In Final Week, Uncertainty Clouds Energy Bills
With adjournment less than a week away, the 2023 General Assembly is a mixed bag for electricity consumers, with the Assembly seeming to release control to regulators in some areas but continuing to assert its tight control in others.
Dominion Energy Virginia’s legislation to sweeten its authorized profit margin, which will not lower customer bills despite claims in its advertising blitz, passed the Senate but remains in trouble in the Virginia House of Delegates. A key House committee voted late last week to stick with a version of the bill that leaves the return on equity formula unchanged.
Dominion had lowered its ambitions in the version that passed the Senate, now seeking to enhance its rate of return on equity only through December of 2027. Even five years of a higher profit margin, however, likely more than wipes out any financial benefit from the company’s proposal to move $350 million dollars of rate adjustment changes (RACs) into its base rates.
A recent SCC staff estimate was that five years of enhanced profit would cost ratepayers an additional $1.2 billion. It also confirmed that the accounting change with the RACs, simply moving the charges from one part of the monthly bill to another, may not save the ratepayers anything. Its real effect could be to prevent $350 million in customer refunds.
The House version removes all the provisions dealing with the return on equity and eliminates language allowing a long, drawn out repayment for past fuel cost increases, also potentially expensive to consumers. Democrats continue to oppose that version because it contains language giving the SCC more power to keep fossil fuel plants operating. Their commitment to SCC independence has its limits.
The General Assembly is set to adjourn Saturday. The conflicting versions may not be resolved in time. No bill passing would not be a bad outcome for consumers.
Other legislation that is favorable to consumers is poised for passage, although not all the final votes are taken. The most important are matching House and Senate bills that restore State Corporation Commission authority to set rates in future cases without some the handcuffs imposed by previous General Assembly actions.
House Bill 1604 might have passed the Senate last week, having cleared a Senate Committee with bipartisan support. But it was delayed for consideration until this week, perhaps because the Senate version of the same bill is not quite as far along. Senate Bill 1321 has seen similar bipartisan support in committee and will be on the House floor this week, as well.
In previous years, the SCC was prohibited from lowering the utility’s base rates unless it could prove the company had earned excess profits for at least two consecutive cycles. The SCC was also told it could not lower rates more than $50 million per year, far less than was justified by the company’s excess profits. Those restrictions are gone for the future if these bills pass.
Another effort to strengthen the SCC’s independence was offered only on the House side. House Bill 2267 remains pending for the final meeting of Senate Commerce and Labor Committee Monday afternoon. It passed the House 99-0, but that may not be enough to carry it past that Senate committee, friendlier to Dominion. The change it proposes involves those stand-alone rate adjustment clauses (RACs) and lets the SCC decide when to use them for new projects rather than base rates.
Dominion has proposed two bills dealing with its offshore wind project which are advancing without any headwinds. Senate Bill 1477 is now pending on the House floor after a unanimous endorsement by the House Commerce and Energy Committee. It lays the groundwork for Dominion to recruit a capital partner on the $10 billion (or more) project or perhaps on a second wave of turbines in the same place.
The second, Senate Bill 1441, is another strong indication that the second wave is still under consideration. Returning to the old ways of the Assembly dictating outcomes to the SCC, it seeks to direct commission acceptance of an offshore wind project if it is tied to development of a wind turbine manufacturing facility in Virginia. Representatives of Siemens Gamesa have testified to their interest in such a plant in Portsmouth, which would create far more jobs than the facility it already plans to assemble turbines built overseas.
Also advancing without significant opposition is a change in the ratemaking rules for the state’s second largest utility, Appalachian Power Company, serving Western Virginia. Should it pass, there will be major differences in how its rates are reviewed and its customers are charged, with the vast majority of the existing, stand-alone rate adjustment charges folded into base rates. It passes, and Dominion and Appalachian will be operating under very different regulatory structures.
The companion versions of the Appalachian bill, Senate Bill 1075 and House Bill 1777, have been amended over the weeks but have remained identical or nearly so. There is no House versus Senate conflict, perhaps because Appalachian quickly distanced itself from Dominion’s push to change the return on equity formula. Appalachian will remain under the peer group calculation of its allowed profit margin as it has been in place for 15 years.
