Virginia Clean Economy Act clears General Assembly, aided by beefed-up ratepayer protections

The Virginia Clean Economy Act cleared its last hurdle in the General Assembly this week when both the House of Delegates and the Senate agreed to a final version that reflected the more aggressive House timeline of making Virginia’s electric grid carbon-free by 2045 while also incorporating stronger protections for electric utility ratepayers. 

The bill, SB 851, heads to the desk of Gov. Ralph Northam, whose administration has been heavily involved in pushing it forward. 

Sen. Jennifer McClellan, D-Richmond, the Senate patron of the bill, called the passage “a major historic moment” that will “break our reliance on fossil fuels.”

“I kept thinking the entire time we were voting about the moon landing and wanted to shout, ‘The eagle has landed!’ on that final vote,” she said at a news conference Friday. “That’s how big this is. This is a giant leap forward for Virginia.”

The landmark bill was described by numerous advocates as the most progressive climate legislation to come out of the South, the product of statewide elections that swept Democratic majorities intent on addressing climate change into both chambers of the legislature. 

“Our policy at this time is in the same realm as California, Washington and Colorado. Those are Virginia’s peers,” said J. R. Tolbert, managing director of clean energy business group Advanced Energy Economy, which was closely involved in the drafting of the VCEA, shortly after Senate passage of the bill. “Ten minutes ago, our peers were Alabama and Mississippi.”

Karla Loeb, chief policy officer of Charlottesville-based Sigora Solar, a member of the executive committee of the national Solar Energy Industry Association and a participant in the sprawling coalition that negotiated the omnibus legislation, said that by passing the VCEA in a single legislative session, Virginia had charted a different course than that taken by other states.

“Every other state’s been iterative,” she said, while Virginia has gone from “zero to 100 overnight.”

“Six months ago,” she reflected, “not a single person in the country thought this was possible.”

That speed, however, while alarming to many Republicans and some younger Democrats in the House committed to a more aggressive “Virginia Green New Deal” that caucus leaders never brought to a vote, was a deliberate choice, the bill’s patrons said Friday morning.

“There was the argument that we were moving too fast and we should wait,” said House sponsor Del. Rip Sullivan, D-Fairfax, as he spoke to reporters with McClellan. “My view was, and I think the senator’s view as well, was this was the year that we needed to get started.”  

A delicate balancing act

The passage of the Clean Economy Act, which cleared the House Thursday on a 51-45 vote and the Senate Friday on a 22-17 vote, represented the end of a session-long push by clean energy and environmental groups to reach a compromise acceptable to the state’s powerful electric utilities, Dominion Energy and Appalachian Power Company, as well as some key legislators, many of whom have deep financial and political ties to Dominion. 

Over the past two months, the central pillars of the bill have remained unchanged: an ultimate goal of making the electric grid carbon-free by midcentury, ambitious targets for solar and wind development, binding standards for utilities’ renewable energy portfolios and energy efficiency, and loosened restrictions on distributed generation like rooftop solar. 

Hammering out exactly what the timelines and targets would be, though, proved a thorny task, one mostly conducted behind closed doors.

Republicans remained largely opposed to the bill, voicing concerns about its effect on the state’s newest coal plant, Dominion’s Virginia City Hybrid Energy Center in the coalfield county of Wise, and on ratepayers.

A late concession to the Southwestern delegation that will allow the eight-year-old VCHEC to stay open until 2045 instead of closing in 2030 as an earlier version of the bill called for garnered Democrats one Republican vote in the House. Del. Terry Kilgore, R-Scott, said he had been willing to offer his support in exchange for a longer life for the plant, which is a significant contributor to Southwest Virginia’s struggling economy. 

“The important thing to me is VCHEC,” said Kilgore Friday. “Without those dollars, we would lose jobs, we would lose teachers — just fill in the blank.” 

The ratepayer concerns proved harder to assuage. Not only Republicans but some Democrats worried that the huge buildout of renewables directed by the Clean Economy Act, which includes 16,100 megawatts of solar, 5,200 megawatts of offshore wind and 2,700 megawatts of energy storage, will push electric bills to unsustainable levels. 

Most misgivings centered on the offshore wind component, particularly language that allows Dominion to build more than half of that, in line with its plans to independently develop the country’s largest offshore wind farm off the coast of Virginia Beach. 

That, many lawmakers pointed out, will produce a financial windfall for the company’s shareholders, who are guaranteed a return on the estimated $8 billion project, while also adding what the State Corporation Commission has calculated to be an extra $11 to $12 to the average residential customer’s monthly bill. 

Overall, the SCC’s last estimates project that the VCEA will add almost $28 to the average monthly bill by 2027-2030, although advocates strongly dispute those numbers on the grounds that the agency analysis did not include key factors such as fuel and energy efficiency savings.

