McAuliffe Promise to Accelerate VCEA Schedule Will Accelerate VCEA Consumer Bill IncreasesOctober 3, 2021
by Steve Haner
When a State Corporation Commission staff analysis warned last year of $808 annual increases in Dominion Energy Virginia residential bills by 2030, that 58% increase was based on the existing deadlines set for Dominion’s conversion away from using fossil fuels.
Change the deadlines, change the cost. Shorten the deadlines by half, as Democratic gubernatorial nominee Terry McAuliffe is promising to do, and 2030 electricity costs will grow even higher.
The 2020 Virginia Clean Economy Act set a deadline of 2045 for Dominion Energy to meet a renewable portfolio standard of 100%. 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% fossil-free and APCO 45% by 2035.
In campaign speeches and debates, McAuliffe has pledged to move both 100% 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 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. More will need to be in service sooner, which of course is what advocates want.
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. In Appalachian’s plan to comply with VCEA, an even higher portion of the needed investments were planned beyond 2035. In terms of impact, McAuliffe’s accelerated schedule 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 – customer 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…