Dominion CEO Thomas Farrell’s history of railroading Black communities and glorifying the Confederacy is under new scrutiny after the demise of his controversial pipeline.
By Alexander Kaufman
Summer 2014 was an exciting and nostalgic season for the most powerful unelected man in Virginia.
In May of that year, Dominion Energy CEO Thomas F. Farrell II made his cinematic debut with “Field of Lost Shoes,” a Civil War drama following the victorious Confederate cadets at the Battle of New Market. He had co-written, produced and financed the film. In addition to being a lawyer and the boss of a $62 billion Richmond, Virginia-based utility that serves 6.7 million people in eight states, Farrell is a history buff who said he pulled many of the movie’s lines straight from diaries and speeches of the time. Historians, however, say he added one glaring fiction to his film: depicting the young, white Rebel heroes as would-be abolitionists, who were either apathetic about or opposed to slavery.
Historical criticism aside, Farrell was still riding high on that premiere when, in September, he arrived in a blue suit at the historic state capitol building in Richmond to accept then-Gov. Terry McAuliffe’s support for the Atlantic Coast Pipeline, a natural gas project that Farrell hoped would define his legacy as one of his generation’s great industrialists.
“In the 19th century, we had railroads, the steam engine and the beginning of steel manufacturing. In the 20th century, we had the automobile assembly line, the internet and ― from my perspective, the most important of all ― the electric grid,” Farrell told reporters at the press conference, held on the hottest day in Richmond that year. “In the 21st century, the expansion of our natural gas pipeline network looks to be one of those key infrastructure developments.”
Six years later, the Atlantic Coast Pipeline project has been torpedoed by a mix of changing economics, accusations of environmental racism and climate recklessness. The collapse of the pipeline coincides with a national movement against anti-Black racism that has had particular resonance in Virginia, once home to the capital of the Confederacy. Critics of the racial impact of Dominion’s actions under Farrell’s leadership hope that, together with the financial loss from the pipeline project, the current political ferment could finally end his 14-year reign.
Under Farrell, Dominion has become a national symbol of how political corruption and monopoly power can undercut efforts to reduce the country’s dependence on fossil fuels. That was worked for Farrell so long as Dominion’s cash could buy it the acquiescence of state legislatures. But now Virginia and many other states are looking to transition to 100% carbon-free electricity, and Dominion’s shareholders are in revolt. In May, nearly 47% of those shareholders voted in favor of a proposal to require an independent board chair, which would have given Farrell ― who currently serves as both chairman and chief executive ― a boss. In early July, Dominion’s stock price plunged more than 11% after the company and its partner, North Carolina-based Duke Energy, announced the Atlantic Coast Pipeline’s cancellation. The stock price has yet to fully recover, even as the market rebounds.
Virginia progressives, who cheered the toppling of four Confederate monuments in Richmond in recent weeks, hope Farrell could be the next storied edifice to fall.
“Clearly there’s a need for new leadership and new direction,” said state Del. Sam Rasoul, a Democratic legislator from Roanoke. “Dominion has consistently operated counter to the interests of Virginians and … when you have a CEO who championed a film that essentially glorifies the Confederacy, with all that is going on, it’s clear that there’s a new mindset needed.”
Dominion declined to comment on the record, but internal messages show the company worried this story aimed to “tar” Farrell as part of a coordinated effort to damage the firm. In an on-background phone call, a spokesman pointed to the company’s recent commitments to donate $25 million to historically Black colleges and universities in Virginia, Ohio, North Carolina and South Carolina and to fund $10 million in scholarships for minority students. The spokesman also highlighted a corporate pledge in June to direct $5 million to “social justice” and “community rebuilding efforts.”
“At Dominion Energy, we have a saying that ‘Actions Speak Louder.’ We share the anger of our communities at the unjustified deaths of Breonna Taylor, Ahmaud Arbery and George Floyd,” Farrell said in a press release announcing the latter commitment. “Our communities are grieving. Words can evoke empathy, compassion and understanding, but actions truly speak louder. So, we are investing in recovery and reconciliation, and in the vital work of overcoming years of debilitating actions, attitudes and abuses of authority that have traumatized our country.”
The company denied a request to interview Farrell.
Opposition from environmental justice groups contributed to the demise of the Atlantic Coast Pipeline. The proposal would have sent the pipeline through Buckingham County, a rural, mountainous area roughly 90 minutes west of Richmond. Dominion also planned to erect a compressor station in Union Hill, a historically Black community in Northern Virginia that freed slaves founded in the 1800s before the Civil War.
Compressor stations, which use fuel from the pipeline to run a series of gas-compressing engines that keep fuel flowing through the pipeline, emit air pollutants that cause respiratory and cardiovascular problems. Dominion said the Union Hill permit that the Virginia Air Pollution Control Board had unanimously approved set limits on emissions four to 10 times lower than other recent permits granted in the state. But that still allowed for the release of a cocktail of pollutants, including nitrogen oxide, carbon monoxide and particulate matter.
For years, Union Hill residents protested and organized groups against the project. The Virginia NAACP condemned Dominion’s plans and urged regulators to halt permitting. In an August 2018 letter, the 15-member state Advisory Council on Environmental Justice urged Gov. Ralph Northam (D) to suspend the permits already granted and conduct a review of potential “civil and human rights violations” and “ensure that predominantly poor, indigenous, brown and/or black communities do not bear an unequal burden of environmental pollutants and life-altering disruptions.”
“We strongly disagree with the Advisory Council’s recommendations,” the company told The Washington Post at the time.
The company then proposed pouring $5.1 million into the Union Hill community, vowing to build a community center and fund an expansion of emergency services. The money proved divisive, which some there said was exactly the point.
“Dominion is an expert at the divide-and-conquer tactic,” Rev. Paul Wilson, the preacher at one of Union Hill’s two historically Black churches and a leading opponent of the pipeline, told NBC News in 2018. “There’s a group of people who are even moving to get me out as pastor. Once you inject money into the conversation, it becomes a wedge.”
When former Vice President Al Gore and anti-poverty activist Rev. William Barber II denounced the compressor station as environmental racism in 2019, Dominion started running Facebook ads featuring video from a high school essay contest on civil rights that it had sponsored.
Meanwhile, the company plowed ahead with plans to build the compressor station ― until a federal court intervened in early 2020, overturning the permit because Dominion had failed to resolve questions about how emissions would affect Union Hill.
It had taken Union Hill activists five years to get redress from the courts.
But a similar fight in a largely white and affluent community played out much differently. Three hours north, in Charles County, Maryland, Dominion spent two years planning another compressor station for the Eastern Market Access project. Then the Mount Vernon Ladies Association intervened, noting that the project would sully the view from President George Washington’s plantation across the Potomac River in Virginia. Four months after the society group joined local environmentalists in opposing the compressor station, Dominion canceled its plans.
It’s difficult to say how Farrell’s personal views have factored into company positions. But critics argue that redevelopment schemes that Farrell supported as a real estate investor, independent of his work at Dominion, have shown a similar disregard for Black history and communities.
In 2017, Farrell led a group of developers pushing a $1.5 billion project to rebuild a 10-block swath of downtown Richmond into a new arena, hotel, offices and luxury apartments. He and his co-investors dubbed the planned development Navy Hill after a Black neighborhood that was razed in the 1960s to make way for highways. That clearance demolished landmarks and displaced more than 1,000 families. This time, Farrell lined up the support of Richmond Mayor Levar Stoney (D), who is Black and has recently expedited the removal of Confederate monuments in response to the new protests against racism. Stoney received $10,000 from Dominion during his first year in office and announced in 2018 that he planned to continue accepting donations from the powerful utility.
While the project’s wealthy backers promised some funding, the city planned to largely finance the redevelopment through bond market debt. The proposal swore off tax hikes. But the need to pay off that bond debt threatened to divert funding from city services for decades to come, risking more budget cuts at a moment when municipal deficits were already triggering increased austerity.
Many also feared the project would gentrify a historically Black area of the city and make the neighborhood unaffordable for its longtime residents.
