Bill to protect two Charles City gas plants from RGGI effects moving quietly through Senate

Power plants covered under Virginia's carbon regulation. The unbuilt Chickahominy Power Station and C4GT facilities are not included. (Virginia Department of Environmental Quality presentation, October 2018)

Even before legislation to bring Virginia into the Regional Greenhouse Gas Initiative comes before the Senate, a bill to protect two planned new natural gas plants from its effects is working its way through the chamber.

The measure from Sen. Lionell Spruill, D-Chesapeake, would order the state to give carbon allowances to any new electric generating plant that received an air permit and a certificate of public necessity and convenience before the state’s carbon regulation went into effect this summer.

Only two facilities — the privately owned Chickahominy Power Station and C4GT facilities being developed within a mile of one another in Charles City County — appear to be affected by the measure, because though they were permitted prior to the rule, they have yet to be constructed.

Despite administration opposition, senators have shown little concern so far over the bill, which sailed through a Democrat-controlled energy panel and Commerce and Labor Committee unanimously before landing on the Senate floor for its first reading Wednesday. 

Jef Freeman, director of development for Chickahominy Power Station developer Balico, justified the allocations as necessary to provide “equitable treatment for all generators.”

The bill “is not seeking to avoid paying for carbon emissions under the regulations. It is not the intent,” he told Commerce and Labor’s energy subcommittee Jan. 29. “The focus is to set a level playing field.”

But opponents say the bill at best doesn’t align with the structure that the RGGI proposals moving through both chambers would set up and at worst could give the two private generators a competitive advantage in the market.

State distribution of carbon allowances is a feature of the carbon regulation developed by the Department of Environmental Quality that went into effect over the summer. Because agencies can’t appropriate funds — such as auction proceeds — without enabling legislation, the regulation instead created a “consignment auction” under which DEQ would distribute carbon allowances to emitters, and the emitters would then sell the allowances into the broader 10-state RGGI market while buying back what they needed.

But because budget language last session blocked Virginia from formally joining RGGI, the consignment auction system was never tried out. And now the RGGI bills moving through both the House and Senate this session would do away with it entirely, setting up in its place a state-controlled allowance auction. Under this framework, no allowances would be given away, and any emitter would be free to purchase them.

That legislation “is nearly guaranteed to pass and be signed into law,” said Walton Shepherd, a Virginia program director for the Natural Resources Defense Council. 

And what that means for Spruill’s bill, he said, is that “as written, this bill will soon be obsolete.”

But what isn’t clear is whether the RGGI legislation would override the requirement for Virginia to provide the Charles City plants with allowances that could then be sold on the RGGI market if Spruill’s bill also goes into law. 

Chief Deputy Director Chris Bast told the Senate Energy Subcommittee last week that allowances for the facilities would be for approximately 10.5 million tons of carbon emissions and worth about $131 million over three years.

The state’s 2021 emissions budget under the carbon regulation is 27.16 million tons. The Charles City plants would account for almost 40 percent of that.

Spruill’s office did not respond to a request for comment.