Miyares Wins Partial Transparency Victory

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Attorney General Jason Miyares (R) was partially successful in his efforts to challenge much of the secrecy shielding key data in Dominion Energy Virginia’s application to build its planned offshore wind facility, with some useful precedents set for the future.

Just before the hearings on the application began last week, a State Corporation Commission hearing examiner accepted the Attorney General office’s motion in part and rejected it in part.  As a result, several portions of the SCC staff testimony have been filed again with dozens of previously redacted sections now open.

Virginia law designates the Attorney General as Consumer Counsel, charged with representing the interests of consumers, accomplished by a Consumer Counsel section in the office.  Senior Assistant Attorney General Meade Browder led this effort to bring more data into the sunlight.

In conceding the point, Dominion proposed, and the hearing examiner accepted two broad categories where secrecy could continue:  Information from confidential internal presentations to the company’s board of directors, and information about individual third-party bids, contracts and prices.

Pleas to Miyares’ predecessor to act were ignored. Miyares, who took office in January, also recently pushed back on secrecy in an application from the other major electric utility, Appalachian Power Company.  Perhaps pushing for transparency will become a regular part of the process, changing the insider culture of that courtroom and its cast of regular players.

Despite the apparent retreat, Dominion had the major role in deciding which portions of the testimony to reopen, even going so far as to create a table of unnecessarily redacted portions by page and line number (see page 5 of its brief).  In several other cases, however, information remains covered up simply because the motion from the Attorney General did not specify its challenge by page and line number.

That is part of the precedent the ruling seems to set.  The items withheld may need to be challenged in greater specificity.  It was also the case that the motion was filed very late in the process, months after the initial assertions of secrecy back in 2021, and while all the parties were busy preparing for the hearings. Dominion promised in a footnote:

 In the future, the Company is open to Consumer Counsel reaching out to the Company informally, as Staff and other parties have done, to discuss concerns it may have with confidentiality markings prior to filing a Motion with the Commission. The Company commits to working in good faith with Consumer Counsel, Staff, or any party to work out any disputes of this sort prior to bringing motions to the Commission.

All the parties to the case, including representatives of non-government environmental groups and business groups, do have access to all this information.  They sign non-disclosure pledges.  But the general public is not a party to the case or the non-disclosure agreements, nor are media representatives.  Why would a reporter want to sign an NDA?

The Attorney General did not challenge any of the company’s original designations of confidentiality from the beginning.  He focused on later testimony from the SCC staff, which sought to maintain that secrecy in their own analysis and testimony.  The result were documents riddled with exemptions.

Here are some examples of statements that are no longer redacted in the key testimony of Katya Kuleshova of the Division of Public Utility Regulation, who wrote about the costs and risks of the $10 billion project.  Her refreshed testimony is in two parts (here and here.)

  • According to the Company, $7.6 billion in competitively bid contracts’ costs constitute 86% of the approximately $8.9 billion of total Project costs, excluding interconnection costs. (Page 7)
  • The Project’s LCOE (levelized cost of energy) is most sensitive to capacity factor and potential capital expenditure (“CAPEX”) overruns. (Page 8)
  • The CVOW Commercial Project is expected to generate more energy during the shoulder months of lower energy prices and less energy during the months of higher energy prices in summer. Therefore, winter is the only season in which higher expected energy production of the CVOW Commercial Project coincides will higher energy prices.
  • The Moody’s report suggests the following key protective provisions in construction contracts: Fixed prices, guaranteed completion dates, minimum performance thresholds, such as capacity or power curve, extended equipment warranties, contractual enhancements for serial defects, and liquidated damage provisions for nonperformance or delays.

Several tables and charts outlining how various construction or operational problems would impact the cost of the project to consumers are also now visible, having been blacked out before.

Much of importance remains off the record, hidden from the public, and it is not just board presentations or data about individual vendor bids.  In the future, if the hearing officer’s ruling is precedent, the challenge to confidentiality should be made early on, when the utility cannot plead that it lacks time to respond.

No formal news media organization objected to the secrecy or asked the SCC to review the utility’s assertions it needed the data hidden.  Under the SCC rules, only the parties who sign the NDA can do that, and since they have the data for their own use, it has seldom happened.

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Standards Decline: Can They Be Brought Back?

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“… score standards were adopted that made it easier for students to pass;

and changes in accreditation regulations let schoolsoff the hook for their failures.”