A November 2019 editorial in the Richmond Free Press, a weekly newspaper serving the city’s Black community, savaged the project. The editorial board called the plan “a travesty” that risked “leaving the taxpayers … stuck with the bill for the rising costs of city services.” Any new municipal revenue from the project would end up going toward paying off the new arena, the newspaper concluded.
“With this latest scheme, our community once again winds up as losers,” the editorial stated. “Only Mr. Farrell and friends are benefiting from this project and the charade being perpetrated to pull it off.”
There was a lot of race-baiting from folks who want to maintain a certain kind of racial capitalism in the former capital of the Confederacy.Chelsea Wise, organizer and host of the Richmond radio show “Race Capitol”
Chelsea Wise, an organizer and host of the Richmond politics radio show “Race Capitol,” said she saw members of her family holding up picket signs supporting the project at a key city council hearing. When she confronted them, they said they’d been offered $25 to show support.
“I like to joke that, after that, Thanksgiving was very different,” Wise said.
But the project was no laughing matter, she said. Wise took to calling the Navy Hill proposal “the second wave of the Bartholomew project,” a reference to the displacement of Black families during the 1960s under city planner Harland Bartholomew.
Among Navy Hill supporters, “there was a lot of race-baiting from folks who want to maintain a certain kind of racial capitalism in the former capital of the Confederacy,” Wise said. “This project would hurt Black people.”
The Richmond Free Press suggested the paltry rate at which Farrell’s group compensated picketers was an insult unto itself. “Sadly, it shows how deep poverty and depression is within Richmond’s African-American community that $25 can get people to show up and hold signs at a City Council meeting,” the editorial read.
In February, the Richmond City Council voted for a resolution that effectively killed the project.
“While the council resolution didn’t name him, the development proposal process did not reflect civic needs so much as the interests of one man in particular: Navy Hill’s leader and Dominion Energy’s chief executive, Tom Farrell, who has been arguing for a new Richmond arena for almost a decade,” Richard Meagher, an associate professor of political science at Randolph-Macon College, wrote in a February op-ed in Style Weekly, Richmond’s alt-weekly newspaper.
Electricity rates are another area where the public interest in Virginia has been increasingly at odds with Farrell’s. In 2007, a hastily passed law proposed and backed by lawmakers who received donations from Dominion restricted the State Corporation Commission’s ability to police the utility rates the company charges. Between 2009 and 2018, the company overcharged Virginians by an average of $234 million per year, according to analysis by the advocacy group Clean Virginia. In 2018 alone, state regulators found that the company overcharged ratepayers by nearly $300 million, which averaged out to an extra $113 per customer for the year.
Dominion also asked to raise the percentage of its revenues it could keep as profit ― a request that regulators rejected last November. Now the company wants to raise rates by as much as $50 a month to help cover the cost of complying with Virginia’s new renewable energy targets.
That would come on top of the financial tsunami ratepayers already face in the months ahead as unemployment in Virginia sits at roughly 10% and workers struggle to make rent amid the coronavirus pandemic. Virginia extended its moratorium on utility service shutoffs for nonpayment until the end of August. Dominion said it will maintain the policy until Oct. 15.
By then, when colder weather risks inflaming the coronavirus infection rate, thousands could lose access to electricity in the state with the seventh-highest average monthly residential electric bill in the country. (Not to mention the other states where Dominion operates. The company said it will apply the same Oct. 15 endpoint to all eight states it serves.)
The risk of losing electricity, advocates say, will fall disproportionately on communities of color. Median-income families in Richmond and Virginia Beach, for example, spent between 3% and 4% of household income on utilities, according to 2013 data from the progressive nonprofit New Virginia Majority. But Black households in the same two cities spent 8% and 10%, respectively. Latino households spent about 6%.
“If you look at what’s actually affordable, paying the current bill plus catching up on arrearage that may have been accumulated during COVID, that may be hard to accommodate,” said Dana Wiggins, director of the Center for Community Outreach and Affordable Clean Energy at the Virginia Poverty Law Center. “When you take into account that they have been overcharged over a long period of time, it makes it very difficult.”
Dominion, meanwhile, increased its dividend to shareholders in February and then paid them an equivalent sum in June.
Had the nearly $3 billion Dominion spent on the Atlantic Coast Pipeline gone instead toward solar and wind projects, it would have likely lowered the cost of Virginia’s effort to transition to 100% clean energy by 2045.
But Farrell has long maintained that fossil fuels are the past and the future. Until early July, Dominion owned an entire gas transmission and storage subsidiary separate from its utility business. “We’ve come a long way in a relatively short time with renewable energy, but we’re still in the age of fossil fuels, whether we like it or not,” Farrell said in a 2015 speech to regional business leaders. “Seventy-five to eighty percent of it is going to come from fossil fuels, as I said, for many decades to come.”
The election of President Donald Trump, a fossil fuel hardliner, only cemented those views. “We need to acknowledge we are an energy superpower and start acting like it,” Farrell said in a July 2017 lecture to the U.S. Chamber of Commerce’s Global Energy Institute. “Instead of trying to keep it all in the ground.”
Thanks to that mindset, Virginia still produces about 63% of its electricity from fossil fuels, compared to 7% from renewables, according to federal figures. The new state rules require that 26% of electricity come from renewables by 2025. In a lone on-the-record statement to HuffPost, a Dominion spokesman said: “We intend to comply with that.”
But climate change’s mounting toll of more disastrous storms, heat waves and flooding show that just meeting that minimum standard is insufficient and “Dominion needs new leadership,” said Harrison Wallace, a community organizer and the Virginia director of Chesapeake Climate Action Network, a regional grassroots environmental group.
“The leadership of our utility monopoly should at least represent the changing tide in politics and how climate is affecting our planet,” he said.
Farrell’s movie may offer the most damning indication that the executive is out of step with the current moment. The $6 million film ― which received $1 million in public funding via a state filmmaking tax credit ― was widely panned for its historical revisionism.
The script for “Field of Lost Shoes,” which Farrell co-wrote, depicts its Confederate heroes at the Virginia Military Institute as deeply conflicted over slavery.
Historian Jeffrey Evan Brooks complained in a review that a “black character named Old Judge, who runs the VMI bakery, is inserted into the story in order to give the cadets a slave with whom to sympathize when he runs into trouble.” In The Hollywood Reporter, critic Frank Scheck said that the movie “doesn’t exactly score points for objectivity.”
“Amazingly, none of the staunch Southerners seem to hold any negative feelings toward blacks,” Scheck wrote.
At one point, a main character suggests as a given that the newly independent Confederacy must abolish slavery after winning the war. Another insists: “This war is not about slavery. It’s about money. It always is.”
For a white person in the Civil War era to express skepticism about slavery, much less outright support for abolition, would “have been an untenable position in Virginia,” said historian Rev. Benjamin Campbell, author of “Richmond’s Unhealed History,” a book about the city’s failure to confront the oppressive racist policies that shaped its past.
“A white person would have been thrown out of the state,” Campbell said. “A newspaper editor who simply questioned slavery was challenged to a duel in 1848 and killed in Virginia.”
Politically acceptable opinions at the time, he said, ranged from full-throated support of slavery to “advocating the American Colonization Society,” which was an effort to deport freed Black people to Africa and establish a U.S. trading colony there.
Campbell said he knows Farrell, who is in his mid-60s, personally and the Dominion boss is “not a rigid racist.”
“He’s a Virginian of his generation, and he’s a person in moral and emotional transition like all the rest of us,” Campbell said. “But it may not be fast enough.”
An internal text message HuffPost obtained showed what appeared to be public relations employees worrying about a “total of three negative pieces brewing” that will “try to tar us,” including this story, an op-ed due out in a local newspaper criticizing a lawmaker for accepting Dominion contributions, and an investigation in another outlet examining the company’s political donations. The texting thread of five Richmond-area numbers, which appears to have accidentally included this reporter, suggested the publications were “brewing all in rough coordination,” though HuffPost had no prior knowledge of the other two pieces.