An independent cost impact study by clean energy consultancy 5 Lakes Energy commissioned by Advanced Energy Economy found that the law would reduce monthly bills by about $3.40. Other modeling commissioned by the Northam administration found that the combined impacts of that legislation and another law that will join Virginia to the cap-and-trade market of the Regional Greenhouse Gas Initiative will reduce monthly residential bills by 71 cents by 2030, according to Northam Press Secretary Alena Yarmosky.

Shadowing the debates over the legislation’s true costs was suspicion among many Democrats that the Clean Economy Act is another financial gift to Dominion, an accusation that has dogged the proposal since its inception. 

Del. Lee Carter, D-Manassas, on the House floor Thursday, said the utility is “in my opinion taking advantage of this new majority’s desire to do something for the environment, and they are using that as a way to gouge the citizens of this commonwealth.”

So strong were the concerns that they briefly threatened to derail the tenuous compromise reflected in the final bill Thursday after Democratic Del. Sam Rasoul of Roanoke, the chief patron of the failed Virginia Green New Deal and one of the most outspoken critics of the VCEA, proposed last-minute amendments that would have lowered the cost cap placed on Dominion’s offshore wind project.

The unexpected passage of the amendments sparked a panic among the VCEA’s coalition, which throughout its long negotiations has used offshore wind as a carrot to get the utilities onboard with more aggressive energy policies that they have long resisted, like beefed-up energy efficiency targets and the expansion of distributed solar.

“Wind has become the boogeyman in this bill,” a visibly angry Sullivan told the chamber Thursday before describing Rasoul’s amendments as a “poison pill” that “will not improve the bill” but would “make it dramatically worse.”

A re-vote ultimately scuppered the 11th-hour changes, but the flap cost Democrats at least one vote, that of Del. Mark Keam of Fairfax, who told the Mercury he took “very strong personal offense at the way my own caucus members, especially the leadership members, dealt with one of our rank-and-file members in an effort where one of our members was trying to improve the bill.” (Keam did not cast a vote on the legislation.)

“I’m glad it passed,” Keam said. “I think it’s better than not having a bill, and it certainly does move the needle a lot. But if [Sullivan] had to literally throw language to Terry Kilgore to pick up his vote in order to get 51, as opposed to getting 55 Democratic members, that tells you that the bill was not as strong as it could have been.”

The political clout of ratepayer protections

But while some Democratic lawmakers remained unsatisfied with the final product, others found its inclusion of more robust ratepayer protections sufficient to garner their support.

Many of the final changes to the bill focused on beefing up State Corporation Commission oversight of utility renewable energy projects and their costs, tightening cost caps and expanding the pool of projects deemed to be in the public interest to third-party projects whose energy is purchased by a utility.

“The bill was always good on climate, the question was, ‘What was the cost?'” said Will Cleveland, an attorney with the Southern Environmental Law Center who was closely involved in crafting the VCEA. And the House, he pointed out, “spoke very clearly about ratepayer concerns.”

“The VCEA removes a number of long-overdue barriers to clean energy construction in Virginia, and that work needed to be done this session,” said freshman Del. Sally Hudson, D-Charlottesville. But, she cautioned, “We’d be lying if we said we didn’t swallow a lot of undue costs to consumers, and I know there are several legislators who will be coming back with that work at the top of their list.”

At least two have openly expressed such a desire. Freshman Del. Josh Cole, D-Spotsylvania, told colleagues that “next session, when we come back we still have to fight to protect our ratepayers.” And across the aisle, Republican Del. Lee Ware of Powhatan, who with Democratic Del. Jay Jones of Norfolk tried without success this session to increase SCC oversight of Dominion’s 2021 rate review, told the Mercury he intends to continue his efforts on behalf of ratepayers next year.

The final VCEA, he said, does “reflect an effort toward ratepayer protection, and I will acknowledge that, but I just don’t think it’s enough.”

Ultimately, what may have tipped the scales in favor of the VCEA was not a provision in that bill at all, but a piece of legislation sponsored by another freshman Democrat, Suhas Subramanyam of Loudoun.

That measure, HB 528, is a ratepayer protection measure that restores authority to state regulators to set the cost recovery schedule for utility plant retirements, sidestepping a 2018 law that let the utilities amortize retirement costs in a single year rather than over a period of time, thereby reducing the pool of overearnings they might have to return to customers. 

The passage of that bill by the more utility-friendly Senate played a critical role in counterbalancing some House Democrats’ concerns about the ratepayer impacts of the VCEA, Hudson said. The House several times delayed its vote on the Clean Economy Act until after the Senate had approved Subramanyam’s bill, a thumbs up that cleared the path for the omnibus legislation to move forward.

“The Senate can hold a line,” Hudson said. “But the House can too.”

McClellan pledged to continue monitoring the protections built into the VCEA as the year progresses.

“If we see that the consumer protections that are in there now aren’t sufficient, we have time to fix that,” she said. “We meet every year, so if we need to make adjustments, we can.”