At Senate panel, a clash over the costs of shifting away from carbon

The Virginia Clean Economy Act, the Democrats’ energy omnibus bill designed to achieve Gov. Ralph Northam’s goals of reducing Virginia’s carbon emissions to zero by 2050, sparked sharp questions from senators Sunday over how the costs of shifting away from carbon should be calculated.

“You can’t do this stuff for free,” said a visibly irritated Senate Majority Leader Dick Saslaw, chair of the powerful Commerce and Labor Committee, at an unusual Sunday meeting designed to clear the Senate’s legislative decks before the crossover deadline Tuesday. “Everybody says that we’ve got a climate problem, and you know, you can’t fix the climate problem for free. You all need to understand that.”

Saslaw’s comments were addressed to Kimberly Pate, director of the Division of Utility Accounting and Finance for the State Corporation Commission, the body that regulates all electric utilities in Virginia. But while they reflected an ongoing tension between the legislature and the SCC over who should take the reins in energy decision-making, they also touched on a question increasingly troubling governments forced to grapple with the consequences of climate change: What are the costs of doing nothing?

The SCC estimates that the Clean Economy Act, which is being backed by a coalition that includes the renewable energy industry, environmental groups and Virginia’s two electric monopolies, will cause the average electric ratepayer’s bill to increase by at least $23.30 per month by 2027-2030. Annually, customers would see a roughly $280 jump in their bills.

According to the SCC, the majority of that increase will come from the buildout of 5,200 megawatts of offshore wind and 16,100 megawatts of solar, both of which the legislation would declare to be in the public interest. 

Some legislators seemed skeptical of those numbers: Sen. John Bell, D-Loudoun, in particular questioned Pate about the SCC’s decision to not include estimated fuel savings in its calculations of the offshore wind component of the cost.

“The problem is the fuel savings may or may not occur. And so we have not quantified that,” said Pate. 

In an email to the Mercury, SCC Division of Information Resources Director Ken Schrad pointed to the uncertainty surrounding the offshore wind units’ capacity factor, a measurement that compares how much energy a unit actually produces to how much it’s capable of using.

“All of the risk is on the ratepayer. If the project does not generate electricity at its expected capacity factor, the utility company will have to purchase power from the wholesale market or construct backup generation (i.e. — gas-fired generation),” Schrad wrote. “Purchased power and fuel costs are recovered through the fuel factor. So, while (Dominion Energy) claims the possibility of fuel savings, staff cannot quantify what those savings might be because of the unknown capacity factor of offshore wind.”

Fuel savings aren’t the only variable that Clean Economy Act backers claim were incorrectly omitted from the cost analysis.

Virginia Advanced Energy Economy Executive Director Harry Godfrey, one of the key players involved in drafting the legislation, told the Mercury the commission had also failed to take into account ratepayer savings from such provisions as binding energy efficiency targets and investments, cost caps and a rate relief program for low-income customers. 

“I don’t know that they have considered any of this,” he said. 

Disagreements between the SCC and other officials on energy costs are not uncommon. Last spring, the commission and the Department of Environmental Quality quarreled over the cost to Virginia of joining the Regional Greenhouse Gas Initiative, a cap-and-trade agreement between 10 states that aims to reduce carbon emissions. The SCC estimated the average customer would see their bill rise by $7 over 25 years; DEQ said joining the market would decrease monthly bills by about 54 cents.

The SCC’s current estimate of the costs of RGGI membership, according to the analysis presented by Pate Sunday, is a $2 to $2.50 increase in the average customer’s monthly bill.

At Sunday’s meeting, however, lawmakers’ criticism went beyond whether fuel savings should or should not be included in the financial impact estimate, with Sen. Scott Surovell, D-Fairfax, questioning whether the very foundation of the SCC’s analysis was sound.

“You all do this analysis every time, and all you focus on is the cost you can identify on a bill,” he said. “If you all quantified what the cost of however many more Virginians are going to have asthma or cancer, or what happens when Norfolk goes underwater, or all the other costs that we continue not to count of puffing carbon in the atmosphere — do you all ever look at that when you make these decisions?”

“That is not the charge of the commission,” Pate responded. “We are an economic regulator. We look at the applications before us … and we analyze the costs there and what the impact is on customer bills. That is what the commission does.”

If the Clean Economy Act is passed, that may change: among the many provisions of the 75-page bill is one that would require the SCC to consider the “social cost” of carbon in evaluating new generation facilities. That, said Godfrey, could begin “to rebalance the equation and analysis” of what energy proposals cost.

The Clean Economy Act passed Senate Commerce and Labor on a 12-3 party-line vote. A House version of the legislation advanced to the floor last week.