Farrell’s role should “certainly be questioned” in the wake of the pipeline project, said Barber, a towering figure of the current civil rights movement.
“A company that would attempt to do all this to communities and put its customers through this kind of fight should be challenged in so many ways,” he said. “Racism is not just about symbolism, it’s about substance.”
FOR IMMEDIATE RELEASE
Cassady Craighill, Clean Virginia Communications Director
Dominion Energy’s costly new energy blueprint fails to meet challenge of Virginia’s clean energy transition
Clean Virginia: Plan approval should depend on full rate case review of Dominion’s spending
Richmond, VA — Dominion Energy released its latest Integrated Resources Plan (IRP) today, projecting significant rate increases and an increased reliance on short-term fracked gas, despite the monopoly’s recent public commitments to clean energy.
“After decades of delays and resistance, Dominion has been forced by recent law to move forward on clean energy. The new Integrated Resource Plan appears after an initial review to be a flawed and imperfect reflection of the clean energy directive from the Governor, General Assembly, and citizens of the Commonwealth,” said Clean Virginia Executive Director Brennan Gilmore.
The utility monopoly filed its latest IRP to account for the Virginia Clean Economy Act (VCEA), which Governor Ralph Northam signed into law last month. Primary findings from the plan include:
“Dominion is proposing a substantial overhaul of the way electricity is generated, consumed, and stored, all of which will have a significant economic impact for Virginian families and businesses,” Gilmore said. “The new construction envisioned by its IRP will generate significant shareholder profit for Dominion, but major rate increases for customers. However, the utility monopoly has aggressively opposed any attempt at a transparent review of its rates, despite overcharging Virginians by $1.3 billion since 2015. Dominion’s continued unwarranted reliance on fossil fuels and evasion of a fair review of rates — particularly at a time of unprecedented hardship — is deeply irresponsible. The General Assembly should urgently mandate regulators to conduct a full, transparent review of Dominion’s current rate structure in light of its massive spending plans.”
RICHMOND, Va. (AP) — Dominion Energy Virginia recently told state regulators “significant build-out” of natural gas-fired power plants is no longer viable because of renewable energy legislation lawmakers passed earlier this year.
The disclosure came in a filing with the State Corporation Commission several weeks before Dominion has to file its integrated resource plan, or IRP, a long-range planning document that describes how the utility will generate power to comply with regulations and meet customer needs.
The company’s critics called it the latest development to raise questions about why the Atlantic Coast Pipeline, the approximately $8 billion multistate natural gas pipeline the utility’s parent company is spearheading, is needed.
When Dominion proposed the pipeline in 2014, it was planning to build several thousand megawatts of additional natural gas generation in Virginia, said Will Cleveland, an attorney with the Southern Environmental Law Center.
“Now, not only are they not planning to do it, they’re saying that that kind of a build-up isn’t even possible. Which just begs the question that we’ve been asking for years: What is that pipeline for?”
Dominion spokesman Jeremy Slayton said the pipeline is still “urgently needed for electricity, home heating and manufacturing in Virginia and North Carolina.”
“Dominion Energy Virginia is just one of several public utility customers of the ACP, with a large portion of the capacity going to North Carolina utilities,” Slayton said in a statement.
Dominion’s filing asked the commission to waive a requirement it had previously instituted that said all future IRPs must include a risk analysis of constructing significant new natural gas and nuclear power generation.
Dominion said doing that modeling would be time- and resource-intensive work on something that was “no longer relevant.”
“Significant build-out of natural gas generation facilities is not currently viable, with the passage by the General Assembly of the Virginia Clean Economy Act of 2020,” the filing said.
That bill, which is awaiting Gov. Ralph Northam’s signature, sets a goal of zero carbon emissions by 2045, paving the way for an enormous expansion of offshore wind generation, solar or onshore wind generation, and the use of battery storage technology.
The legislation also requires utilities to meet certain energy efficiency standards, establishes annual goals for the sale of renewable energy, and contains provisions advocates say remove barriers to rooftop and shared solar energy.
Dominion also cited the bill in a filing last week with the U.S. Securities and Exchange Commission as part of the reason it anticipates recording an abandonment charge in the first quarter of 2020 as a result of the probable early retirement of coal- and oil-fired units. The charge is expected to be between $500 million and $650 million after-tax, the filing said.
Slayton called the filing with the State Corporation Commission a “procedural step to remove some outdated reporting requirements.” He said natural gas remains an important part of Dominion’s reliability.
The company has not canceled natural gas plant projects in Chesterfield and Pittsylvania County that are currently in the permitting process, he said.
A move away from natural gas would mark a significant shift from Dominion’s last IRP in 2018, which called for at least eight new gas-fired plants.
The SCC granted Dominion’s request to skip the modeling. The IRP is due by May 1.
By Elizabeth McGowan
A scantly noticed bill curated by a freshman legislator from northern Virginia elicited giant cheers from Dominion Energy watchdogs when it passed both the Senate and the House of Delegates just seven days before the General Assembly adjourned on March 12.
Though overshadowed by the Virginia Clean Economy Act, supporters view the success of House Bill 528 as a momentous first effort to shift power from utility monopolies and toward regulators and ratepayers.
On its face, the measure deftly shepherded by Del. Suhas Subramanyam is simple. It restores the State Corporation Commission’s oversight of Dominion’s cost recovery timeline for early retirements of all types of power plants.
“This is part of a larger effort to even the playing field and make sure a monopoly plays by the same rules as any other company,” the Loudoun County Democrat said in an interview. “No one else can determine how to depreciate their own assets and I don’t think people understood the implications of that.”
Subramanyam’s measure reverses current law, passed in 2018 as part of the massive Grid Transformation and Security Act. That allowed Dominion to recover — as a one-time expense — the remaining balance on a retired power plant instead of refunding the extra earnings to customers.
“I was trying to reverse an accounting trick that would prevent ratepayers from getting refunds,” he said. “When I first started with this, I thought it was a long shot. Once people understood what it did, they saw it as a common-sense bill.”
Part of what spurred him to push his bill was the imminent passage of the overarching Virginia Clean Economy Act, which is designed to shift energy priorities and speed up the retirement of coal- and natural gas-fired plants. To decarbonize Virginia’s electricity grid by 2045, the act establishes aggressive energy efficiency standards, broadly expands incentives for rooftop solar, and kickstarts a massive offshore wind industry.
Brennan Gilmore, executive director of Clean Virginia, praised what he called a newly emergent bipartisan coalition of lawmakers for challenging Dominion with HB 528 and on several other fronts.
For instance, legislators blocked Senate Bill 1096, a Dominion-backed bill to expand an exclusive electric school bus contract. They also advanced pilot competition bills for energy services, signaling interest in overhauling the state’s vertically integrated monopoly structure.
And they came remarkably close to passing the bipartisan Fair Energy Bills Act, which would have empowered state regulators to examine Dominion’s earnings, decide how much is fair, then direct the utility to refund the surplus to customers.
Dominion has overcharged customers by more than $1.3 billion since 2015, according to State Corporation Commission figures.
Combined, those initiatives sent “a strong message that Dominion Energy will no longer be able to use the General Assembly as a rubber stamp for its profit-padding legislation,” Gilmore said. “New lawmakers have joined seasoned members of both chambers to build a firewall of support for consumer protection, good governance and distributed clean energy.”
Dominion Energy did not respond to a request for comment for this article.
Will Cleveland, a senior attorney with the Southern Environmental Law Center, said he was disappointed legislators who professed to care about ratepayers bucked the Fair Energy Bills Act.
It was a necessary complement to the Clean Economy Act because “as long as rates are where they are, we’re not doing a transition to zero carbon emissions in the power sector in the least-cost manner,” he said.
Subramanyam’s bill isn’t comprehensive enough to solve that problem.
“HB 528 is a good starting point, but it fixes only one of the many things wrong with Virginia’s regulatory structure,” Cleveland said. “The Fair Energy Bills Act would have removed all of the obstacles.”
