Competitive suppliers’ attempt to reopen Virginia’s renewable energy market faces tough utility opposition

A bill that would let millions of electric customers in Virginia again begin purchasing renewable energy from companies other than the utility that controls their territory cleared the House of Delegates last week but now faces a Senate committee that struck the proposal down in 2020. 

“The Senate oftentimes is a higher hurdle to get over,” said Del. Jeff Bourne, D-Richmond, the sponsor of House Bill 2048. “I think we’ve got a puncher’s chance, right? So we’re going to go in and give it all we got.” 

Bourne’s bill targets a provision of state code that allows licensed third-party suppliers to sell “100 percent renewable energy” to customers in utility territory as long as the utility isn’t offering the same product. On the books since 2007, the law was rarely used until relatively recently, when renewables prices began to fall and more Americans began to shy away from carbon-emitting fossil fuels. 

Increasingly, corporations were also looking to renewable energy, both for cost savings and to meet sustainability targets attractive to investors. In 2016, one group of 18 heavy-hitters including Best Buy, Microsoft, Nestle and Walmart wrote a letter to the State Corporation Commission, which regulates Virginia utilities, asking for “an explicit legal framework” that would give companies the choice of getting renewable energy from either the reigning utility or a third-party supplier. Businesses like Costco were also looking to other loopholes in state law that would let them get out of having to buy electricity from Dominion Energy, which they said was overcharging them.  

With demand on the rise, non-utility companies like Direct Energy, Calpine and Constellation took advantage of the renewable energy provision of state code and began signing up customers. According to numbers from the Virginia Energy Choice website funded by Direct Energy and Vistra Energy, 12,000 businesses switched from Dominion to renewable energy suppliers between September 2019 and July 2020, with another 6,800 in the queue at that time. 

Facing the loss of customers, Dominion in particular fiercely resisted the incursion, and in May 2019 started the process of setting up its own renewable energy service, often colloquially called a green tariff. 

Appalachian Power had a program on its books that started in 2019, and regulators approved Dominion’s in July 2020, despite an outcry from businesses unhappy with the tariff’s inclusion of energy from facilities fueled by biomass and, in the original proposal, mostly coal. That approval triggered what Bourne calls a “kill switch” in state code: Once the utility offers renewable energy, the renewables market is shut down. Third-party suppliers can keep their existing customers but are barred from signing up new ones. 

The competitive energy companies have fought back. In 2020, they backed a version of Bourne’s bill that would get rid of the kill switch. That law cleared the House but died in the Senate Commerce and Labor Committee, which has long been viewed as friendly to Dominion and is chaired by Senate Majority Leader D-Saslaw, a major recipient of Dominion campaign contributions. 

Then, unexpectedly, the bill was revived in the final weeks of the 2020 session. Although Dominion had railed against the measure in prior hearings, the utility lodged no objection to its resurrection, which came with a condition: to go into effect, the law had to be passed again in 2021. 

This year’s House Bill 2048 is largely the same as the 2020 proposal, with the addition of a provision that would require the renewable suppliers to propose discounted service to low-income households. 

A host of businesses is backing the change, many of them strange bedfellows. On the business side, companies like Kroger, Walmart and Target have joined with groups like the Southern Environmental Law Center and Conservatives for Clean Energy. 

“This legislation is overall a good bill for business and will allow grocery stores to meet sustainability goals that they’ve set for themselves,” Parker Slaybaugh, executive director of the Virginia Food Industry Association, told delegates during one hearing on the bill.

The renewable supply companies have also been pouring money into campaigns: According to the Virginia Public Access Project, Direct Energy contributed $23,750 to lawmakers, mostly during the fall of 2020. Most of the recipients were Democrats, including Bourne, but the company also targeted a handful of sympathetic Republicans, including Sen. Richard Stuart, R-Stafford, Sen. David Suetterlein, R-Roanoke County, and Del. Tony Wilt, R-Rockingham. 

So far, Bourne has seen some success: On Friday, his bill cleared the House on a bipartisan 67-32 vote. Opposition in House committees from both Dominion and Appalachian Power, however, signals a rough road ahead in the Senate. 

The utilities have returned to the arguments they made against the measure in 2020, casting the bill as a dangerous foray into deregulation that will result in the shifting of costs from customers that leave the pool to those that remain. 

Asked why Dominion didn’t oppose the bill going forward with a reenactment provision in 2020 but does now, Dominion spokesperson Rayhan Daudani directed the Mercury to comments made by John Rust, a utility lobbyist and former state delegate, before a House subcommittee on energy on Feb. 1. 

“What this bill does with regard to renewable energy, which is becoming a major source in our system, is take that into deregulation,” Rust said. “That’s not healthy for Virginia. It’s going to result in a series of spikes in (costs). It’s going to make the ability of the utility to generate the necessary electricity from renewables a question mark in the financing.” 

Daudani also added that the utility’s Virginia customers “pay rates more than 10 percent below the national average with very reliable service and an industry-leading clean energy portfolio.”

Bourne has pushed back on the cost-shifting argument. Customers who buy renewable energy from a competitive supplier continue to pay for distribution service, he has pointed out. 

“It seems to me to be a specious argument that if customers leave a particular market that costs are going to go up for the remaining folks who stay there. Because to me, the inverse has to be true … that if more people come to the market, costs should go down,” he said. “More and more customers are coming into Dominion’s service area … but costs aren’t going down. Customers are still paying the same, and what I would argue are too-high energy bills.”