The big difference for Appalachian is the SCC is now directed to set rates that give the utility that profit and adjust its forward rates to compensate if the utility fails to make that profit. Under traditional ratemaking the rates are set to create the opportunity to earn a profit, but nothing is promised.
This remains another example of the Assembly making the rules rather than trusting Virginia’s independent regulators. So far it has been a session of steps forward and steps backward on the issue of SCC independence. The final tally probably can’t be known until Governor Youngkin (R) gets his opportunity to veto or amend whatever bills reach his desk.
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Virginia’s Math SOLs: Science-Based — or Common Core?
Parents depend on schools to prepare their children with the skills needed in the global economy. In Virginia public schools, K-12 instruction is governed the Standards of Learning (SOLs). Between 1995 and 2015, our math SOLs were based on “best practices” identified by scientists who study how the brain learns mathematics. Listening to cognitive experts worked. In national testing, Virginia’s math test scores rose to rank in the top 10% of the nation.
But in 2016, at key points, Virginia’s science-based SOLs were replaced with Common Core math standards. According to cognitive scientists, the Common Core asks students to learn math in ways that have proven to be ineffective.
During 2023, math SOLs will again be revised by the Virginia Board of Education. Citizens will be invited to submit public comments. Should we once again align our SOLs with the Common Core?
Facts On K-12 Standards
Virginia adopts standards for subjects including English, Mathematics, Science, and History. By law, SOLs in each subject are reviewed and re-adopted every seven years. Since 2002 in all states. K-12 reading and math instruction in states has been governed by state-approved standards, and students are tested on those standards.
I was a Virginia K-12 educator both before and after the adoption of the SOLs. Standards are only one part of instruction, but I found they played an important role. Virginia’s SOLs and their accompanying “Curriculum Frameworks” specify what to teach, and often how to teach, each subject. Local school divisions may use a state-supplied framework or their own but the result is the same: Good standards provide guidance helpful for beginning teachers. Poorly written standards require teachers to use ineffective strategies in classrooms.
For 20 years prior to 2016, Virginia was one of the few states with math standards that followed recommendations of cognitive science. By the end of those two decades, on the National Assessment of Educational Progress (NAEP), Virginia’s 8th graders ranked 5th in math among the 50 states. Most states had adopted “Common Core” or similar standards that were not science-based, and nearly all that did scored lower on the NAEP than Virginia.
Yet in 2016, Virginia changed its math SOLs to be nearly identical at key points to the Common Core standards. How did this happen?
A History of Standards
To learn mathematics, historically students had no choice but to memorize facts and procedures. But in the 1980’s, as calculators became inexpensive, theorists in math education proposed that memorizing facts (such as times tables) was no longer necessary.
The National Council of Teachers of Mathematics (NCTM), an organization including education professors, in 1989 proposed “standards” calling for “decreased attention” to “memorizing rules and algorithms” and “rote practice.” By 2003, over 40 states adopted standards modeled on the NCTM’s.
Virginia chose a different direction. In the early 1990’s, cognitive scientists made an unexpected discovery: that the human brain is very good at reasoning with information that is quickly recallable from memory, but the brain is exceptionally limited when applying knowledge that has not been well-memorized. 1
University of Virginia cognitive scientist Daniel Willingham explains that math is about more than fact memorization. but as a foundation, because of the brain’s structure, for all the basic arithmetic facts (such as 8 + 7 and 42/6), answers must be “not calculated but simply retrieved from memory.”
Another scientific finding was: To achieve quick recall in the limited time available for math in classrooms, flashcards and similar “retrieval practice” are essential.
And for 20 years, Virginia officials listened to science — until the SOL revision of 2016.
The 2016 Changes
From 1995 to 2015, the Virginia SOLs called for students to “recall” from memory all the basic math facts. But in 2010, the new Common Core standards set the goal as “demonstrating fluency with addition and subtraction.”
In 2016, Virginia’s SOLs were changed to say students should “demonstrate fluency for addition and subtraction.”
Similar to the Common Core?
Both 2016 Virginia and 2010 Common Core defined “demonstrating fluency” as calculating math facts. Science finds basic facts should be “not calculated but simply retrieved.” 1 The 2016 changes made our SOLs the opposite of what science recommends.
The 1995 to 2009 SOLs called for using “flashcards” to learn facts. The 2016 SOL revision dropped flashcards, calling instead for complex calculations science says the developing brain of children in Grades 1-4 simply cannot manage.