That latter oversight measure would have applied to Dominion’s 2021 rate case, when utility regulators will be examining four years of records — from 2017 to 2020 — and setting Dominion’s next base rate and allowed profit level.
Five years ago — when the Obama administration’s U.S. Environmental Protection Agency was rolling out the Clean Power Plan — Virginia legislators voted to let Dominion keep excess profits in exchange for freezing base rates for seven years.
“The State Corporation Commission is not failing to do its job,” Cleveland said about the overcharging. “It’s not legally allowed to do so.”
He noted that passage of the Clean Economy Act is “the first time a major piece of energy legislation has passed that Dominion didn’t write,” adding that the bill educated lawmakers about shortcomings in their state. “I’m excited about the number of people committed to helping to fix this in the future.”
Dominion will be filing its next version of an Integrated Resource Plan on May 1. Regulators have asked the utility to include a model detailing the costs of executing the Clean Power Plan.
“It’s the first time that Dominion is having to put numbers to paper in front of a court rather than through a press release,” Cleveland said. “Nobody has done a good job of quantifying the costs and savings of the Clean Economy Act.”
Some advocates intent on reining in Dominion emphasized that legislators found voting for the Clean Economy Act more palatable after Subramanyam’s bill passed, even though it wasn’t as comprehensive as the Fair Energy Bills Act.
An analysis by state regulators said the Clean Economy Act would lead to Dominion collecting $50.8 billion more from its ratepayers.
But J.R. Tolbert, the managing director for the Advanced Energy Economy, questioned the accuracy of the commission’s math. He said a Lakes Energy study commissioned by his organization was more spot-on. It predicted customers’ monthly bills would drop by about $4 a month between 2020 and 2030.
Tolbert attributed legislators’ attempts to constrain Dominion this session to years of frustration by lawmakers and clean energy advocates in the trenches. Strategic thinking and the first Democratic majority in both chambers in a generation allowed that pent-up anger to be released.
“We reached a full boil on how we handle and address Dominion’s rates and everything else,” said Tolbert, who has tracked the General Assembly since 2008, the year after Virginia electric utilities returned to a regulatory model. “This year there was an enormous push for more accountability.”
The coalition that crafted the Clean Economy Act chose to achieve 100% clean energy without breaking the bank, he said.
“We know there are flaws in the current regulatory regime,” he continued. “But we can’t fix and change that regulatory model and put Virginia on a path to clean energy in the same package.”
Some key breakthroughs Tolbert cited include:
“We tried to fight for things that achieve the goals but take into account the impact on ratepayers, families and businesses,” Tolbert said. “Are there places where it could have been better or stronger? Yes.”
For instance, his coalition wanted third parties to have a higher ownership stake in renewable energy projects. But that didn’t fly.
Still, “the clean energy folks were able to get out in front,” he said. “As a result, we were able to make sure the conversation was based off our sheet of paper instead of the utility sheet of paper.
“Both Dominion and Appalachian Power came to the table to work on the bill.”
Democratic Gov. Ralph Northam is expected to sign Subramanyam’s ratepayer protection bill into law early this month. The Senate greenlighted it on a 35-5 vote, while the House passed it 50-43.
“It’s a really big deal,” Subramanyam said. “This bill would have never passed in previous years because of the opposition from regulated utilities.”
During back-and-forth negotiations, he agreed to a few amendments to advance his measure. For instance, one allows Dominion to present specific amortization cases involving plant shutdowns to regulators — but commissioners have the power to make the ultimate decision.
Subramanyam, elected in 2019, credits his mentors for helping him to navigate the intricacies of legislating. However, he knows the value of listening and give-and-take.
He might be a rookie in Richmond, but his background is on Capitol Hill and in President Barack Obama’s White House.
“I think it was a surprise to the investor-owned utilities that there were both Democrats and Republicans who stood up in support,” he said. “Sometimes this is about relationships.”
Virginia lawmakers passed bills during the 2020 legislative session that unlock billions of dollars in potential clean energy investments and continue shifting off of fossil fuels, although proposals to challenge the power of the state’s largest electric utility gained little traction.
Bills that sought to open up the state to retail competition, curb contributions from Virginia’s investor-owned utilities and put stricter regulations on utility earnings were either weakened or passed over.
Dominion Energy Inc. still has a “very strong tool in the toolkit” in Senate Majority Leader Dick Saslaw and the “powerful” Senate Commerce and Labor Committee, Brennan Gilmore, executive director of Clean Virginia, said in a March 13 phone interview.
“They still have an ability to use the legislature through that tool, but the wall that that tool provided in the past has been breached and we were able to get around it in a couple places,” Gilmore said.
The Senate Commerce and Labor Committee on March 2 killed a bipartisan bill that would have given the Virginia State Corporation Commission the ability to lower Dominion Energy Virginia’s base rates and order customer refunds for excess earnings.
The SCC showed in a late August 2019 report that Dominion subsidiary Dominion Energy Virginia and American Electric Power Co. Inc. utility Appalachian Power Co. earned millions in excess revenues for the second year in a row following a reinstatement of rate reviews in 2018. Dominion is now held to a “maximum $50 million rate reduction” following the first review of excessive earnings.
The state Senate committee voted 8-7 to indefinitely table the Fair Energy Bills Act.
“I think that was a loss, but at the same time it exposed just how badly a clean rate case is needed and I think it helped fuel the appetite for more structural reform in the system,” Gilmore said.
Clean Virginia endorsed and contributed to the campaigns of dozens of candidates for the state legislature in the November 2019 general election, all of whom refused to accept money from Dominion.
Democrats then took full control of the Virginia General Assembly for the first time in more than 25 years in a legislative shift seen as paving the way for the state to embrace stricter clean energy mandates and join the Regional Greenhouse Gas Initiative, or RGGI.
Customer and clean energy advocates said they are seeing signs of change even if direct challenges to power largely fell flat.
“For the past decade, [Dominion has] essentially had their way with the legislature and there wasn’t any point where … they were held to the fire in negotiations around a big energy bill over things like cost containment or competition,” Gilmore said. “They were able to get into the code a lot of incredibly utility-friendly ratemaking provisions. I think the dynamic that we saw during this session was that is just not the case anymore.”
Although Dominion Energy has previously expressed concerns about Virginia’s effort to join RGGI and efforts to deregulate the electricity market, the utility said it will work to slash emissions in line with the state’s new policies.
“We are committed to net-zero carbon and methane emissions company-wide by 2050, including meeting any emissions requirements signed by the Virginia governor as a result of the General Assembly session,” Dominion spokesman Rayhan Daudani said in a March 20 email.
Virginia Clean Economy Act
One significant piece of legislation passed by the Virginia General Assembly is Senate Bill 851, known as the Virginia Clean Economy Act.
The legislation essentially phases out coal-fired generation by the end of 2030 and requires Dominion Energy Virginia and Appalachian Power to “retire all other electric generating units located in the Commonwealth that emit carbon as a by-product of combusting fuel to generate electricity” by Dec. 31, 2045.
The legislation replaces the state’s voluntary renewable portfolio standard with mandatory annual benchmarks that would eventually require electricity suppliers to produce 100% of their electricity from renewable sources.
Appalachian Power must procure 100% of its electricity from renewable resources by 2050, while Dominion Energy Virginia must hit that benchmark by 2045.
It also requires Dominion Energy Virginia, known legally as Virginia Electric and Power Co., and Appalachian Power to “retire all generating units principally fueled by oil with a rated capacity in excess of 500 [MW] and all coal-fired electric generating units operating in the Commonwealth” by Dec. 31, 2024. The bill provides an exception for coal plants co-owned with a cooperative utility and for Dominion Energy Virginia’s 624-MW Virginia City Hybrid Energy Center, which must be shut down by the end of 2030.
The measure adopts a target for energy storage deployment of 3,100 MW by the end of 2035. A new energy efficiency standard also would apply to both utilities with a 5% energy savings target for Dominion and a 2% target for Appalachian Power by 2025, both from 2019 levels.