The words of Governor Glenn Youngkin at Thursday’s unveiling of a new report analyzing the decline of Virginia’s public education?

Nope.  They came from The Washington Post, in a February 8, 2020 editorial titled “Virginia made a mistake by easing its academic standards.”

Three years earlier, The Post presciently predicted the standards decline after interviewing the future governor:  “Mr. Northam claimed to believe in accountability, but was utterly unable to explain what he means by the word,” as Northam suggested different standards for different students.

An editorial titled “Virginia’s retreat from academic rigor” noted:  “Creating different expectations for children does them no favors; it just allows adults to escape responsibility…. The emphasis appears to be not on actually improving schools but rather on approving how they appear….”

This was precisely the result of the last eight years.  And it is precisely what the Virginia Department of Education report has exposed.

The report contains nothing new:  The information was there all the time.  The new team at Education simply put it all together in one place, and the data are not good:  Declines in reading and math on the Nation’s Report Card, declines in the way Virginia measures its standards of excellence, and ever-widening socio-economic achievement gaps, and an “honesty gap” when comparing results on the Nation’s Report Card assessments vs. Virginia’s Standards of Learning.

Where, in 1994, a report like this inspired cooperative and corrective action by a Republican Governor and a solidly Democratic General Assembly, in 2022 it has inspired only vituperation from the Left, with claims of “cherry-picking data” and even a claim to taking “us back to the days of Jim Crow.”

Hardly.

The data involved is comprehensive – going back several years and emphasizing pre-pandemic trends.  Comparing The Nation’s Report Card – or the National Assessment of Educational Progress (NAEP) – is especially valid because it’s use was a compromise back when President George W. Bush and Senator Ted Kennedy were calling the shots on federal education policy.  Instead of one national test, states were permitted to execute their own exams with NAEP providing a common yardstick for states to measure their progress.

It is why the Institute of Education Sciences (IES) produces biennial reports making those comparisons and by thumbing through those reports (hereherehere, and here), Virginia’s decline is documented.

The theory of the IES reports is that if a state’s standards falls too far behind, smart people will fix it.  A 2016 report by Harvard’s Kennedy School of Government noted that 45 states had increased their proficiency standards.  Four states slipped, and Virginia was among them.

By 2019, Virginia stood alone:  The only state with a rating of “proficient” that was below Basic.  Other states had worked to improve their proficiency standards.  Virginia didn’t.  In fact, it doubled down in the wrong direction.

Between 2013 and 2017, Virginia’s standards for proficiency in 4th grade reading had dropped from 17th  to 48th , causing even Northam’s State Superintendent to recommend a higher “passing grade” on the state literacy exams, warning “setting the cut scores too low would mask the needs that many students have in our schools.”  In the past, this was usually enough for a responsible Board of Education to vote for strengthening the cut scores.

The Northam Board would have none of it, in its November 19, 2020 meeting unanimously slashing the standards for success and their measurement even further.  When Mr. Youngkin replaces Board members, this is why they need to go.

The main point made by Superintendent Jillian Balow is clear: “The proficiency benchmarks on Virginia’s fourth- and eighth-grade reading tests map below the Basic level on NAEP and are the lowest in the nation (emphasis mine).  While other states have raised standards on their state tests to align more closely with NAEP proficiency, Virginia has moved in the opposite direction.”

The results have been devastating, hollowing out any responsible means of measuring student progress and imploding the state accreditation system.  They are especially devastating for students of color or limited means, as school systems abandoned strength in standards for a Lake Woebegon-ish equality of outcome, instead of doing the much harder work of helping students learn.

The Youngkin Administration rang the alarm bell, but has its work cut out for it – and there should be no illusion that it needs to combine both reforms and a budget to pay for them.  For example, training teachers for high standards in 1994 cost $59 million … $115 million in 2022 dollars.  And while Virginia has dropped from 3rd to ninth place in the percentage of students qualifying for college credit on Advanced Placement tests, six of the 8 that outpace the Old Dominion underwrite the AP exam fees.  Virginia does not.

