With approval of Dominion’s renewables plan, is it a ‘new day’ or ‘business as usual’ for state regulators?

State regulators’ blessing of Dominion Energy’s first annual plan for how it will meet the ambitious renewables targets set by the 2020 Virginia Clean Economy Act has sounded the starting bell of Virginia’s race to decarbonize its electric grid by midcentury.

In rulings handed down April 30, the State Corporation Commission signed off on a set of proposals from the state’s two largest electric utilities, Dominion and Appalachian Power. Among the projects that received a stamp of approval were plans by Dominion to build three new solar farms and purchase large amounts of power from six independently-owned solar facilities. 

Clocking in at nearly half a gigawatt of power, the solar proposals will be capable of generating electricity for 125,000 homes. Dominion, which called them “a major step toward achieving the goals of the Virginia Clean Economy Act,” is already gearing up for more. 

“This next filing will be larger in scale,” Dominion chairman, president and CEO Bob Blue told investors last week, referring to the renewables development plan the company is required to file with the state this fall. And while this year’s filing relies primarily on power purchases rather than utility-owned renewables, “that will be different going forward,” he promised.

Passage of the Democrat-driven VCEA in 2020 made Virginia the first state in the South to commit to full decarbonization of its electric grid. The wide-ranging law had two key directives. First, it set annual targets for how much of Dominion’s and Appalachian Power’s energy load will have to come from renewables, with Dominion required to hit 100 percent by 2045 and Appalachian by 2050. Second, it ordered Dominion to propose 16.1 gigawatts of new solar and onshore wind generation by 2035, and Appalachian to propose 600 megawatts. 

From its inception, the Clean Economy Act was controversial. Nearly all Republicans voted against it, and candidates vying for the 2021 Republican gubernatorial nomination vigorously denounced the law on the campaign trail. Earlier this month E&E News reported that Glenn Youngkin, who was chosen as the party nominee in a convention this week, had described the law as “an energy policy that will fail Virginia” and a plan that “is not doable, affordable or good for Virginia.” 

Some Democrats also balked at the VCEA, citing concerns that without reforms to the state’s system of rate regulation, it handed a blank check to the politically powerful Dominion to make millions in profits off of building new generating assets at the expense of ratepayers. 

Since the law’s passage, Dominion has touted its financial potential to investors. 

“We believe we offer the largest, the broadest in scope, the longest in duration and the most visible regulated decarbonization opportunity among U.S. utilities,” Dominion executive vice president and chief financial officer Jim Chapman said during the company’s May 5 earnings call. Former company head Tom Farrell put it more succinctly in July 2020: “It’s tens and tens and tens and tens of billions of dollars over the next decade.” 

But despite these fears and the legislature’s decision to kill a package of rate reform proposals this winter, many clean energy advocates said they are cautiously optimistic about the first round of plans to implement the VCEA — and the oversight role that regulators have signaled they will take. 

The case marks one of the first consequential utility rulings to come before a revamped SCC. Of the three-person body only Judge Judith Jagdmann is a long-running fixture; the other two commissioners, Jehmal Hudson and Angela Navarro, were appointed by Gov. Ralph Northam and approved by the General Assembly this winter. Navarro, formerly a deputy secretary of commerce and trade, was the Northam administration’s key negotiator of the Virginia Clean Economy Act.

The SCC’s April 30 ruling on Dominion’s first implementation plan “indicates that the commission is going to take a more hands-on approach, and in our opinion that’s a good thing,” said Will Reisinger, an energy attorney who represented the Chesapeake Solar and Storage Association in proceedings surrounding the plan. 

“The utilities would probably prefer to go about their business with minimal oversight from regulators, but in this case we think that more oversight from the commission will mean that the VCEA is implemented more efficiently, in a manner that is going to maximize the economic and environmental benefits for Virginia,” he added.

Since the VCEA went into effect in July 2020, two questions have dogged regulators. First, does the law require only that the utilities propose 16.7 gigawatts of solar and onshore wind, leaving it up to the SCC to vet the merits of those proposals, or does it require regulators to approve any and all solar and onshore wind Dominion and Appalachian Power put forward? 

Second, when determining whether to approve new onshore wind and solar, what part of the law should take precedence: the renewable portfolio standard that sets annual binding targets for how much of a utility’s load must come from renewables and acts as the measure of how close the utility is to its ultimate decarbonization target or the directive that a utility must propose a certain amount of new generation? 

Both questions have big implications for the costs captive electricity customers will be required to pay in coming years. While the SCC has yet to resolve the first, its ruling this April handed a victory to clean energy and consumer advocates hoping to strengthen guardrails on how the electric utilities carry out the decarbonization mandates.

In testimony on its annual plan, Dominion argued that regulators should take a narrow view of their duties: the case “is about meeting the development targets … not cost-effective compliance” with the renewable portfolio standard, argued Glenn Kelly, Dominion’s director of strategic planning. Emil Avram, a Dominion executive, said the commission should focus on the law’s “development requirements” and leave the issue of compliance with the RPS targets to review of the company’s long-range plan.

Clean energy and consumer advocates, though, said the company was misinterpreting the Clean Economy Act. Building new wind and solar is only one way to reach decarbonization goals, they contend, with power purchase agreements with non-utility companies and the purchase of “unbundled” renewable energy certificates offering other cost-effective alternatives.

“The VCEA does not exist to let Dominion acquire assets for the sake of acquiring assets,” Will Cleveland, an attorney with the Southern Environmental Law Center, argued during hearings in February. “There must be a purpose, and that purpose must serve customers.” 

Harry Godfrey, executive director of clean energy business group Virginia Advanced Energy Economy and one of the architects of the VCEA, in an interview with the Mercury said compliance with the renewable portfolio standard “is the thing that matters most in the law.” 

“It’s not just building renewables for the sake of building renewables, it’s building renewables for the sake of the RPS,” he said. 

In their April 30 decision, commissioners explicitly disagreed with Dominion’s position and ordered future annual plans to not only analyze how proposals will meet the state’s broader decarbonization targets but also offer a least-cost pathway for meeting state mandates. 

“I applaud the commission for doing that, because none of this is going to work if we’re not doing that in a least-cost way,” said Cleveland. “Of course,” he added, “next year we’re just going to be fighting what ‘least cost’ means.” 

Dominion spokesperson Audrey Cannon said the utility “appreciate(s) the commission’s direction on this and other issues” and “will of course follow the commission’s guidance in preparing future clean energy filings.” 

David Murray, executive director of the Chesapeake Solar and Storage Association, said he was “very encouraged” by the commission’s rulings.

“I think that for a while the industry has felt like the commission hasn’t leaned into its regulatory authority and there was concerns that the legislative intent of the bill was going to get diluted at the commission,” he said. “But I think this order really showed that this is a new day in Virginia, and that the commissioners’ intent was for the VCEA to not only advance all kinds of solar and storage but also protect ratepayers.” 

Not everyone was so pleased. Karla Loeb of Sigora Solar, who was also closely involved in VCEA negotiations and is a member of the Solar Energy Industries Association, called the ruling “business as usual” and particularly criticized the absence of any discussion of distributed generation in the rulings as “basically handing a win to Dominion to fill in the blank.” 

“The commission is supposed to regulate the utility. This didn’t feel like regulation,” she said.