The Virginia Clean Economy Act (VCEA), with its demand to eliminate hydrocarbon fuels for electricity in Virginia, will soon take a deeper bite out of bank accounts for many Virginia families and businesses.
As of September 1, Dominion Energy Virginia residential bills will rise 11%. Adding to that, next summer the cost of back-up generation from outside that utility’s network jumps 1400%. A previous article warned Virginia might run out of “other people’s power” to meet customer demand, and this sudden jump in the price of “other people’s power” proves the point.
The Dominion tariff will become more than $143 per 1,000 kilowatt hours for a residential customer. Before VCEA took effect in 2020, that was about $116, so the overall jump in four years exceeds 23%. All those new energy costs were vetted and approved by the State Corporation Commission, but many would not be imposed but for VCEA. Commercial and industrial rates will rise as well.
The largest increases are for the Coastal Virginia Offshore Wind facility, now under construction but not due to produce electricity until 2026 (an extra $3.89 per 1,000 kwh), and for a separate charge collected for complying with VCEA’s renewable portfolio standard (an extra $3.48 per 1,000 kwh). Details and a full list of the changes to the bill can be found here.
It is worth noting they can only be found there. No major news media in the state has reported on these price increases, except for the added costs of the wind project. The numbers come from a presentation the State Corporation Commission made to the Virginia Manufacturers Association energy summit in late July.
Soon after passage of the VCEA, the State Corporation Commission staff projected its future bill impact and with this latest round of VCEA-driven costs, that projection is proving fairly accurate. The new bill in September would be even higher, closer to $148, had Governor Glenn Youngkin (R) not pulled Virginia out of the Regional Greenhouse Gas Initiative carbon tax. RGGI is something else VCEA sought to add to customer bills.
The changes to Dominion’s bill were planned and expected. But when the regional transmission organization that Virginia belongs to held its most recent auction for future generation capacity, the totally unexpected result was nothing anybody had planned for. The price for guaranteed access to a megawatt of electricity rose from the current $29 to $270 in most parts of PJM, but to $444 per megawatt within the Dominion Zone of PJM’s footprint.
The 14-fold increase can be blamed in part on the VCEA here in Virginia, but the elimination of coal and natural gas generation in the other PJM member states also played a role. The Dominion Zone, with its rapid growth in demand due to the data center industry, also has insufficient transmission connections to PJM and thus is considered constrained. That can be fixed, but the big power lines they require are often controversial and contested.
PJM Interconnection is a 13-state regional electricity pool that smoothly moves power around to balance fluctuating demand and supply. An electric grid must be constantly balanced to operate, and PJM is the largest such regional pool in North America. Utilities within PJM must also ensure that their own supply of power matches their expected peak demand, and if their own resources are short of that target, the utility must secure guaranteed supply from other generators in PJM.
In some states, the company that sells power retail does not own its own generators. Those companies will be highly vulnerable to the PJM capacity auction and when these new capacity prices kick in July 2025, their customers will feel it.
In Virginia, most electricity retailers do own generation and thus buy little or no outside capacity. Those include Dominion, Appalachian Power Company in the western part of the state, and the various rural electric cooperatives which belong to the Old Dominion Electric Cooperative. The Northern Virginia Electric Cooperative (NOVEC), however, is not part of ODEC and relies more heavily on purchased power.
Dominion insisted the higher capacity price would have little impact on its customers when it kicks in next summer. The utility pays for purchased capacity through base rates, and those are only adjusted after a full rate review case at the SCC. There are indications the higher capacity price will eventually find its way to customer bills.
In its own public planning documents, an integrated resource plan Dominion filed with the SCC, the utility projected it would be buying 1,100 megawatts of outside capacity in 2025. That would have cost $12 million at the old price but now would cost $178 million. That planning document predicted capacity purchases rising to 2,600 megawatts in about a decade.
A crucial question will be whether the price within the Dominion Zone remains that high in the next PJM auction, for summer 2026. If it does, expect the higher capacity prices to cause higher base rates.
The capacity auction price shock is another story mostly ignored by the media, except for the online Virginia Mercury. Dedicated to the green energy movement, it sought to blame the spike on extreme weather and the unreliability of natural gas plants, both easily disputed. The utility demand targets that must be balanced with outside capacity are usually winter peaks, thus not “global warming.”
In the Dominion Zone, the rapid expansion of demand from the data centers is a major factor. Yet another is PJM’s own evaluation of the reliability of various methods of generation, which ones can be called upon on short notice to meet any demand spike. The wind and solar projects at the heart of the VCEA’s mandates do not match the effective load carrying capability of natural gas, nuclear and the remaining coal plants within PJM.
Building those unreliable power plants is what is adding to your monthly utility bills. Now shutting down the remaining reliable hydrocarbon plants throughout PJM is going to bite through future base rates. One way or another, VCEA and similar laws in other states are costing Virginians real money.
Steve Haner is a Senior Fellow for Environment and Energy Policy. He can be reached at [email protected].
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