“From a Clean Virginia perspective, it was a bit of a mixed bag,” Gilmore said. “From a climate perspective, it’s a great bill.”
Under the legislation, “the construction or purchase” of offshore wind facilities up to 5,200 MW off the Virginia shoreline by Dec. 31, 2024, is in the public interest.
Dominion Energy Virginia in September 2019 announced plans to build the “largest offshore wind project” in the U.S. off the coast of Virginia Beach in three phases of 880 MW each. If approved, the first phase of the $8 billion project would be completed in 2024, with the final phases expected to come online in 2025 and 2026.
“I think there is a pretty big delta between a gold-plated, profit-padding offshore wind deployment and one that is deployed with particular attention to cost and cost overruns,” Gilmore said. “There is some good language in the [Virginia Clean Economy Act] about the SCC’s ability to monitor this process to ensure that there is competitive procurement in a way to keep costs down. We would’ve liked to see more of that language but I think it’s going to bear careful attention in the years to come.”
Virginia set to join RGGI
In February, the General Assembly passed legislation that would lay the groundwork for the state to join RGGI.
The legislation authorizes the director of the Virginia Department of Environmental Quality to “establish, implement, and manage an auction program to sell allowances into a market-based trading program consistent with the RGGI program.”
The vote comes after the Virginia Air Pollution Control Board in April 2019 adopted a rule to move forward with linking the state to RGGI and effectively curb total power plant carbon emissions 30% by 2030.
States involved in RGGI use a market-based cap-and-trade program to reduce greenhouse gas emissions from regional power plants, selling nearly all emissions allowances through auctions and investing proceeds in energy efficiency projects.
Dominion Energy Virginia has previously claimed that linking to RGGI could lead to emissions increases outside the state, a phenomenon known as leakage.
The utility has also claimed that such a move “would raise rates considerably in Virginia” and threaten the company’s competitive retail electric rates.
Gov. Ralph Northam is expected to enact the legislation.
A landmark legislative session for energy came to an end in Virginia last week, after the Democratic-controlled General Assembly mounted a late push to pass numerous new regulations on fossil fuels and promote zero-carbon sources of electricity.
One of the measures, which Democratic Gov. Ralph Northam is expected to sign, would make Virginia a participant in the Regional Greenhouse Gas Initiative (RGGI), the East Coast’s cap-and-trade system for carbon dioxide emissions.
The governor is also expected to sign the “Virginia Clean Economy Act,” which would make Virginia the first state in the South to move toward 100% carbon-free electricity. It would require the state to decarbonize its power by 2050 and establish new mandates for a renewable build-out.
Cale Jaffe, an associate professor of environmental law at the University of Virginia and a former attorney at the Southern Environmental Law Center, said he “never would have imagined something like the Virginia Clean Economy Act to be remotely possible” when he began lobbying the Legislature for renewable policies over a decade ago.
“This is an absolute sea change,” he said in an email.
Other bills that passed in February and March would ban hydraulic fracturing in much of the state along with offshore drilling for oil and gas, while a third — already signed by Northam — creates a 27-member environmental justice council to advise the governor.
The flood of legislation came after Democrats took control of both chambers in last November’s elections. The political shift was apparent in the state’s entry into RGGI: In 2017, Republicans successfully inserted provisions into the state budget that blocked regulators from implementing the cap-and-trade program.
Some clean energy and green groups that have positioned themselves as rivals of Dominion Energy, the state’s main investor-owned utility, say this year’s legislation is just the beginning of a larger shake-up. An appetite is growing on both sides of the aisle for a deregulated power sector that allows other electricity generators to compete with Dominion, they say.
In the recently ended session, “you did see some shifting of power from Dominion” to utility regulators and Virginia ratepayers, said Cassady Craighill, communications director for Clean Virginia.
Craighill pointed to the passage of H.B. 528, which would give regulators control over how Dominion charges ratepayers for the early retirement of fossil fuel plants. It cleared both chambers over the objections of the utility giant — a rare event for a Legislature where the company has cast a long shadow.
“I think next year, you’ll see a bigger wave of that change,” she said.
Other clean energy advocates were more skeptical.
Several measures that would have expanded consumers’ ability to enter contracts with other companies for renewable power — including one co-sponsored by a Republican state senator — never cleared the Legislature, said Bryn Baker, director of policy innovations at the Renewable Energy Buyers Alliance.
Dominion spokesman Rayhan Daudani did not directly respond to queries about the company’s influence on lawmakers, saying that the company’s focus “has been and will continue to be on providing safe, reliable and sustainable energy to our customers.”
‘Undue and harmful influence’
If the next session does see additional attempts to decrease Dominion’s control over power generation and distribution in Virginia, however, it likely will have the backing of a new activist donor with deep coffers.
Clean Virginia, a 501(c)(4) nonprofit, was created in 2018 by hedge fund manager Michael Bills in order to “offset the undue and harmful influence of Dominion Energy and other utility monopolies … over Virginian politics,” according to a founding statement. In 2019, it received $300,000 from Bills.
A former vice president of Goldman Sachs and current chief investment officer at Bluestem Asset Management, Bills sits on the nonprofit’s board and has emerged as one of the state’s largest donors to political campaigns, according to the Virginia Public Access Project.
In 2019, he gave $1.24 million to dozens of Democratic candidates for state office, all of whom swore off donations from Dominion, and $200,000 to the state’s Democratic Party. Eight of those candidates won seats formerly held by Republicans.
In emailed comments to E&E News, Bills said he believes Clean Virginia has been “a valuable resource” in electoral battles but that voters have given “a clear mandate … to tackle both corruption and climate in Virginia politics.”
“The General Assembly started an important conversation this year about reforming Virginia’s energy market into a competitive one,” he added.
“[F]or the sake of Virginia customers, they should thoughtfully return to that conversation next year,” he said.
FOR IMMEDIATE RELEASE
Cassady Craighill, email@example.com, 828-817-3328
March 12, 2020
Clean Virginia: Legislative Session Opens Door for Ambitious Energy Reform in Virginia
Lawmakers Should Continue Holding the Line on Dominion Energy Accountability
Richmond — A suite of energy bills that challenge the dominant role of Virginia’s regulated utility monopolies passed with bipartisan support and are now on their way to Governor Northam’s desk upon adjournment of the General Assembly on Thursday.
“For the first time in decades, legislators overcame Dominion Energy’s strong opposition to pass legislation that first and foremost protects ratepayers. A newly emergent bipartisan coalition of lawmakers rightfully put the interests of Virginians above those of shareholders, sending a strong message that Dominion Energy will no longer be able to use the General Assembly as a rubber stamp for its profit-padding legislation,” said Clean Virginia Executive Director Brennan Gilmore.” New lawmakers have joined seasoned members of both chambers to build a firewall of support for consumer protection, good governance, and distributed clean energy.”
Legislators from both parties worked vigilantly this session to shift the power from utility monopolies to third-party regulators and Virginia energy customers:
“There is still tremendous work to be done to fight utility monopoly corruption in Virginia politics and to distribute both electric and political power more equitably across the Commonwealth,” Gilmore said. “General Assembly leadership can start by committing to grant all bills a fair hearing next session — Delegates were never given a chance this session to vote on a good governance bill that would have prohibited unlimited campaign contributions from utility monopolies. Virginia voters gave the legislature a clear and overwhelming mandate on this issue last November and the General Assembly must listen.”
“Lawmakers overcame what once seemed like an insurmountable barrier during the 2020 legislative session — considering Virginia’s energy market on the customers’ terms, not the terms of Dominion Energy. The outcome of this legislative session demonstrates that there is a growing bipartisan appetite to broadly reform Virginia’s utility monopoly structure. We look forward to working with legislators and stakeholders to ensure that legislation to power Virginia with a 21st-century energy market is as strong as possible.”
