McAuliffe’s promise to speed up the VCEA schedule will accelerate the rise in the VCEA consumer bill

CSC staff’s 2020 projection of the monthly residential bill increase by 2030 for Dominion Energy Virginia customers, primarily related to a rapid phasing out of fossil fuels.

by Steve Haner

When an analysis of State Corporation Commission staff warned last year of an annual increase of $ 808 in residential bills from Dominion Energy Virginia by 2030, that 58% increase was based on existing deadlines set for Dominion’s conversion out of fossil fuel use.

Change the deadlines, change the cost. Cut the deadlines in half, as Democratic gubernatorial candidate Terry McAuliffe promises, and electricity costs in 2030 will rise even more.

The Virginia Clean Economy Act of 2020 set a deadline of 2045 for Dominion Energy to meet a 100% renewable portfolio standard. The deadline for Appalachian Power Company in the western part of the state is 2050, but it has far fewer generating assets than Dominion in Virginia. Under current law, Dominion only needs about 60% fossil-free and APCO needs 45% by 2035.

In campaign speeches and debates, McAuliffe pledged to move both deadlines from 100% to 2035, ten years earlier for Dominion and fifteen years earlier for Appalachian. It would completely upend years of negotiations between anti-fossil fuel state officials, environmental activists and utilities, and throw most existing compliance plans in the trash.

Three factors will accelerate customer bills for both utilities if a faster schedule is imposed, somewhat by 2030 and significantly by 2035.

Dominion serves 68% of Virginia’s 3.9 million electricity accounts, Appalachian Power 14%, and various rural co-ops 16%. Source: CSC

First, customer bills will need to reflect faster construction of new planned solar, wind and battery assets. The cost of each new unit appears on customer invoices at the start of operations. It will take more serves sooner, which is of course what defenders want.

Recent documents filed by Dominion project its renewable energy investments through 2035, but the company does not plan to meet all of its renewable energy production targets by then. In Appalachian’s plan to comply with the VCEA, an even higher share of the necessary investment was forecast beyond 2035. In terms of impact, McAuliffe’s accelerated schedule could hit Appalachian customers harder.

Second, businesses may need to take taxpayer dollars and buy a lot more renewable energy credits (RECs) on the open market, especially if renewables can’t speed up new deadlines. In the absence of their own renewable energy production, the RECs are compliant. REC vendors may prove to be the biggest beneficiaries of McAuliffe’s idea.

Finally – and often forgotten – customer bills by 2030 (and certainly 2035) can include stranded costs from perfectly useful fossil fuel power plants that will shut down sooner than expected. Once approved and built, utilities are guaranteed to be paid in full for these plants, even if they close earlier.

How to compensate Dominion for eleven coal-fired power plants already shut down prematurely is a key argument in the current accounting review. This means nearly a billion dollars in costs to taxpayers, money paid for zero electricity production. Under current plans, most of Dominion’s new natural gas generators are expected to remain in service for another 20 to 25 years. How much will it cost to close them by 2035? Appalachian Power also has fossil fuel power plants that it could operate after 2035.

Appalachian Power has not filed projected rate impacts to comply with the VCEA, but these are expected next year when it begins another review of the Integrated Resource Plan. Its compliance depends on much smaller amounts of new solar energy, onshore wind facilities, and some battery storage. It does not include the massive offshore wind facility which is at the heart of the Dominion’s compliance costs.

The CSC residential cost estimate produced for Dominion by economist Carol Myers became a common topic of discussion for Republicans during the 2021 campaigns. It was dismissed as too high by Dominion, but its own projection (also on table above) exceeded $ 600 per year. Both are based on 1,000 kWh per month usage, which is lower than the actual average for its residential customers’ bills, so add 10% immediately.

Campaign pitches generally fail to note that the projection involves much more than the impact of VCEA and includes the costs of pre-2020 bills, such as those related to coal ash disposal and landfill lines. The general theme, however, is to quickly end the use of coal and gas and replace them with solar, onshore and offshore wind power plants and batteries to conserve that energy in case of excess. There is every chance that the SCC’s preliminary prices on these future investments will be too low.

Informative, eh? Click to enlarge this typical page of the CSC testimony.

The appendix filed with the CSC file documents gives precise details of these costs, year by year through 2035. But the data cannot be seen because Dominion or others have requested that it be kept. secret. Myer’s testimony includes page after page of graphs and tables drawn up. (See pages 35-49) If visible, this could form the basis for an estimate of the amount greater than $ 808 per year that we could consider.

For lack of data, just know this: it will cost more, much more, if the calendar moves to the left. Yes, some of that money will be spent on building the factories and thus creating jobs in the short term, but, remember, the closure of the fossil fuel factories kills a lot of jobs in the long term. Each construction salary will come from a higher family or business energy bill.

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