interesting to compare VA and MD approaches. MD has just announced an updated climate change policy to reduce state CO2 by 40%. I’d like to hear more about the MD approach, but I believe MD imports about 50% of their power. To further reduce CO2, I assume MD will probably have to import even more of their power.

    Virginia is going the other way, towards becoming more power self-sufficient within our own state boundaries.

    The Virginia approach is quite a bit harder to explain to the public under the CPP, since CO2 could go up within our state boundaries. In truth, Virginia will emitting much less CO2 per person, but the lack of a “left-handed smoke shifter” to shift our CO2 emissions to other states will make Virginia vulnerable to criticism for superficially “increasing” CO2 .

    That’s one aspect I personally do not like about the CPP as it is currently proposed, and why I am little confused Dominion would agree with the CPP approach.

    1. Acbar Avatar
      Acbar

      I don’t know either, but I have some suspicions. Consider: Dominion has already spent or committed to spend most of what it needs to comply with the CPP; but not everyone else has. Why not change tactics and support legislation/rules that will drive up your competitors costs as well, thus enabling you to grow your wholesale (PJM) market share (or at least defend what you’ve got)? Also, Dominion must have been stung by the SCC’s rejection of its Remington plant on the grounds that Dominion didn’t look sufficiently at alternative sources of power (e.g. PJM and its burgeoning market for wind and solar resources): What better way to prepare for that comparison than by improving your position relative to the alternatives?

      TomH and Larry both ask fundamental questions about Dominion’s motivation. It is true that “They are attempting to meet their social obligations (reliable power) in a way that best serves their shareholders.” And we all agree that the non-utility plant options, notably DG/solar and energy efficiency investments, are not given enough attention; TomH sums it up well with “This is a failure of will in creating a sensible long-term energy policy that is good for both the utilities and the ratepayers.” But there really is another cook in this kitchen: “The organization in Virginia that is charged with balancing the interests of the utilities with the interests of the ratepayers is the State Corporation Commission. They don’t seem terribly inclined to depart from the business as usual approach but they are also hampered by the GA and deals made with the Governor.” That’s what the annual IRP exercise is all about, folks. Read the last one; you can even send in your own comments to the SCC when the comment period for the next one is announced — they are listening. Despite that surely-accurate quip about “hampered by the GA,” I still believe the SCC’s Remington order was a shot across Dominion’s bow on this subject, and therefore Dominion’s next IRP filing (and the SCCs’s action on it) should prove to be especially interesting reading.

    2. Acbar Avatar
      Acbar

      Bacon’s column on the SCC’s order rejecting that Remington plant was published here: https://www.baconsrebellion.com/2015/10/scc-says-dominion-must-seek-third-party-solar-alternatives.html

  11. LarrytheG Avatar
    LarrytheG

    re: ” am little confused Dominion would agree with the CPP approach.”

    two parts to this – actually 3

    1. – first that they support it even if they did not announce it publicly

    and

    2. – the do publicly announce it – they are making a statement that does affect others – opponents, other states , our own Virginia politics.

    they could have done 1 without 2… so 2 is not accidental .. it’s purposeful

    Clearly – Dominion disagrees with the SCC, the Va GA and speaker Howell… and not just quietly – very publicly – filing the amicus brief is way beyond:

    1. – selectively releasing info via “undisclosed sources”

    2. – Press Release

    this is a legal action…( 3) resources have been expended in taking the action and resources may be needed in further work in supporting it.

    I think Dominion is sending a very purposeful and pubic message on CPP and am a bit amused and bemused that apparently few folks know what is behind both their bold support of CPP itself as well as making it very public.

    so we have our own SCC and Mr. Howell saying it’s very bad for Virginia and Dominion saying the opposite…

    there’s a significant story here for some journalist…

    1. TBill Avatar
      TBill

      Larry- Are you suggesting Dominion is “supporting” the CPP because Dominion wants distance itself from the SCC and GA repubs “bad attitude ” as defined by the VA Dems who are self-appointed to officially conduct the Va state attitude checks? I personally doubt that.

      Rather my thought is that Dominion may feel CPP helps them in a business sense relative to their competition. I wonder if CPP, for example, plays into Dominion’s poker hand trying to leave AES with coal plants stranded (in WV built to sell power to Va). Or just perhaps Dominion wants to look better to the public. Many companies have now found it’s just better to stop being adversarial and accept EPA mandates, and go forward to see if it works, or not. Cellulosic ethanol is one example where mandates did not change the reality of non-existence of the technology potential.