In line with the Common Core, instead of teaching students the “standard algorithms” of arithmetic, the 2016 SOL Framework requires 2nd graders to “invent” their multi-digit addition and subtraction procedures.
Guess how well that works.
In the 2023 SOL revisions, the 2016 changes can be revisited, and it comes at a good time. In 2022, the General Assembly unanimously passed the Virginia Literacy Act calling for reading instruction to be science-based.
Jillian Balow, Virginia’s Superintendent for Public Instruction, has taken steps to open the standards-setting process to more citizen input. In March of 2023, a draft of the 2023 math revisions is scheduled to be released for public comment.
My hope would be that citizens evaluate those standards by asking these questions. Will the 2023 SOLs call for:
- Quick recall, not calculation, of all basic math facts?
- Using flashcards and practice to help in learning?
- Teaching students all the standard algorithms?
- Teacher explanation, rather than student “invention,” of math?
- Help for teachers in implementing the science of learning?
If each answer is YES, a foundation will be in place for SOLs that work.
As parents, when we take our children to doctors, we don’t ask: Are they Baptist or Buddhist? Red or blue? We seek treatment based on science.
From officials who decide education standards, children also deserve science-based best practices. Shall we ask state leaders to restore Virginia’s science-based SOLs?
Both the Board of Education ([email protected]) and the State Superintendent ([email protected]) are anxious to hear your views. If we are to ensure Virginia’s students learn using the best science-based practices, the time to contact them is now.
Eric (Rick) Nelson served 28 years with the Fairfax County Public Schools teaching math-intensive chemistry and physics. For over 10 years, he was an elected President of the Fairfax Co. Federation of Teachers/AFT/AFL-CIO. Currently Rick works with college educators to publicize cognitive research on how students learn in math, sciences, and engineering. He may be reached at [email protected]. For references on the science of learning cited in this commentary, visit https://bit.ly/3V7xCMc .
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House should hold the line on tax cuts
“You got to know when to hold ‘em, know when to fold ‘em,” country singer Kenny Rogers sang in his classic hit, The Gambler. In other words, playing a winning hand is just as important as cutting your losses.
Members of the House of Delegates should remember that bit of homespun wisdom when it comes to negotiating with the Virginia Senate on their competing budgets, specifically Governor Glenn Youngkin’s proposal to return $1 billion of the $3.6 billion record surplus back to taxpayers still struggling with inflation.
The differing budgets passed by the House and Senate offer a stark contrast between the two chambers. The Senate version offers no tax relief. Senate Finance and Appropriations co-chair Janet Howell, D-Reston, told fellow committee members that after agreeing to an earlier $4 billion tax relief package, “to go further at this time would be premature given the inflationary pressures our economy has been experiencing.”
But this extraordinary admission by one of the Senate’s top leaders that inflation – now at 6.4 percent – is a problem for state government failed to acknowledge that inflation is also a problem for Virginia taxpayers, whose income taxes fund 77 percent of the commonwealth’s General Fund, according to the Department of Planning and Budget.
The Senate’s refusal to even consider returning at least some of the surplus to those same taxpayers while voting to give state employees another raise is such a glaring example of a “what’s-mine-is-mine-and-what’s-yours-is-mine” mentality, it should convince even the most spineless Republicans in the House to fight for tax relief.
In contrast, the budget passed by the House of Delegates returns $466 million to individual taxpayers by lowering the top tax rate from 5.75 percent to 5.5 percent and raising the standard deduction to $9,000 for single filers and $18,000 for married couples. This is long overdue, but it is still modest tax relief. Much if not all of the gains will be negated in future years by the General Assembly’s continuing refusal to index state income taxes to inflation, which the Thomas Jefferson Institute for Public Policy has long been urging the legislature to do.
The House version would also lower the business income tax rate and give small businesses in Virginia an added 10 percent deduction – all while using the remaining $2.6 billion of the surplus for new spending. The Senate’s refusal to share less than a third of the excess funds with the same people who were overcharged is the extreme position here, which legislators will have to defend in an election year when all 40 seats in the state Senate are on the ballot.
