Carbon cap debate focuses on uncertainty for utility customers

Carbon cap debate focuses on uncertainty for utility customers

Richmond Times DispatchBy MICHAEL MARTZ Richmond Times-Dispatch

Would a cap on carbon emissions from big power plants make renewable energy a more economical option for electric utilities, or would it simply raise rates for industrial and other customers?

Virginia won’t know until it adopts a rule for carbon dioxide emissions and utilities respond with their own proposals for living within new pollution limits, according to the State Corporation Commission.

“There are too many uncertainties for staff to calculate or estimate those costs,” said Greg Abbott, associate deputy director for public utility regulation at the SCC, in a presentation on Wednesday to a legislative commission focused on promoting manufacturing in Virginia.

The challenge is already apparent in the escalating debate over Dominion Energy Virginia’s proposed 15-year “integrated resource plan” and the consequences of a sweeping new law on utility regulation that allows excess monopoly earnings to help pay for billions of dollars in investments in the electric network.

The SCC staff estimated late last month that the Grid Transformation and Security Act would cost Dominion ratepayers almost $5.6 billion over the next 15 years, including more than $1.8 billion to expand the utility’s use of solar and wind technologies to generate an additional 5,000 megawatts, as the new law declares in the public interest.

Dominion officials reject the staff’s analysis, which they say underestimates the efficiency of future solar power technologies, making renewable energy appear more costly compared with high-efficiency natural gas-fired power plants and other options to meet a projected power demand that’s also under debate.

A carbon cap, being developed by a state working group under the direction of Gov. Ralph Northam’s administration, would change the cost-benefit analysis for solar, wind and other renewable sources of electric generation, Secretary of Natural Resources Matt Strickler told the Manufacturing Development Commission.

The new law’s mandate for renewable energy “moves us in the right direction,” Strickler told Sen. Frank Wagner, R-Virginia Beach, the law’s sponsor and chairman of the panel.

However, investments in renewable energy are “much more likely … if the rule is adopted,” Strickler said.

Wagner’s concern is that carbon allowances that Dominion and other utilities would purchase to compensate for pollution from their plants would end up costing ratepayers more in their monthly electric bills.

That concern is especially strong for industrial customers, whose businesses “are incredibly price sensitive” because of the global competition they face, said Brett Vassey, president and CEO of the Virginia Manufacturers Association, and a member of Wagner’s commission.

Strickler estimated the cost on ratepayers at less than 1 percent — slightly more for industrial customers. He said the rule would give a new stream of revenue — an estimated $200 million a year — to utilities from the sale of their allowances in a consignment auction as part of the Regional Greenhouse Gas Initiative.

The regional initiative includes nine states in the Mid-Atlantic and Northeast as members, with New Jersey and Virginia proposing to join, despite opposition from Republicans in the General Assembly.

The assembly killed legislation the administration proposed this year to create the carbon dioxide cap-and-trade market and use revenue from allowances to help pay for protection against rising sea levels and other effects of global warming.

In turn, Northam vetoed legislation the Republican-controlled legislature passed to prevent Virginia from joining the regional initiative under an executive order his predecessor, Gov. Terry McAuliffe, issued two years ago.

“Creating the system reduces our carbon footprint by putting a price on the pollution that’s generated,” Strickler said.

Wagner pushed the Dominion and SCC representatives for a preliminary assessment of what the carbon rule could cost ratepayers. Dominion executive Bill Murray said he expects the issue to be “litigated fully” in formal commission review of the company’s proposed long-term plan.

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