Democrat Andy Rotherham served on the State Board of Education and in his most recent column offers a chart, asking:  if you think these 8th-grade math and reading outcomes (and pay attention to the gaps) are good enough, then, yes, you should oppose this.  If not, let’s see if there is a bipartisan center for a meaningful school package touching on the various dimensions of this problem …”

Nearly three decades ago, politics was dropped at the schoolhouse door to do what was right for all children, but most especially those in greatest need.  Since then, hyper-partisanship on both sides has ruled the day in nearly every aspect of policymaking.

Can this issue possibly become the exception again?

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Miyares Challenges Secrecy

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Virginia Attorney General Jason Miyares (R) has moved to open to public inspection much of the secret data and analysis about Dominion Energy Virginia’s proposed Coastal Virginia Offshore Wind project. His petition filed with the State Corporation Commission April 29 comes about two weeks before formal hearings on the application begin in mid-May.

Dominion is seeking SCC approval to build the 176-turbine project off Virginia Beach, and to begin billing customers for it with a new monthly charge. Authorized and all-but-mandated by the Virginia Clean Economy Act of 2020, the current estimated capital cost is $9.8 billion, including the required transmission upgrades but not including financing costs and utility profits.

The liberal use in the initial application of claims that data were confidential or extraordinarily sensitive obscured much of the cost and risk the project imposes on the company’s customers. Once designated as secret, only parties who have signed non-disclosure agreements can see the data or be in the room when the data is discussed in a hearing.

Miyares’ push to open more of the CVOW record follows a similar effort by that office to reverse confidentiality assertions by Appalachian Power Company (APCo) in a pending application dealing with that utility’s proposals for new renewable energy projects. Miyares’ Division of Consumer Counsel had filed a 142-page argument in support of that motion, citing among other things specific instances where information APCo claimed as too sensitive to release had been public in other cases.

That first motion was the subject of a hearing at the SCC on April 25, most of it in a closed session, but two days later the hearing officer declined to rule. The court reporter on the virtual session had technical problems and failed to record the debate between the Attorney General’s staff and Appalachian’s lawyer.

In this new motion, signed by Senior Assistant Attorney General Meade Browder, the focus is on how Dominion’s initial claims of confidentiality on key data caused the SCC’s own professional staff to also file much of its analyses and commentary under seal. One key witness filed 129 pages of public testimony with 52 of the pages containing redactions, some lengthy.

The project is “all-but” mandated because the General Assembly included a cost cap in the 2020 legislation, based on the project’s calculated levelized cost of energy (LCOE). If the utility fails to stay below that cap, the SCC has the authority to reject the project, and the key staff witness mentioned above claimed the project could exceed the cap under certain circumstances. But details were redacted. Browder complained:

With the breadth and scope of Confidential and ES (Extraordinarily Sensitive) designation…it would appear to be difficult for any meaningful examination of this important testimony to take place in public session.

In some cases, Miyares noted, the staff testimony redacted information that it didn’t need to because Dominion had included the underlying data in public portions of its application or has since revealed the details on its own. Staff also referenced and then redacted information from financial ratings services, which is usually only available to subscribers but has often been referenced openly in earlier cases.

Another SCC staff witness redacted details about the 30-year lifetime revenue requirement for the project, drawing this objection from the Division of Consumer Counsel:

This a public utility project that will be funded entirely by captive ratepayers with a dollar-for-dollar rate recovery mechanism. Captive ratepayers have the right to know how much of their money is being committed to pay for a project at the time it is being proposed. This would necessarily include the total cost of the project, plus the amount of any benefits that the Company believes it may be able to monetize for the benefit of customers. This further includes the impact that would accrue through anticipated changes to the capacity factor or capacity value.

In both this case and the pending Appalachian application, the Attorney General is making no objection to secrecy for specific bids or technical information provided by third party vendors.

The presumption in the SCC’s rules is that information in applications and testimony should be public, and the burden is on the party requesting secrecy to justify that. The motion calls on Dominion to review the instances cited, and if the utility chooses not to contest the request, then the item will become public record. SCC staff testimony versions without the redactions would be filed.

Whether that will happen before the hearing begins on May 16 remains to be seen. A decision on the similar APCo motion either way would have been a good indicator, but now that is delayed until a new hearing can be scheduled.

Browder is correct that as it now stands, much of the key information on the CVOW project’s LCOE, total cost, reliability and risks will be questioned and debated at the May hearings with the people who will be paying the bills excluded.

A version of this commentary originally appeared on May 1, 2022 in the online Bacon’s Rebellion blog. Stephen D. Haner is Senior Fellow with the Thomas Jefferson Institute for Public Policy. He may be reached at steve@thomasjeffersoninst.org.