Ironically, Howell and five other Democratic members on her committee (co-chair George Barker, D-Alexandria, Senate Majority Leader Richard Saslaw, D-Springfield, and Sens. David Marsden, D-Burke, Adam Ebbin, D-Alexandria, and Mamie Locke, D-Hampton) who voted to torpedo tax cuts are from Northern Virginia and the “urban crescent” including Hampton Roads, which for the past nine years has been experiencing the largest out-migration in the state as residents — including young adults aged 18-29 — flee the high cost of living.
During an appearance before this same committee in December, Youngkin pointed out that Virginia’s tax structure needs to be reformed because taxpayers “are voting with their feet.”
Youngkin’s high-profile anti-tax campaign has not hurt him politically. On the contrary, according to a Mason Dixon survey released earlier this month, he enjoys a 56 percent approval rating – the highest since he’s been in office.
That’s why when negotiating with their counterparts in the Senate, budget conferees on the House side hold a winning hand on tax cuts – if they don’t snatch defeat from the jaws of victory.
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Deadlocked Again on Taxes vs. Spending
We have seen this before in Virginia and here we go again: the classic conflict between tax cuts for the many versus more government spending for a few.
The Republican-dominated House of Delegates has passed a series of broad tax reductions, while the Democratic-dominated Virginia Senate has killed its versions of the same bills. Last Sunday the Senate then produced a budget proposal about $1 billion richer in funds for education, mental health services and other poll-tested priorities.
Killing the tax bills creates even more revenue to spend in future years, billions more.
The 2023 Virginia General Assembly tax debate is just another revival of an old political show. Last year it ended well for new Governor Glenn Youngkin (R) and for those hoping to pay less in state taxes. This year is not guaranteed to see the same outcome, not unless there is a late push to engage public attention as the House and Senate seek compromise.
The long list of tax cuts which passed the House should also be whittled down to the essentials, which might make it easier to build that public support.
It is a long list of proposals, perhaps too long. The Senate killed a proposed increase in the standard deduction, a reduction of the corporate income tax rate from 6 to 5 percent, a reduction in the top personal income tax rate from 5.75 to 5.5 percent, and a state version of a popular business deduction available at the federal level.
The Senate even rejected (so far) a highly popular proposal to expand a major tax break for military retirees. Last year bipartisan majorities in both houses supported creating the big tax subtraction but allowed it only for those age 55 or older. The House has now voted to eliminate the minimum age, but the Senate didn’t even have a bill on that issue.
What of all that is essential? The most important tax measure the 2023 General Assembly should pass is not even under consideration. The recent spate of serious inflation has provide the best opportunity in 50 years to index Virginia’s tax code. The tax brackets, subtractions and deductions should all be adjusted for inflation and then set to rise gradually with future inflation.
The Thomas Jefferson Institute inserted a single question on the issue in a recent Mason-Dixon Polling and Strategy survey, and the idea was universally applauded by Democrats, Republicans and Independents. Support was strongest among Democrats (70 percent). Everybody grasps the impact of inflation now, even the younger folks who missed the last wave in the 1970s.
But Youngkin didn’t propose it and probably the most comprehensive bill on the topic was introduced by a House Democrat. It never came up for a vote, not even in committee. Unless indexing reappears out of the budget talks, inflation will continue to produce revenue windfalls for government and higher taxes for people.
In the absence of indexing, Youngkin’s effort to add another $2,000 to a couple’s standard deduction becomes the highest priority in his package. The other high priority item the Assembly really should adopt in any compromise is the qualified business income deduction, only of benefit to businesses which are not incorporated.
Little has been done to promote the package beyond talking points on Virginia’s anemic economic performance and population loss, with the premise being that lower corporate and individual tax burdens will turn things around. Go to the public website for the Virginia Chamber of Commerce and look up its legislative priority list and you find a vague endorsement of “tax reform to better position the Commonwealth for economic growth and investment” with no mention of the corporate rate cut or qualified business income deduction.
From the outset, the only way to sell a major corporate income tax reduction was a compelling argument it would improve economic outcomes coupled with a strong show of support from the business community. The window is closing on that. There might be value in trimming the top rate from 6 to 5.75 or even 5.5 percent just so Virginia’s economic marketers could advertise a rate “less than 6 percent.”
There may also be value in arguing that the top rate for corporations should mirror the top rate for individuals. So much business activity now is in non-incorporated entities. Gig workers and many small businesses are taxed under the individual tax rules. That is why the other high priority item is the qualified business income deduction based on a similar federal provision.
