Regulators approve Dominion bill increase for participation in carbon trading network

Commissioner warns of ‘potential costly duplications’ in state carbon reduction efforts

By: - August 5, 2021 12:01 am
Potomac River Generating Station/Mirant power plant

Coal stacks at the now-closed Potomac River Generating Station in Alexandria, Va. (Sarah Vogelsong/Virginia Mercury)

Virginia utility regulators on Wednesday signed off on the costs of Dominion Energy’s first year of participation in a regional cap-and-invest program for carbon emissions from power plants, which is expected to increase the average residential customer’s monthly bill by about $2.39. 

But while concurring with the opinion, Judge Judith Jagdmann warned the General Assembly of “potential costly duplications that may impede” the legislature’s goal of making the state’s electric grid carbon-free by 2050. 

Wednesday’s order from the State Corporation Commission, which oversees the state’s large electric utilities, approves nearly $168 million in costs Dominion expects to accrue as a result of purchasing carbon allowances in auctions held by the Regional Greenhouse Gas Initiative between Aug. 1, 2021, and July 31, 2022. 

Under RGGI, participating Northeast and Mid-Atlantic states agree to a cap on the number of allowances available at auctions, with each allowance covering one short ton of carbon dioxide emissions and the cap decreasing annually. Those allowances are then auctioned off four times a year to electric plants with a capacity of 25 megawatts or more, and the proceeds are distributed back to the states where the plants are located. 

In Virginia, state law directs 50 percent of auction proceeds to low-income energy efficiency programs and 45 percent to the Community Flood Preparedness Fund, which assists localities and residents in dealing with recurrent flooding and sea level rise. 

While Gov. Ralph Northam’s administration estimated in 2020 that the state would receive about $100 million annually from RGGI, high allowance prices in the last two auctions have quickly outstripped projections, netting Virginia $89 million overall

Joining RGGI was one of Virginia Democrats’ top-line environmental goals when they assumed control of the General Assembly in 2020. Republicans in the legislature had previously blocked the effort

Cost estimates for participating in the program have varied widely over the years.

State Corporation Commission Judge Judith Jagdmann (Photo by Ned Oliver/Virginia Mercury)

In 2019, the State Corporation Commission estimated participation would cost the average residential customer an extra $7 per month. The Virginia Department of Environmental Quality said it would save such a customer 54 cents per month. In February 2020, when the General Assembly was debating RGGI, senior Dominion Energy executive Bill Murray quoted an average monthly cost of $1.22 for the first five years of participation. 

By the time Dominion filed its application to recover costs with state regulators, the estimate had settled at $2.39 per month. 

Through 2045, when the Virginia Clean Economy Act mandates that 100 percent of the power Dominion generates must come from renewables and nuclear, RGGI participation will cost an estimated $3 billion for Dominion’s Virginia ratepayers, according to utility and commission staff calculations

These costs “are in addition to the requirements and associated costs” of the Virginia Clean Economy Act, which are expected to be significant, Jadgmann notes in her concurrence.

Among its provisions, the VCEA calls for the utilities to develop more than 16 gigawatts of solar and onshore wind, as well as more than 5 gigawatts of offshore wind and almost 3 gigawatts of energy storage, while transitioning their fossil fuel-dependent fleets to renewables.  

The consideration of RGGI costs “raises the question of the need for two separate and distinct modes for achieving carbon reduction,” wrote Jagdmann. 

Because “the VCEA plainly states that” Dominion will need to source all of its energy from renewables by 2045, “it remains unclear whether the significant cost required for participation in an additional cap-and-trade program — which is expected to cost customers billions of dollars — are necessary for Dominion’s and Appalachian’s ratepayers to bear in order to achieve the General Assembly’s carbon reduction objectives,” she said. 

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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. She previously worked as a staff reporter for Chesapeake Bay Journal, the Progress-Index and the Caroline Progress, and her work has been twice 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 Institute and is a graduate of the College of William and Mary. Contact her at [email protected]

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