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Most States Outperform Virginia Over Past Decade

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As measured by the American Legislative Exchange Council (ALEC), Virginia’s economic outlook has continued its precipitous drop and now barely ranks in the top half among the American states, 24th out of 50. A decade ago it was in the top five, ranking third in 2011 and 2012 and fifth in 2013.

Using three direct measures of actual economic performance, gross domestic product and job growth and population out migration, ALEC placed Virginia 30th among the 50 states over the past decade.  Neighboring North Carolina, on the other hand, ranked 12th in recent economic performance and second in economic outlook. 

Virginia’s number 24 ranking in the annual “Rich States, Poor States”comparison will be dismissed by some as less important than other indicators of competitiveness, including the ultimate bragging point of being number one in the last CNBC ranking of best states for business.  But the downward trend is dramatic, Virginia having ranked 17th last year and dropping seven places in this survey.

And Virginia’s economic performance, including job recovery since the bottom of the COVID-related recession, continues to lag several other states.  It was 31st in the 2021 ALEC survey, using data from before the pandemic.  Examining what has changed among the 15 criteria since Virginia ranked near the top may offer some explanations.  

On two of the fifteen criteria Virginia receives a perfect score, but in both cases, there have been recent legislative efforts to reverse them.  The first is the Right to Work Law.  The other is the lack of a state inheritance tax, which would surely be among the proposals if the Democratic-controlled Virginia Senate gets the comprehensive tax study it is demanding before any tax cuts.

Change those, and Virginia is down in the bottom half. 

During the period of full Democratic control of state government, the 2020 and 2021 General Assembly sessions, the state adopted a minimum wage higher than the federal requirement, now up to $11 per hour and heading higher.  That moved the state down in the ALEC rankings, as did a measure of “recently legislated tax changes.”  Those were projected to cost citizens $1.80 per $1,000 of personal income.

Only three states ranked lower than Virginia on the “recent changes” measure, a result of the various tax increases approved in 2020 and 2021.  On that same measure, North Carolina ranked second in the country because its recent legislative tax changes reduced collections $2.38 per $1,000 of personal income.

With several of the ALEC measures tied to individual tax burden, the tax cuts still pending at the overtime General Assembly session could improve a future report on Virginia’s economic prospects.

Should all or most of the stalled Virginia tax reductions pass, Virginia’s next “recent changes” measurement would go positive, indicating less tax burden per $1,000 of income, although we would still be competing with the many other states lowering taxes in the midst of the revenue surge.

The higher standard deduction would make the income tax more progressive, another of the ALEC tests, and the elimination of sales taxes on groceries would result in lower taxes from that source per $1,000 of personal income, another ALEC measure.

Worker’s compensation costs per $100 of payroll and the state’s legal climate are other areas where Virginia’s ranking deteriorated compared ten years ago, when it ranked third in the country.

Looking at some other nearby states:

  • South Carolina ranked 7th in economic performance and 26th in economic outlook.
  • Tennessee ranked 10th in economic performance and 13th in economic outlook.
  • Kentucky ranked 27th in economic performance and 34th in economic outlook.
  • Maryland ranked 37th in economic performance and 42nd in economic outlook.
  • West Virginia ranked 46th in economic performance and 25th in economic outlook.

The authors of the annual Rich States, Poor State report are economists Arthur Laffer and Stephen Moore, and ALEC Executive Vice President and Chief Economist Jonathan Williams.   Delegate Kathy Byron, a Republican from Forest and chair of the House Commerce and Labor Committee, is Virginia’s representative on the ALEC Board.

The data come from various sources, including the U.S. Census Bureau, Bureau of Economic Analysis, the Federation of Tax Administrators and the U.S. Chamber of Commerce Institute for Legal Reform.

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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SCC Staff Review Opens the Door to “No”

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Testimony filed by the State Corporation Commission staff on April 8 opened a slight possibility that the Commission could reject Dominion Energy Virginia’s proposed $10 billion wind project off Virginia Beach. It all depends on how the SCC decides to calculate the project’s levelized cost of energy (LCOE), the dollar cost of every megawatt hour of electricity it produces plus the transmission costs.

