Time To Reform Virginia’s Energy Policies

Dominion Energy Virginia’s November announcement that its proposed offshore wind project has jumped almost 25% in cost to $10 billion, with years to go before construction even starts, has put Virginia’s energy policy and its response to claims of climate disaster on the front burner for 2022.

Dealing with these issues should be a top priority of the Youngkin Administration and the General Assembly, and the Governor-elect has already taken important first steps by pledging to leave the Regional Greenhouse Gas Initiative and its accompanying power bill tax.

Here are additional suggested priorities, based on 15 years of dealing with these issues at the General Assembly and the State Corporation Commission.  First and foremost:

• Restore the proper oversight role of the State Corporation Commission over utility rates, profits, and capital planning. Let the SCC decide how to allocate costs between customer classes. The General Assembly has dangerously usurped that function, often leaving the SCC nothing but an administrative agency subject to changing political winds.

• One of the first key decisions the new General Assembly will need to make is whether to give a full term on the SCC to Angela Navarro, elected by the Democrats last year after serving as an architect and advocate for the Virginia Clean Economy Act of 2020 and other anti-fossil fuel efforts.  As I wrote elsewhere, personnel is policy.

• Limit campaign contributions from all donors (still important even if the General Assembly stops usurping the SCC’s job in the future.)  We’ve now held another election where utilities and the vested interests behind unreliable, intermittent generation sources poured incredible amounts of money on candidates and parties.

• Limit or eliminate non-disclosure agreements in cases before the SCC. Too much vital information is redacted and never made public.  The first motion Dominion Energy Virginia has made to the SCC in its effort to build 2,600 megawatts worth of ocean wind turbines is a motion to seal much of its data.  Outgoing Attorney General Mark Herring should have opposed that motion and demanded transparency.  He didn’t.  Incoming Attorney General Jason Miyares should.

• Move the Consumer Counsel function outside of the Office of the Attorney General. Perhaps the job should be filled in the same manner as the SCC itself, or some other judicial position.  But it needs to be at least shielded from the election process and the person holding it should have a term certain and perhaps no expectation of reappointment.

• Review every code section dealing with electricity regulation or other energy use and reconsider each instance of the phrases “in the public interest” or “shall be deemed reasonable and prudent.” Those are the words the General Assembly uses to dictate policy to the SCC despite the ignorance of most legislators on these matters, and their sensitivity to donors.  Likewise remove hard numerical targets for various forms of energy generation, which were based on politics, not engineering.

• Review every code section and reconsider any financial subsidies or rewards offered to influence utility decisions about one project over another, especially any remaining bonus returns on equity for stockholder-favored investments. This would include recently approved (but not yet funded) subsidies for rich people to buy electric cars.

• Require local governments providing monopoly utility service to maintain that service or turn it over to the private sector if they wish to exit.  The recent indication that the City of Richmond might close its gas utility and leave 120,000 customers stranded is a warning the Assembly must heed.

• Require more competition for utility-scale generation services both to discourage placing all the cost and risk on ratepayers, and to be sure of fair and honest pricing on utility-owned projects.  The monopoly utilities don’t need to own so much of the generation.

Virginia should not abandon the current structure entirely. The pure competitive supplier model has plenty of downsides (See Texas).  It is only attractive to so many in Virginians at this time because Dominion Energy Virginia has corrupted the market to unfairly enrich its stockholders.  If all these other steps are taken and electricity costs in Virginia stabilize, the desire to bolt from the monopoly service will wane.

Now to the various controversial decisions on generation and transmission being dictated by the Virginia Clean Economy Act, which will be radically revised by several of the points above.

• The remaining coal generation should be allowed to die a natural death from market forces. As the environmental costs grow, and the revenues shrink, remaining facilities will be closed early without any action by the SCC necessary.  Requests to fund improvements should be viewed with skepticism.  No new coal plants are going to be built.  Dominion’s Virginia City plant in Southwest Virginia was always a good political investment, never a good energy investment. If it is now a financial liability; it should be closed.

• The SCC should be making the decision how much utility-scale wind or solar generation is justified, and when, and what are the best options for reasonable cost and reliable supply. That will likely reduce the amount of those wind and solar investments over the next 25 years below the VCEA’s goals, with more natural gas remaining.   The offshore wind proposal in particular demands a real evaluation of its cost and prudence.

This is not a complete list, and of course some of these points would engender incredible debate and maybe even full-scale war at the General Assembly.  But it is where Virginia needs to go to keep energy abundant and costs reasonable.  With the flip in the Governor’s Mansion and House of Delegates, a change of direction on this front must follow.

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Stephen D. Haner

Senior Fellow for State and Local Tax Policy at Thomas Jefferson Institute for Public Policy.

Stephen D. Haner is Senior Fellow for State and Local Tax Policy at the Thomas Jefferson Institute for Public Policy.He may be reached at [email protected].

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