FOR IMMEDIATE RELEASE
Cassady Craighill, Clean Virginia Communications Director
BREAKING: VA Lawmakers Show Appetite for Competitive Energy Market
Del. Keam, Del. Ware lead bipartisan effort to break up utility monopolies in Virginia
January 30, 2020
Richmond, VA — A House subcommittee expressed interest tonight in the Virginia Energy Reform Act, a robust bill that would reshape Virginia’s energy market from one dominated by utility monopolies to one open to retail competition. The House Labor and Commerce energy subcommittee moved to carry the bill over until next session, a noteworthy move considering the political influence of Virginia’s dominant utility monopoly, Dominion Energy. The subcommittee’s move will allow the legislature to continue discussions of reform and consider the bill again in the 2021 session. The Virginia Energy Reform Coalition, a lead proponent of the bill said this in response,
“Virginia legislators proved today that they are finally ready to consider a post-monopoly energy market in Virginia. Thanks to the bipartisan leadership of Democratic Del. Mark Keam and Republican Del. Lee Ware, lawmakers broke through what once seemed like an impossible barrier – considering Virginia’s energy market on the customers’ terms, not the terms of Dominion Energy.”
“Reforming our energy market into one in which customers are in control will lower prices, protect low-income communities, and unleash market innovation. We look forward to working with legislators and stakeholders in the coming months to ensure that legislation to power Virginia with a 21st-century energy market is as strong as possible. When the Commonwealth embraces a competitive energy market, Virginia can start leading the pack towards a better energy future powered by lower energy rates, job growth, and innovation.”
Del. Keam described the bill as a “pro-consumer, pro-competition, and a good governance” measure. Former economic advisor to FERC Chairman Pat Wood Rob Gramlich also spoke in support of the bill.
This is the third of a five-part series exploring oversupply in the power sector and the factors driving a glut of natural gas-fired power plants.
When Dominion Energy Virginia decided in 2012 to convert two units of its coal-fired Bremo Bluff power station to burn natural gas, it pledged that the conversion at the Fluvanna County plant would save customers $32 million compared to the cost of building new gas-fired generation and $155 million compared to continued operation on coal.
Those benefits never materialized. Instead, in December 2018, four years after the conversion was completed, the company known legally as Virginia Electric and Power Co. placed the Bremo units in “cold reserve” along with several other generating units, idling more than 1,200 MW in total, nearly three-quarters the size of Virginia’s largest power plant, the North Anna Nuclear Generating Station. And earlier this year, Dominion Energy Inc. executives announced they would permanently shut down the idled Bremo Bluff units.
But despite a dramatic fall in power prices and its decision to mothball a significant portion of its generating fleet, Dominion continues to add more natural gas generation capacity.An examination of State Corporation Commission, or SCC, records; Dominion’s past integrated resource plans, or IRPs; campaign finance documents; and independent reports, along with interviews with utility analysts and environmental advocates and statements from Dominion officials, shows that the company has consistently over-forecast electricity demand to justify building new capacity, primarily natural gas plants with dubious economics that will ultimately be paid for by ratepayers.
The utility said it plans to add at least eight new natural gas-fired plants, totaling nearly 3,700 MW, by 2033, according to its 2018 integrated resource plan,. An update to the IRP outlines three alternatives that call for adding 2,425 MW of natural gas-powered combustion turbine capacity by 2044.
That is on top of two large gas plants that recently came online: the Brunswick County Power Station, which started up in April 2016, and the Greensville Power Station, brought online in December 2018. Together, those two plants total more than 3,000 MW of new gas-fired generation capacity and cost more than $2 billion to build.
The proposals come as electricity demand in Virginia grew less than 1% from the Great Recession of 2007-2008 through 2017, according to the U.S. Energy Information Administration, and is projected to remain essentially flat for at least the next decade. In an era of little to no demand growth, when it is already removing plants from service long before their planned retirement dates, Dominion continues to add thousands of megawatts of new gas-fired capacity. And since it is a regulated monopoly, the company continues to pass the costs of those plants along to its customers.
“Dominion is on a massive natural-gas building spree, having added five plants in the last 10 years,” said Will Cleveland, an attorney for the Southern Environmental Law Center who has represented the group in proceedings before the SCC involving Dominion for several years. “Their forecasts have consistently and inaccurately over-predicted load. And when the commissioners ask ‘What are you doing to fix it?’ the answer is ‘Nothing.'”
Dominion Energy spokeswoman Audrey Cannon said the company is “investing in natural gas because it’s a great partner for renewables.”
Natural gas “helps fill in the gaps when the sun isn’t shining and the wind isn’t blowing,” Cannon said in a Nov. 1 email response to questions about the company’s resource plans. “Renewables alone don’t have the capacity to meet the peak demand of our customers. That’s why a diverse energy mix — including solar and wind as well as natural gas and zero-carbon nuclear energy — is critical to serving our customers reliably and affordably.”
Now, though, the era of untrammeled building by Dominion could be coming to an end.
In December 2018, the SCC rejected Dominion Energy Virginia’s proposed IRP, finding that the company’s forecasts “have been consistently overstated, particularly in years since 2012, with high growth expectations despite generally flat actual results each year.”
Dominion’s plan failed to model $870 million in energy efficiency programs and a battery storage pilot as required by a landmark 2018 state law known as the Grid Transformation and Security Act, the commissioners said. The regulators ordered the company to “correct and refile” the IRP and not to rely on its internal load forecasts in future IRPs.
In mid-January, the SCC also rejected about 90% of Dominion Energy Virginia’s proposed grid transformation plan, filed under the new law. The overall plan was “unsupported by the evidence,” the regulators said, and too costly for customers.
Meanwhile, a growing number of state legislators and other political officials have declared that they will no longer accept campaign contributions from Dominion, which for many years was the largest corporate contributor to political campaigns in the state of Virginia. The shift was underscored by the November general election, in which Democrats took full control of the Virginia General Assembly for the first time in 26 years.
“Dominion’s stranglehold on the Virginia state legislature is slowly loosening,” Harrison Wallace, Virginia director of the Chesapeake Climate Action Network Action Fund, said in a statement following the election. “Now it’s up to our leaders to put Virginia on the path to 100% clean energy.”
“Now, the times they are a-changing,” said former Virginia Attorney General Ken Cuccinelli, who served several years in the General Assembly and who is now the acting director of U.S. Citizenship and Immigration Services under President Donald Trump. “There’s a political price now to be paid on both sides of the aisle for just doing what Dominion wants. They don’t get to just say what they want and go get it. It’s a fight now. And it’s a fight with political costs.”
Cuccinelli, a Republican, has formed an unlikely alliance with left-leaning groups to fight Dominion’s power in the state, including Clean Virginia, founded by Charlottesville, Va., investor Michael Bills. Bills’ Clean Virginia has endorsed a slate of 61 candidates for the state legislature, most of them challengers to long-seated incumbents and all of whom have refused to accept money from Dominion.
“Our problem is not convincing people, it’s just educating them about the way the system is,” said Brennan Gilmore, executive director of Clean Virginia. “Once they realize Virginia is a place where a regulated monopoly can give endless amounts of money to politicians who then have to regulate it, they understand that that’s a fundamentally broken system and want to do something to fix it.”
Attorney General Mark Herring, a potential Democratic candidate for governor in 2021, has also pledged to no longer take campaign donations from state-regulated monopolies, including Dominion, based on the “lack of public trust” in government oversight that this creates. “That’s something that I think I could do to help restore the public’s trust,” Herring told the blog Blue Virginia.
The shift in pressure marks an abrupt turn of fortune for Dominion, which has long wielded considerable political power in its home state of Virginia. At the very least, it means that Dominion could face more resistance to new gas plants in the future.
Often, Dominion has used its influence to win regulatory approval for new power plants in Virginia, according to Cuccinelli. “I’ve been paying attention to this specifically since I got elected to the state Senate in 2002,” Cuccinelli said in an interview. “And sitting here talking to you more than 16 years later, I can’t name a time they didn’t basically get one of these requests granted. “If they had to go change the law to do it, they did it. Really without much trouble.”