When the 2020 General Assembly adopted the Virginia Clean Economy Act and related legislation, it set a cap on that key LCOE measure, which is used to compare the costs of various methods of making electricity.

If the utility failed to stay under the cap, the SCC would have the authority to reject the proposal as imprudent and unreasonable. If the project remains below the cap, legislators mandated approval by the SCC, despite any other doubts about its prudence and without considering less expensive alternatives.

No party to the case so far has asked the SCC to reject the application, perhaps doubting that the two judges will thwart the utility’s plans absent an indisputable finding that the project exceeds the cost cap.

The cap set was $125 per megawatt hour, after deducting the value of the very large tax credits granted for wind projects under federal law. In the application it filed late last year to build the facility, it estimated the LCOE (after the tax credits) at about $83 per megawatt hour. But Katya Kuleshova of the SCC’s Division of Public Utility Regulation challenged several of the assumptions in her testimony and noted that if the assumptions prove wrong, that number rises substantially.

If a combination of the many assumptions – actual construction cost and schedule, energy output from the installed turbines, the assumed 30 years of operation – prove too optimistic, then the cost of energy can exceed that $125 per MWH target, she wrote. She also challenges Dominion’s failure to include $1.7 billion in future decommissioning costs, and questions whether at least some related energy storage batteries should have been included.

Unfortunately, most of the details of her analysis are based on data the utility has labeled as extremely sensitive or confidential, so her numbers are also either redacted or contained in sealed documents. The most important energy investment in Virginia’s history is being made with customers kept in the dark. Testimony from other witnesses is also riddled with redactions, and much of the May hearing will likely be behind closed doors.

Kuleshova also details the risks being imposed on Dominion’s 2.6 million Virginia ratepayers, again almost all of it hidden behind secrecy, pages and pages of inked-over text.

Dominion proposes to build 176 turbines, each capable of generating 14.7 megawatts of electricity, 27 miles off the coast of Virginia Beach. It hopes to start construction next year and be fully operational for 2027. The case has already built up a massive file of documents and exhibits. Public comments are being taken here until May 16.

If approved, the costs for the project will begin to appear on customer bills this September in a new stand-alone rate adjustment clause (RAC). It starts small but ramps up quickly during the construction process and should peak in 2027 to just over $14 for a residential customer using 1,000 kilowatt hours in a month. This RAC will work differently, with customers credited for certain avoided costs. Thus after plant operation begins the bill charge may start to decline.

President Joseph Biden has put the federal government on a crash course of offshore wind development on the Eastern Seaboard, with more lease areas expected to be claimed. Among all the projects so far, as testimony from the advocacy group Clean Virginia has detailed, Dominion’s is 1) the largest by far and 2) the only one that will be owned by a monopoly utility with its ratepayers directly providing the capital and profit and bearing great risk.

Every other project as of last year is owned by a third-party developer who will sell the power to a specific utility under a power purchase agreement or sell the related renewable energy credits to a state or utility. The Clean Virginia analysis does not provide evidence those are cheaper alternatives, but it becomes a fair question to ask. There is also (yet again) sealed testimony from that expert witness which may address that question.

The party to the case charged by law with representing Virginia’s consumers, Attorney General Jason Miyares (R), did not have his outside expert witness focus on the company’s calculation of levelized cost of energy. That testimony focused on how the project is not needed for its energy production, not really needed to meet emission reduction goals, and the company’s claims that the project is a net financial benefit to consumers is based on faulty assumptions.

Both the AG’s witness and the SCC staff go into detail arguing the claimed customer benefit (measured as net present value) is really negative, and substantially so. Like the calculation of levelized cost of energy, however, there is no firm guideline or agreed upon industry standard what to include and what to exclude in the formula. The two SCC judges (the 2022 Assembly failed to fill a vacancy) will decide.

Despite the finding that using different but still reasonable assumptions, the project might exceed its legislative cost target, the SCC staff did not recommend that the Commission reject the application. Neither did the Attorney General, the consumer’s representative at the table, despite his evidence that the project benefit numbers are wrong and lower cost approaches were ignored.

Attorney General Miyares, the SCC staff, and other parties have asked the SCC to impose a cost cap on the project, and to find some way to put the cost of any construction delays or overruns back on the utility. There are also solar projects previously approved where if the energy production, as measured by the capacity factor, falls too low consumers are protected from the downside cost.

Hearings are the next major step in the review, starting May 16.

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