Dominion Energy has responded to calls for electric deregulation in the form of an op-ed by William Murray, senior vice president of corporate affairs and communications. His argument: We tried deregulation once, it didn’t work, and the arrangement we have now works just fine.
Electric deregulation was “in fashion” in the 1990s,” he wrote in the Richmond Times-Dispatch. “It promised lower prices and more choices for customers. What really happened was something quite different. In fact, electric rates in deregulated states are more than one-third higher today than rates in states that have retained regulation.”
Moreover, Murray argued, 1990s-era deregulation did nothing to make the electric grid stronger, more secure, and more resilient — “pressing needs today in the face of threats such as cyberattacks from hostile nation-states.” To the contrary, deregulation invited predatory players like Enron into the system, leading to price spikes in New England, Maryland, Delaware and California. The outcome in California was particularly disastrous, bringing rollouts and widespread economic chaos.
Maybe his argument stands up, maybe it doesn’t. This may sound like a cop-out, but we need more data.
Earlier this month a coalition of free-market and environmental groups led by former Attorney General Ken Cuccinelli called for a massive restructuring of Virginia’s electric system. The proposed deregulating electric generation and electric transmission but retaining local distribution lines as a natural monopoly. The emergence of new technologies, the invention of new business models, and the influx of new players into the market makes the 2020s far different from the 1990s. Furthermore, the disastrous outcomes of 1990s-era deregulation in California, they argued, stemmed from partial deregulation, not the Texas-style system they envision.
Murray responded that things will not be better this time, even though Virginia utilities belong to a regional transmission organization, PJM, which creates wholesale markets for electricity in a large swath of the Mid-Atlantic and Midwest.
Experience shows that PJM membership does not immunize a state from deregulation’s pitfalls. The “M” in PJM is for Maryland, a founding member and one of the case studies in the challenges of moving ahead with deregulation. Plus, Dominion Energy Virginia was a member of PJM for almost two years before the General Assembly chose to re-regulate our state’s electric industry. Belonging to PJM is not a shield against the consumer protection and price volatility challenges of deregulation. …
Virginia has chosen a better way. We have low, stable prices for customers. We have a rapidly growing portfolio of renewable energy. And we are transforming the grid itself to accommodate renewable energy and to further improve service. We are also strengthening the grid at a time when threats come from both natural disasters and foreign aggressors.
Bacon’s bottom line:
Virginians have three broad sets of goals when it comes to the electric grid. We want reliable power. We want inexpensive power. And we want green power. Different people might emphasize one over the other, but broadly speaking, any electric system needs to balance those three priorities.
Reliability. The most essential to my mind is reliability. If the power goes off, people stop caring in a big hurry how much it costs or how much CO2 it puts into the atmosphere. I would like to see numbers comparing the reliability of Dominion’s system and Appalachian Power Co.’s system to that of other electric systems and ascertaining the degree to which reliability may (or may not) be a function of regulation. Presumably, objective metrics exist based on the frequency and length of power outages, and presumably there are ways for adjusting for factors that utilities cannot control such as severe weather event so that we can make fair comparisons.
Rates. Next, I would like to see a comparison of electric rates that does not engage in cherry picking data. How high are Dominion and Apco rates compared to other electric systems, and how stable are they? (By stable, I mean mainly how rapidly have rates been rising?) Making apples-to-apples comparisons is tricky. Adjustments must be made for average temperatures, temperature extremes, humidity, cloud cover, and other meteorological conditions as well as access to low-cost sources of electricity such as hydroelectric power.
Carbon intensity. Finally, I would like to see a comparison of CO2-equivalent emissions that captures not only CO2 emissions but methane emissions (more potent but shorter lived than CO2). The methodology should include not only CO2 emitted during natural gas combustion but methane leaked from natural gas pipelines and drills, as environmentalists insist should be counted. But any life-cycle methodology also should take into account methane leaked from others source,, most particularly from mines, some of which are notoriously gassy. If thousands of acres of land are to be turned over to solar farms, then the methodology should include the opportunity cost of not converting that acreage to carbon-sequestering woodlands. In other words, we need to capture all aspects of the issue and not frame the methodology to advantage one side over the other.
If we had the data on reliability, rates, and carbon intensity, then we as Virginia citizens could make better informed choices about the merits of regulation versus deregulation. Until then, we’re just captive to our biases and predispositions.
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