Doubling down on gas
Dominion Energy’s portfolio includes 8,989 MW of operating natural gas capacity announced since 2000, according to S&P Global Market Intelligence data. In addition to at least 4,700 MW of new solar capacity in the next 15 years, all of the scenarios modeled in Dominion’s 2018 IRP involve the addition of eight new natural-gas-fired power plants by 2033, with a combined capacity of up to 3,664 MW.
To justify building these new plants and passing on the costs to ratepayers, Dominion has consistently produced load-growth forecasts that have proven to be overestimated — and that exceed those produced by PJM Interconnection, the grid operator whose territory includes Virginia and that has acknowledged that its own forecasts were overly optimistic for years.
In 2017, for example, PJM forecast that load growth in Dominion’s service territory would be relatively flat through 2032, reaching just over 20,000 MW. In its 2017 IRP, by contrast, Dominion said load would grow steadily, reaching nearly 25,000 MW by 2032. The difference equates to three major gas-fired plants the size of the 1,588-MW Greensville Power Station.
Justifying these aggressive forecasts, Dominion has claimed that growth in data centers in the state, which has become a major hub for online traffic, will dramatically increase electricity demand.
“Data centers are just an unbelievable growth machine for us,” former Dominion Energy Executive Vice President and CFO Mark McGettrick said on a May 2017 earnings call. At the time, Dominion said data centers made up about 18% of the company’s commercial load. In August 2017, Dominion Energy Chairman, President and CEO Thomas Farrell II said higher electricity sales to data centers and residential customers, along with increased defense spending, would support electric sales growth of at least 1% annually.
Tech companies, however, have questioned those assumptions, and they have pursued plans to purchase renewable energy for their facilities. In a September 2018 letter to the SCC, a group of data center operators, including eBay Inc. and salesforce.com inc., said the need for electricity from conventional power plants will dwindle as the data industry becomes more energy-efficient and shifts toward renewable energy. Many of the largest owners of data centers in the state, including Amazon.com Inc. and Microsoft Corp., have committed to 100% renewable energy, and access to renewable energy “is a significant factor in deciding whether to locate or expand new data centers within the Commonwealth,” the letter stated.
Nevertheless, Dominion continues to defend its forecast models, which show demand increasing into the foreseeable future.
“We find our forecasts have been much closer to the actual figures than the other models,” Dominion spokesman Rayhan Daudani said in an interview. “In the long term, the type and amount of generation resources might get realigned to meet the load, but solar along with gas-fired power stations remains the best option for our customers for reliability and cost.”
A flaw in the scheme
As Virginia’s political winds shift, Dominion continues to be one of the most profitable U.S. utilities. According to data compiled by S&P Global Market Intelligence, Dominion ranks second among U.S. utilities in terms of recurring EBITDA margin, just behind NextEra Energy Inc.
Like many regulated utilities, Dominion makes money not only by selling electricity but also by building new plants. While 19 states have decoupled power generation from transmission and other utility operations, Virginia remains vertically integrated, allowing Dominion to be paid in full for new capacity, including an approved profit. For a plant that costs $1 billion to build, for example, customers could pay up to $3.5 billion over the facility’s 40-year life after financing costs and utility returns are included, according to an analysis by Tom Hadwin, a former utility executive who now acts as a pro bono consultant to the Southern Environmental Law Center and other organizations.
“This amount will be recovered from ratepayers regardless of how much the unit runs and whether it does so profitably,” said Hadwin. “This is a major flaw in Virginia’s regulatory scheme and families and businesses will pay a heavy price for it,” he added. “Dominion is proposing thousands of MW of additional generation beyond what its demand requires in order to cash in on this.”
In the case of the Greensville Power Station, Dominion was cleared to make an initial 9.6% return, eventually lowered to 9.2%, under a rate adjustment clause that added about 75 cents a month to a typical customer’s bill — despite the rate freeze that was enacted in 2015.
The Greensville project generated fierce opposition from environmental and ratepayer groups, which argued that the utility had not considered alternatives such as solar power and energy efficiency measures.
The SCC, however, not only found that the company “undertook serious and credible efforts” to investigate non-fossil-fuel options, but also granted the rate adjustment clause to boost Dominion’s earnings. Such adjustment clauses have been attached to each of the large natural gas plants constructed or developed by Dominion in recent years.
In addition, ratepayers across PJM’s territory pay for those plants to be online and available for dispatch. That revenue also flows to Dominion, which uses it to offset customers’ bills through various bill adjustments.
“The revenue from the energy sales to PJM is a credit to our customers in the fuel factor,” Dominion spokesperson Audrey Cannon said in an email. “In other words, all revenue we receive from selling energy into PJM is passed on dollar-for-dollar to our customers each year.”
The revenue the company receives from its capacity sales is “netted out against the cost” of capacity purchases, Cannon said, and the net revenue, whether positive or negative, is passed on to customers through base rates.
PJM does not make capacity payments to individual generators public, but S&P Global Market Intelligence estimates those payments based on information published by PJM, including the resource listing (i.e., available generators), peak credits (adjustments to generator capacity to reflect peak summer availability) and cleared prices. Assuming that all Dominion resources cleared the 2018 auction, S&P Global Market Intelligence estimates that its 14 gas plants, totaling 9,700 MW of summer capacity, received $381.6 million from the capacity market. That would represent about 33.2% of the total revenues those plants received by selling electricity.
Recent pushback at the SCC and in the legislature indicates that the interests of customers, along with environmental considerations, are starting to carry more weight in Virginia. After Democrats gained control of both houses of the Virginia legislature, a group known as the Virginia Energy Reform Coalition said it is “paramount” for newly elected leaders to work on “replacing the current monopoly structure that electric utilities have abused for too long.”Still winning
Still, Dominion continues to win its share of battles in Richmond.
In late June, the SCC approved Dominion’s revised long-term resource plan but raised concerns that it “may significantly understate the costs facing Dominion’s customers.”
Under the approved plan, an average residential customer will pay an additional $29.37 on their monthly bill by 2023, the regulators said. That is a 26% increase from January 2019.
The IRP calls for Dominion to build eight gas peaker units, totaling 3,644 MW of new gas generation capacity. Those plants are slated to come online between 2022 and 2033, meaning they will still be producing power well past midcentury — or they will be idled earlier, just like the plants Dominion shut off in 2018.
In any case, customers will be still be paying for them.
Dominion Energy’s newest plan for a renewable energy package that environmentally conscious customers can buy is causing some big businesses, including Walmart, to push back against what they call “an unattractive offering.”
Why? Companies and an industry group that represents some of Virginia’s and the nation’s largest employers have two complaints. First, the portfolio of renewable energy resources assembled by Dominion includes numerous carbon-emitting facilities, some decades old, including one in Southwest Virginia that derives 93 percent of its energy from coal and is listed by Dominion on its website as a coal asset.
Second, if the utility succeeds in winning approval for its plan, that will deal a blow to the state’s fledgling renewable energy market, leaving nowhere else for most customers in the commonwealth to turn if they want to buy renewables.
“Now is the time to foster innovation and development of renewable energy options, not stifle it,” Lisa Perry, Walmart’s senior manager of energy services, wrote in testimony filed this October with the State Corporation Commission, the regulatory body that will weigh the merits of Dominion’s proposal later this fall.
This isn’t the first time Dominion, which, as Virginia’s largest utility, controls about two-thirds of the state’s electric customers, has proposed a renewable energy package for customers. (In Virginia, the offering is formally called a “renewable energy tariff,” and Dominion has labeled this particular plan Rider TRG, short for “Total Renewable Generation.”) The utility also floated plans for two green offerings in 2017. One was denied by the SCC, while the other was withdrawn by Dominion after the commission approved a package proposed by the state’s other major utility, Appalachian Power Company.
Unlike Dominion’s current proposal, however, the 2017 plans didn’t specify exactly where the renewable energy bought by customers would come from. Under the first, the company would have bought renewable energy through power purchase agreements with “existing or new facilities” while also developing its own fleet of renewables. Under the second, the company intended to craft a portfolio made up of “a combination of hydroelectric, wind and new solar (i.e., constructed after 2017) resources.”