  12. Study: State policies could help create 160,000 jobs annually | Southeast Energy News

    […] • Why a Virginia utility isn't joining the opposition to the Clean Power Plan. (Bacon's Rebellion) • Where's the outrage over illegal dumping of […]

  13. CleanAir&Water Avatar
    CleanAir&Water

    I suspect that Dominion changed it’s mind about the CPP because the old excuses have all been shown to be untrue in the states that have begun the policy changes needed to develop an actual clean energy economy. My guess is that Dominion would rather protect what they hope will be big profits from the huge investments they are making in natural gas, than risk the myth busting truth that gas investments are NOT required as a ‘transition fuel’.

    Reliability and keeping prices low have been Dominion’s wallpaper. Both are now shown to be myths.

    New levels of grid reliability are being built with programs to create efficient buildings, integrating smart metered demand response with onsite renewable generation, and building micro-grids. DOD has been working toward energy security and reliability by turning each base into it’s own electricity supplier since 2008. Check out the headway they are making in Ft. Collins, CO. In New England where Sandy decimated grid connections leaving some areas without power for weeks, states are developing and implementing plans for micro-grids starting with essential service areas. NY’s REV regulation revisions are leading the way.

    Programs to retrofit buildings do the best job of saving customers money. Since 2012, New York has announced 112,000 energy efficiency projects resulting in $341 million in customer savings. In the last 8 years, Rhode Island has invested an estimated $550 million in energy efficiency that has translated into almost $2 billion in benefit to customers. Those savings have been good for the RI economy too. According to Acadia Center, Rhode Island’s investments in energy efficiency in 2014 was expected to create 3,607 job years of employment and boost personal income in Rhode Island by $244 million.

    Solar is saving customers money too, yet Virginia has a 1% aggregate cap limiting the total amount of net-metered solar capacity, as well as limits on third party ownership. Here is the direction of solar.
    1. During the next year utility-scale solar contracts are predicted to reach 4cents/kWh. That is very cheap electricity. What was the Remington figure?
    2. According to a new SEIA report the average cost of a non-residential rooftop solar energy system was $2.07 per watt in the third quarter of 2015, down 9 percent from the same quarter in 2014. More superstores should follow the leads of Wal-Mart, Costco, Kohl’s, and IKEA who use their large rooftop expanses to install solar energy panels.
    3. Rooftop solar with batteries is on the way. Under the Department of Energy’s new SHINES program, Texas utility Austin Energy is working with a wide array of partners, including 1Energy, Clean Power Research, Tesla, and grid operator ERCOT, to create an integrated system capable of providing battery-backed solar energy for a mere 14 cents per kilowatt-hour.

    NREL’s new study has determined that rooftop solarPV has the technical potential to generate enough electricity to meet 25-35% of Virginia’s 2012 energy requirements, or to generate 35.8TW/hrs of electricity per year. That huge solar potential can save Virginia customers money with no future price worry. Is Dominion’s focus on pipelines and fracked gas really the right way to go?

    1. TomH Avatar
      TomH

      Thank you CleanAir&Water for your excellent comments. As I stated earlier, Dominion appears to support the CPP because the CPP supports Dominion’s long-term investment strategy of building infrastructure to obtain a long-term stream of revenues. Those projects will not yield the climate benefits desired nor lower energy costs.

      It is difficult to question the motives of organizations that most people are inclined to trust. In the recent years I have lived in Virginia, I have heard Dominion and many others state that Dominion has kept the rates low. When I checked last year, every state in a similar climate zone (MD, KY, TN and NC) had lower rates than Dominion. It is the old axiom that if an untruth is repeated often enough, people believe it. And customer bills are far more important than rates anyway. California has much higher rates, but as a result of energy efficiency and third-party solar, customer bills are less than in Virginia.

      You have pointed out many reasonable alternatives to non-stop development of gas-fired power plants. The guardians of yesterday are opposing them at every turn. Reliability and low costs are essential considerations, but gas powered plants will only get more expensive as other options decline in price. As with may things, a balance is required. Energy efficiency and third-party distributed generation are lower cost, lower emission complements to the gas-fired plants that have been built. Continuing with a monolithic response despite evidence supporting other options does not serve the best interests of Virginia and its residents. Nor does it serve the long-term financial health of the utilities. Our policymakers and regulators must help Dominion make a transition to become a 21st century energy provider.

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