The qualified business income deduction at the federal level was created in the 2017 Tax Cuts and Jobs Act to level the playing field between incorporated and unincorporated businesses. At the federal level it creates an additional deduction equal to 20 percent of the business net income and Youngkin’s proposal would grant a 10 percent deduction on the state return.
Only businesses organized as sole proprietorships, S-corporations or partnerships (and some trusts) can claim it. While many of these are small, it can include large companies. But they are large companies not organized as C corporations.
As the fiscal impact statement on the bill reports, only Iowa, Colorado, Idaho and North Dakota also recognize the qualified business income deduction for state taxes. If competitive positioning is your goal, Virginia should make every effort to adopt this pro-business provision that is not recognized in most direct competitor states that also have income taxes. For once, let’s lead.
But again, that argument has not been pushed in any public messaging, either from political leaders or from the various business groups that might benefit. If squeaky wheels get grease, silent wheels just rotate around the shaft.
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Is Virginia Ready for Mandated Electric Vehicles?
In all of Virginia, Northern Virginia – with its urbanizing and wealthy population — is the place where electric vehicles are most likely to be popular.
But will a population demanding choices support having no choice? That’s the requirement of a law passed in 2021. Does the Commonwealth have the capacity to seriously switch to 100% electric vehicle (EV) sales by 2035 … without being a detriment to Virginians?
The current data outlook says “no.” A bill to repeal the law, HB1378, has passed the House of Delegates and is on the way to the State Senate. Virginia’s lawmakers should approve it.
According to the Virginia Department of Motor Vehicles (DMV), there were 8.5 million vehicles registered in the Commonwealth in 2021. Only around 30,000 of those vehicles were electric. Moreover, the state has only 1,181 public charging stations with 3,435 EVSE ports currently available. Considering most of these charging stations are Level 2s, which can take around eight hours to fully charge a vehicle, replacing more than eight million internal combustion-engine vehicles with EVs is unsustainable.
While it is true that Virginia will be installing more charging stations on highway corridors, drivers will have to share these stations with everyone else on the road — unless they opt to install a charger at home. The new charging infrastructure, however, won’t be cheap. According to NeoCharge, the total cost of installing an EV charger can range anywhere from $800 to $4,000. That number doesn’t include the electricity bills incurred when charging the actual vehicle. And rural Virginians who don’t have easy access to highway corridors and may not be able to install their own chargers, have been effectively ignored by this legislation.
Millions of new EVs will also result in a significant drain on our power grid. The average electric vehicle requires 30 kilowatt-hours to travel 100 miles. That is the same amount of electricity the average household uses each day to run appliances, computers, lights, heating, and air conditioning. If every driver starts consuming this much electricity regularly, the U.S. Department of Energy predicts that the national consumption of electricity could increase by as much as 38% by 2050. Where is all of this additional electricity supposed to come from?
The strain that would be felt by our state’s electric grid would be astronomical. Currently, our electric grid is primarily powered by natural gas and nuclear energy, but it also includes power generation from renewable energy sources. However, many of these renewables, such as wind or solar power, are not able to be sufficiently stored for electrical generation down the line. According to Roy Nutter, a Computer Science and Electrical Engineering professor at West Virginia University, “power storage will be required if we are going to move toward fickle power sources such as solar and wind. Solar does not work at night. The wind doesn’t blow all the time.” Virginia does not have enough power storage capacity to do this on a large scale.
Simply put, if we are unable to improve the Commonwealth’s power storage to provide for EVs, the grid won’t be able to handle it. The result will be Virginia looking like California, which asked its citizens not to charge their cars amid a heatwave last summer–just days after announcing the switch to 100% EVs.
No matter your beliefs on the subject, the data doesn’t lie — Virginia isn’t ready for the Clean Cars law, which currently mandates that 35 percent of all new cars and trucks sold by 2026 must be electric; 100 percent by 2035 If the Commonwealth expects to see a 100% EV future, enormous, costly changes must be made, and at the current rate, we won’t be ready by the 2035 deadline.
If Virginia’s elected lawmakers value sensible and realistic efforts to improve Virginia, they should unanimously support repealing Virginia’s Clean Cars law. There are ways to make Virginia greener, but this initiative is both counterproductive and unrealistic.
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