The utility’s most recent proposal diverges from that approach, identifying a portfolio of 14 specific facilities that will supply program customers with renewable energy. Eight are solar, either owned by Dominion outright or with which the utility has a contract to purchase power. Two others — the Roanoke Rapids and Gaston power stations, which began operations in 1955 and 1963, respectively — are hydroelectric.
And four, the most controversial of the bunch, are associated with biomass. Besides the Altavista, Hopewell and Southampton stations, which began burning coal in 1992 and were converted to burn biomass in 2013, the portfolio includes the Virginia City Hybrid Energy Center in Wise County, which started operations in 2012 and can produce a maximum of 20 percent of its energy from biomass (with the other 80 percent generated by coal).
Technically, under Virginia law, all of these sources are considered renewable. The state’s definition of renewable energy is expansive, including energy derived from biomass, “sustainable or otherwise,” even if it is produced at a facility that also burns fossil fuels like coal.
But while opponents of Dominion’s renewable energy plan acknowledge that its portfolio is in line with the letter of the law, they argue in SCC filings that the proposal’s mismatch with state goals of encouraging development in renewables means that it falls well short of what customers seeking to buy clean energy are looking for.
Virginia’s changing definition of renewable energy
2007: “Renewable energy” means energy derived from sunlight, wind, falling water, sustainable biomass, energy from waste, wave motion, tides, and geothermal power, and does not include energy derived from coal, oil, natural gas or nuclear power.
2008: “Renewable energy” means energy derived from sunlight, wind, falling water, sustainable biomass, energy from waste, municipal solid waste, wave motion, tides, and geothermal power, and does not include energy derived from coal, oil, natural gas or nuclear power.
2009 (current definition): “Renewable energy” means energy derived from sunlight, wind, falling water, sustainable biomass, sustainable or otherwise, (the definitions of which shall be liberally construed), energy from waste, municipal solid waste, wave motion, tides, and geothermal power, and does not include energy derived from coal, oil, natural gas or nuclear power. Renewable energy shall also include the proportion of the thermal or electric energy from a facility that results from the co-firing of biomass.
“Customers are participating in utility programs to drive additional renewable energy deployment, to lower emissions, and to demonstrate leadership,” wrote Caitlin Marquis, a director of energy industry trade association Advanced Energy Economy, in testimony opposing Dominion’s proposal to the SCC. “Providing financial support to existing projects that are more than 15 years old and to emitting resources — including a seven-year-old coal plant co-fired with biomass — is inconsistent with customers’ motivation and objectives.”
Of the case’s players, none have taken as firm a stance as Walmart, which Perry says will not participate in Dominion’s program if approved by the SCC, even though the retailer has set an ambitious target of supplying 50 percent of its energy needs from renewables by 2025.
“The program fails to meet our expectations as a customer because it offers a product that only results in additional costs to Walmart and does not allow Walmart to realize the benefits (or the costs) of opting to be served by renewable resources,” she wrote.
Just what do businesses want out of a renewable energy program? Bryn Baker, director of policy innovation for the Renewable Energy Buyers Alliance, an industry group that counts leaders from corporate titans like General Motors, Google and Amazon on its board of directors and is opposing Dominion’s proposal, pointed to the Corporate Renewable Energy Buyers’ Principles as a guide.
First formulated in 2014, these principles include such goals as “greater choice in procurement options” and “access to new projects that reduce emissions beyond business as usual.” And, according to Baker’s testimony, Dominion’s renewable energy proposal isn’t in line with them.
Key among her criticisms are that the plan relies on facilities that already exist — and in some cases have been operating for decades — rather than incentivizing the development of new renewable facilities, and that it relies on the largely coal-fired Virginia City plant.
That facility, SCC filings show, has never operated without burning coal.
“There is not a single second where [Virginia City] operates 100% on biomass feedstocks; whenever electric power flows out of [the facility], it is necessarily combusting coal,” argued William Cox, CEO of energy policy analysis firm Greenlink Analytics in testimony for Appalachian Voices, which is also opposing Dominion’s application.
On financial grounds, too, opponents argued that Dominion’s plan — which charges a premium of about 3.6 percent above the typical cost of service — also falls short.
“The costs of renewable technologies have dropped dramatically and zero-emission resources like wind and solar operate are now cost-competitive with existing fossil-based supply,” testified Travis Wright, vice president of energy and sustainability for data center developer QTS Realty Trust, on behalf of REBA. “In these economic conditions, rational commercial consumers are no longer willing to pay a premium cost for renewable energy without receiving a premium level of benefit.”
A Dominion spokesman did not respond to a request for comment for this story. Spokespeople have previously said that they have a policy of not speaking with the Virginia Mercury.
As the case rolls toward its Nov. 21 hearing, stakes are high. Renewable energy is increasingly big business in the U.S., and Virginia, with its burgeoning pool of data centers hungry for energy and close proximity to the nation’s capital, is a desirable market.
But the state’s uniquely complex regulatory structure has complicated development. As a semi-regulated state, Virginia allows few opportunities for businesses that are neither recognized monopolies nor electric cooperatives to sell energy within the commonwealth. One such exception is “100 percent renewable energy”: since 2007, licensed non-utilities have been permitted to sell such energy to customers as long as the monopoly utility isn’t also offering such a product.
There is, however, a catch: As soon as the utility receives approval to sell its own 100 percent renewable energy package, the market is closed, and no more non-utilities can begin offering such a product. Those that are already active can continue to serve their customers for the duration of their contract but can’t enroll anyone new.
It’s a scenario that played out recently in Appalachian Power Company’s service territory, where competition has been halted by the SCC’s approval of the monopoly’s own 100 percent renewable energy plan. And it’s one that the parties opposing Dominion’s tariff fear will come to pass in that utility’s territory, which has recently seen three non-utilities — known in this context as competitive service providers — begin offering renewable energy alternatives to customers.
Dominion has vigorously fought the advance of these companies and sought in the present case to speed up the commission’s proceedings, a move interpreted by competitive service provider Direct Energy, along with Costco and Advanced Energy Economy, as an effort to curtail CSPs’ enrollment of additional customers. Dominion argued that such arguments “lack merit” and that it would benefit the public interest to have the matter decided as quickly as possible; nevertheless, the State Corporation Commission denied the utility’s request to accelerate its deliberative process.
Although the window for competitive service providers to operate in Virginia remains open, further development would be stymied by commission approval of Dominion’s plan, Cox fretted in his testimony for Appalachian Voices: “Some opportunities to increase Virginia’s reliance on clean energy will be set back from day one by eliminating an option that competitively provide[s] 100% renewable energy to participating customers and replacing it with a utility construct that does nothing of the sort,” he contended.
Frank Lacey, a consultant for Direct Energy, also complained about the outcome that would result from commission approval of the utility’s tariff.
“Unfortunately,” he wrote, “the proposed tariff provides customers with only one option for a certain renewable energy service, taking away many other customer options.”
Other things to know about Dominion’s proposed renewable energy package
- Dominion’s proposal, known as Rider TRG, is explicitly modeled on the 100 percent renewable energy tariff proposed earlier this year by Appalachian Power Company and approved by the State Corporation Commission.
- The portfolio the utility has assembled is expected to meet “the capacity and energy requirements of approximately 50,000 residential customers or their commercial equivalent.”
- Customers will pay a premium “based on the prevailing market value of retail renewable energy” equal to about $4.21 per megawatt-hour. They will also pay a “balancing charge” designed to hold non-participating customers “substantially harmless.”
- The typical residential customer using 1,000 kilowatt-hours of energy who signs up to get 100 percent renewable energy from Dominion would see an average monthly bill increase of $4.21.
- Customers who do not elect to participate in Dominion’s renewable energy program will see no increases in either rates or bills.
- A hearing on the application will be held before a hearing examiner at the State Corporation Commission Nov. 21.