Regulator recommends approval of Dominion’s renewable rate scheme, with conditions

By: - April 24, 2020 12:01 am

Dominion Energy’s Virginia City Hybrid Energy Center in Wise County, Va., 2019. (Sarah Vogelsong/Virginia Mercury)

A utility regulator is recommending that the State Corporation Commission approve a proposal by Dominion Energy to offer a renewable energy package opposed by a host of environmental and business groups — but only if Dominion can sign up at least 15,000 customers in six months.

The report released Tuesday is only a recommendation by Hearing Examiner Mary Beth Adams, but it provides an indication of how the commission, which has decision-making power, may approach the case’s key points.

The “green tariff” proposal has sparked broad interest since Dominion filed its application with the SCC last May for two key reasons: the energy portfolio it relies on includes power from a plant fired largely with coal, and if approved, the program could curtail further development of Virginia’s fledgling renewables market. 

Under a 2009 change to Virginia law, the proportion of energy produced at a co-fired electric power plant due to the burning of biomass was legally defined as “renewable energy,” even if the plant otherwise relied on fossil fuels.

In practice, that has meant that because about 7 percent of the fuel mix for Dominion’s Virginia City Hybrid Energy Center in Wise County is currently biomass, the utility can, per state law, declare 7 percent of the plant’s output to be renewable energy.

But the utility’s decision to include that energy in its renewable package sparked a backlash this fall, with opponents arguing that the plant has never operated without burning coal. 

“VCHEC’s energy output is not, and never is, 100 percent renewable,” wrote Will Cleveland, an attorney for the Southern Environmental Law Center representing Appalachian Voices before the State Corporation Commission, in a brief this winter. 

Overall, the portfolio is not “in line with what the vast majority of consumers who are looking for 100 percent renewable energy tariffs are looking for,” said Harry Godfrey, executive director of Virginia Advanced Energy Economy, a business group that advocates for renewables development.

Dominion, however, argued that disallowing the inclusion of the VCHEC energy would contradict the “plain language of the statute, as well as the policy determination made by the General Assembly concerning which resources qualify as ‘renewable energy’ in Virginia.”

In her recommendations, Adams agreed with the utility, noting that under Virginia code, the portion of the plant’s energy that comes from biomass “is eligible for inclusion” in Dominion’s renewable portfolio.

Nevertheless, she noted that “it is reasonable to believe that potential customers might be either confused by a 100 percent renewable offering that includes a generation facility that must burn coal to produce renewable electricity or resistant to pay a premium for renewable energy that is created in conjunction with coal combustion.”

Consequently, Adams offered the commission two alternative portfolios it might consider: one eliminating the Virginia City energy altogether, and another eliminating all plants fired with biomass, a fuel that is widely classified as renewable but still emits carbon. 

Dominion has previously said it is willing to see VCHEC eliminated from the portfolio, although it has not voluntarily proposed such an alternative.

Heightening the stakes in the case is another section of Virginia code that allows non-utility companies to sell 100 percent renewable energy only if the area’s incumbent utility isn’t selling such a product. 

Two such businesses, Direct Energy and Calpine, have made inroads in the commonwealth in recent months despite resistance from Dominion. If the utility’s green energy tariff is approved, those companies will no longer be allowed to sign up new customers for their service, although they will be permitted to keep their existing customers.

While Adams’ recommendations support approval of Dominion’s plan, the hearing examiner has suggested that the commission add a provision that appears to acknowledge the arguments by opponents that the utility’s proposal will not be attractive to customers but will prohibit them from seeking fully renewable energy elsewhere. 

Under this recommendation, Dominion would have six months to sign up at least 15,000 residential customers accounting for 100 megawatts of electricity, or see its program terminated.

Godfrey described the recommended provision as “a high threshold” that “shines a bright light unintentionally on just how arbitrary and overly complex our system has become.”

If the law prohibiting non-utilities from selling renewable energy didn’t exist, he said, “we wouldn’t need to have these sort of hoops laid out for the utility or any other participant to jump through.”

Dominion Energy spokesman Rayhan Daudani said the utility was “reviewing the hearing examiner’s report” and agrees with Adams’ view that the utility proposal “complies with the requirements of the statute.”

“We are a fully regulated state,” said Daudani, “not a deregulated state.”

The General Assembly showed some interest this session in revisiting the state law governing who can and cannot sell renewable energy in Virginia. Reversing an earlier decision, a late vote on a bill from Del. Jeff Bourne, D-Richmond, eliminated the provision barring non-utilities from selling fully renewable energy when the incumbent utility does, but the measure will not go into effect unless the legislature passes it again in 2021.

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Sarah Vogelsong
Sarah Vogelsong

Sarah is the Mercury's environment and energy reporter, covering everything from utility regulation to sea level rise. Originally from McLean, she has spent over a decade in journalism and academic publishing and previously worked as a staff reporter for Chesapeake Bay Journal, the Progress-Index and the Caroline Progress. She is the recipient of a first place award for explanatory reporting from the Society of Environmental Journalists and has twice been honored by the Virginia Press Association as "Best in Show" for online writing. She was chosen for the 2020 cohort of the Columbia Energy Journalism Initiative and is a graduate of the College of William and Mary. Contact her at [email protected]