When the Democratic-controlled Virginia Legislature passed the ill- named Virginia Clean Economy Act (VCEA) in 2020, it imposed on the Commonwealth the most radical electrical energy policy in its history. For the first time, it declared all solar and wind generation projects in Virginia to be “in the public interest” – a finding that had previously been the exclusive prerogative of the State Corporation Commission (SCC).
But even the removal of that essential pillar of consumer protection was not enough for Virginia Democrats. The VCEA also contained a mandatory schedule, called the Renewable Portfolio Standard (RPS), which laid out a precise time schedule for the construction of wind and solar generation facilities, combined with fines for Virginia’s electric utilities if they failed to abide by the timetable.
During the negotiations over the language of the VCEA, Dominion Energy initially balked at the renewable mandate and the RPS. But then, under pressure from Democrats and zealous environmental groups, it relented. Not only did it relent, but it also became a fierce advocate for the new regime. Why? Because it saw a pot of gold for enormous profits if it controlled the ownership and construction of what is unquestionably the most expensive and unreliable form of electricity generation on the planet – offshore wind.
Unlike the solar RPS mandate, which encouraged merchant promoters to build solar generation projects, Dominion made sure the VCEA would empower it alone to build, own, and operate all the offshore wind facilities required by the VCEA. As the late Thomas Farrell, then Chairman of Dominion Energy explained, this construction would require “billions and billions” of expenditures.
Billions of dollars, indeed. After first announcing that the cost of the offshore wind project would be $8 Billion, Dominion suddenly announced in November that the cost would jump 20% to $9.8 Billion, citing “commodity and general cost pressures”. You know – stuff happens.
For the first time in Virginia’s history, the SCC was effectively stripped of its Constitutional authority to protect Virginia consumers from exorbitant electricity rates. Moreover, Dominion Energy now has no incentive to minimize the costs of construction. In fact, it is just the opposite. As a “regulated” monopoly, Dominion is entitled to a statutory 9.2% return on all its equity expenditures for plant and equipment. Of course, this expenditure must be “in the public interest.”
Oh wait. It already is. The VCEA says so.
Which leaves the SCC in the position of re-arranging the deck chairs on the Titanic. The most it can do to protect consumers is determine the least bad of equally bad alternatives – whether the offshore wind expenditures will be really, really expensive and unreliable, or just really expensive and unreliable.
During this past legislative session, Virginia Republicans tried earnestly, with the help of CFACT, the Heartland Institute, and many others, to remedy this situation. Foremost among the bills introduced in this effort were HB 118, sponsored by Del. Nick Freitas (R-Culpeper), which would have resulted in a wholesale repeal of the VCEA, and HB 73, a more narrow bill sponsored by Del. Lee Ware (R- Powhatan), which would have removed the “in the public interest” language from the VCEA. Both bills passed the House of Delegates with 100% Republican support. Both, however, were also summarily dismissed by the Democratic majority in the Senate.
What Virginia electricity policy requires now is an examination of the differential in cost and reliability between the radical, risky, and uncharted path required by the VCEA, versus a simple expansion of the existing nuclear and natural gas assets already owned and operated by Dominion Energy and Appalachian Power.
In fact, this very analysis has already been undertaken by the Center for the American Experimant (CAE), which was retained for that purpose by the Suburban Virginia Republican Coalion. CAE has superb credentials in this area, having already performed similar analyses for the States of Minnesota, West Virginia, and North Carolina.
The results of the study are startling. Under the VCEA, grid expansion would cost $203 Billion. Under the alternative scenario, which CAE calls the “Reliable Resource Scenario” (RRS), the build-out cost would only be $15.5 Billion. The differential in utility profits is equally stunning. Utility profits under the VCEA would be $109 Billion. Under the RRS, just $15.3 Billion.
But the difference in electricity costs for the consumer is the most consequential finding of this analysis, The residential consumer under the RRS would see an increase of only $135 per year, but would suffer a whopping – and completely unacceptable – $2,300 annually under the VCEA.
It seems understandable now why Dominion has formed an unholy alliance with Democrats, the solar/wind industry, and environmental zealots. But as far as consumers are concerned, one word sums it up. They remain …. defenseless.