Renewable energy providers win skirmish against Dominion, but larger war drags on
August 23, 2019

Two renewable energy providers whose attempts to sign up Dominion Energy customers were halted by the utility in July won a victory Wednesday when the State Corporation Commission ordered the company to begin processing the enrollments immediately.

The order is the first decision by the commission in an ongoing battle between Dominion, Virginia’s largest regulated utility, and Direct Energy and Calpine, two competitive service providers seeking to sell “100 percent renewable energy” to customers including Kroger and Costco, both of which have joined the fight against the utility.

But while the commission’s ruling on the enrollments allows Direct Energy and Calpine to resume operations in Virginia, their fate will remain uncertain until the commissioners decide the outcome of a broader case determining what exactly “100 percent renewable energy” is and whether those companies are selling it.

That case, which was heard Tuesday, is a highly technical one, complicated by confusion over terminology (“This is just a mess,” one attorney involved was heard to mutter to a colleague during a break in court proceedings). But it is also a consequential one, watched on a national level, as an indicator of just how open Virginia will be to renewable energy businesses.

Under current state law, licensed competitive service providers, or CSPs, are permitted to sell customers electricity “provided 100 percent from renewable energy” in a regulated utility’s territory as long as the utility doesn’t also offer a fully renewable option.

Dominion doesn’t — yet. On May 31, it filed an application with the State Corporation Commission to establish a renewable energy tariff, regulator-speak for electricity entirely drawn from renewable sources that can be sold to customers as a product. As corporations increasingly seek to distance themselves from fossil fuels, such renewable energy products have become hot commodities.

In Virginia, the CSPs have another powerful appeal for some large corporations: they aren’t Dominion. Companies like Walmart and Costco have been vocal about their dissatisfaction with the utility’s rates and have sought — unsuccessfully, so far — to find other sources of electricity. The renewable energy loophole is an appealing exit.

Dominion, however, isn’t giving up its customers without a fight. The utility has challenged Direct Energy’s and Calpine’s right to enroll customers on the grounds that they don’t meet statutory requirements for serving the “full load” of customers with “electric energy provided 100 percent from renewable energy.”

According to a pre-hearing brief filed by Dominion, in order to be allowed to operate in Virginia, a CSP must demonstrate that it “controls sufficient generation resources to meet the customer’s full load requirements around the clock: not just each month, but each and every day and night during the month.”

At issue is not reliability — both Dominion and the CSPs acknowledge that there is no expectation CSP customers would experience interruptions to their electric service — but capacity.

When customers buy renewable energy, they aren’t actually buying the exact electrons generated by renewable facilities. Instead, their purchase ensures that a certain amount of renewable energy will be generated and fed into the electric grid. Consequently, renewable energy use is measured by matching the supply that flows into the grid (generation) with the energy that customers actually consume (load).

But because renewables, unlike fossil fuels, can’t generate energy continuously, the time frame in which the match is calculated makes a big difference. Even when multiple renewable sources are combined in a portfolio — as Direct Energy and Calpine have done — the amount of energy they supply may at times not meet the full customer load, triggering the need to channel energy from other sources into the grid.

To account for this reality, regulators in many other states rely on what is known as an annual matching standard: the requirement that annual average generation equal or exceed annual average load.

Virginia has taken a more stringent stance in prior cases, establishing a monthly matching standard for Appalachian Power Company’s renewable energy tariff in 2018. Direct Energy and Calpine contend that this standard is sufficient, and that they can easily demonstrate that they meet it through the contracts they’ve made with renewable generators.

Dominion, however, in the present case has pushed for even more rigorous proof of what it calls “renewable capacity” and an “hourly planning standard” — a concept that caused much confusion before the commission Tuesday and was labeled by Calpine attorney Brian Greene “a fancy name for an hourly matching standard.”

The State Corporation Commission previously had the option of setting an hourly matching standard in the Appalachian Power case but opted instead for a monthly standard. It did, however, note in its opinion that the decision “does not preclude other matching standards from also being found reasonable in specific instances.”

Dominion has said repeatedly that it is only seeking to uphold the letter of the statute, which attorney Harry Johnson told the commission Aug. 7 “put(s) the burden on Dominion to verify that enrollments are valid.”

“Dominion is protecting customers, and it cannot simply ignore attempts to provide what appears to be unauthorized service,” he said.

Calpine and Direct Energy both dispute that contention, arguing that Dominion is overstepping its authority and seeking to set the bar for Virginia’s CSPs so high as to prevent them from operating in the state.

Dominion, said Direct Energy consultant John Hanger, has “effectively usurped the role of the commission.”

State Corporation Commission Judge Mark Christie. (Photo by Ned Oliver/Virginia Mercury)

State Corporation Commission Judge Mark Christie. (Photo by Ned Oliver/Virginia Mercury)

“All of the other provisions that you are trying to shoehorn in here like renewable capacity are not in the statute,” he told the utility before suggesting, “Perhaps you should go to the General Assembly and get them to rewrite it the way you want it to read.”

Speaking on behalf of Costco, attorney Cliona Robb argued that not only is there “nothing remotely reasonable about Dominion’s hourly balancing standard,” but that if the commission were to adopt that standard, “what you will do is get rid of the sale of renewable energy in Virginia, you will not promote it.”

At times, even SCC Judge Mark Christie seemed skeptical of Dominion’s argument, at one point telling Greg Morgan, the utility’s general manager of regulatory affairs, “It seems like the standard you’re setting would be almost impossible for (the CSPs) to meet.”

Dominion says that it would not, and that, in the words of attorney Johnson, the statute is “very clear that it requires more than monthly matching to satisfy compliance.”

The commission has noted in an order that it intends to “rule promptly” on the case.