Your Costs Rise Even Faster
If Renewable Transition Comes Earlier
By Stephen D. Haner
10/12/2021 -- When a State Corporation Commission staff analysis (see Table I below) warned last year of $808 annual increases in Dominion Energy Virginia residential bills by 2030, that was based on the existing deadlines in state law set for Dominion’s conversion away from using fossil fuels.
The SCC residential cost estimate produced by a staff accountant has become a common talking point for Republicans in the 2021 campaigns. It has been dismissed as too high by Dominion, but the company’s own projection exceeded $600 per year. Both are based on usage of 1,000 kWh per month, which is lower than the actual average for its residential customers. That alone means both are 10 percent low.
There is no question the estimate is too low if you shorten the deadlines by half, as gubernatorial nominee Terry McAuliffe is promising to do. Do that and expect even more than the 58 percent increase the SCC projection warned about (with even higher increases for commercial and industrial users).
It will be just one of many energy price increases driven by recent General Assembly decisions.
Governor Ralph Northam recently touted a series of grants funded by the Regional Greenhouse Gas Initiative, without any mention of the underlying RGGI tax now imposed on every Dominion customer’s bill. Dominion and Appalachian Power Company bills now also include a small monthly tax to set up the new low-income power bill subsidy. When the actual subsidies begin to flow, that second electricity tax will blossom into a much larger amount.
Still pending, and not getting much attention in the campaign debates, is Virginia’s full participation in the multistate Transportation and Climate Initiative, a tax and cap scheme similar to RGGI but for gasoline and diesel fuel. RGGI, PIPP, TCI and VCEA are confusing acronyms, known to but a few. Add them up and the bottom line is exploding costs for energy used at home, in your car and at work, with the costs rippling throughout the economy.
The 2020 Virginia Clean Economy Act set a deadline of 2045 for Dominion Energy to meet a renewable portfolio standard of 100 percent, eliminating fossil fuels. The deadline for Appalachian Power Company in the western part of the state is 2050, but it has far fewer generation assets than Dominion within Virginia. Under current law, Dominion only needs to be about 60 percent fossil-free by 2035 and APCO 45 percent “renewable” by then.
In campaign speeches and debates, McAuliffe has pledged to move both 100 percent deadlines to 2035, ten years earlier for Dominion and fifteen years earlier for Appalachian. That would completely upend years of negotiations between anti-fossil fuel state officials, environmental activists and the utilities, and throw most existing compliance plans in the trash.
Three factors will accelerate the customer bills for both utilities if a quicker timeline is imposed, somewhat by 2030 and significantly by 2035.
First, customer bills by that year will have to reflect a faster build-out of planned new solar, wind and battery assets. The cost of each new unit appears on customer bills when operations begin.
Recent Dominion filings project its renewable investments out to 2035, but the firm is not planning to reach all its renewable generation goals by that point. It expects to still be depending on natural gas. In Appalachian’s plan to comply with VCEA, an even higher portion of the needed investments were planned beyond 2035. In terms of impact, the accelerated schedule cited by McAuliffe might hit Appalachian customers harder.
Second, the companies may need to take ratepayer dollars and buy far more renewable energy credits (RECs) on the open market, especially if the renewable build-outs cannot accelerate to the new deadlines. Absent their own renewable power generation, the RECs achieve compliance. REC sellers may prove the biggest beneficiaries of McAuliffe’s idea.
Finally – and often forgotten – the bills by 2030 (and certainly 2035) may include stranded costs from perfectly useful fossil fuel plants which get closed earlier than planned. Once approved and built, utilities are guaranteed to be paid in full for those plants, even if they close early.
How to compensate Dominion for eleven coal plants already closed early is a key argument in the current review of its rates and cost of service. Under current plans, most of Dominion’s newer natural gas generators are scheduled to remain online another 20 or 25 years. What will it cost to close them by 2035? Appalachian Power also has fossil fuel plants it could run past 2035. Ratepayers might be billed for closing them early, as well.
Environmentalists are taking a “pro-consumer” pose over the Dominion “impairment costs” for the closed power plants. They are pushing the SCC to force Dominion to recoup the money over several years, which provides a short-term benefit to ratepayers in the rate case. What they don’t tell you is that, over time, the full cost to you is still there. Pay it fast or slow, you will still pay it.
It is yet another major cost imposed by the climate catastrophe believers (just like RGGI is and TCI will be), this time paying for electricity you didn’t get.
A version of this commentary originally appeared on October 3, 2021 in the online Bacon’s Rebellion. Stephen D. Haner is Senior Fellow at the Thomas Jefferson Institute for Public Policy. He may be reached at steve@thomasjeffersoninst.org. 
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