Friday, April 12, 2024

Virginians Feeling the Heat of High Utility Bills this Winter

Photo by Doris Morgan on Unsplash

RICHMOND — On Christmas Eve 2022, temperatures in central Virginia hit a low of 8 degrees, 17 degrees below the record in 2021, according to the National Weather Service.

That and several other arctic blasts this winter came amid global conflicts like war in Ukraine that have strained natural gas supply in the U.S. At the same time, there has been an increase in the use of natural gas to generate energy for the electric grid as more and more coal-fired plants come offline.

As a result, the U.S. Energy Information Administration predicted in October that natural gas bills in the South could increase during the October to March winter season by $761, or 24%, compared to the year before.  Some 28% of homes in the South rely on natural gas for heat.

For homes relying on electricity for heat, bills could increase by $1,249, or 12%. About 65% of homes in the South rely on electricity for heat.

Virginia has eight investor-owned natural gas providers, two large electric utilities and 13 electric cooperatives that are regulated by the State Corporation Commission. There are also three municipal governments — Richmond, Danville and Charlottesville — that provide natural gas and are regulated by their city councils.

In filings with the State Corporation Commission and interviews with the Mercury, all gas and electric providers have acknowledged that global price pressures on natural gas are affecting customers’ bills.

Southwest Virginia Gas Company, “like any other entity that purchases natural gas, has seen increases to the costs it pays for natural gas,” wrote president and CEO James McClain II in one representative request to the SCC for a rate increase.

All of Virginia’s electric and gas providers have assistance programs for customers to help alleviate the burden of rising bills. Millions of dollars are also available through state assistance and energy efficiency programs.

But customer advocates say all those programs can be improved.

“I don’t think there’s anybody out there that doesn’t really want to make efforts to help utility customers,” said Dana Wiggins, director of the Center for Economic Justice at the Virginia Poverty Law Center.

Investor-owned utilities

State law allows investor-owned natural gas and electricity companies like Dominion Energy, Appalachian Power Company and Virginia Natural Gas to recover their operating costs and earn a reasonable profit from customers.

Fuel costs are recouped from customers without any extra profit for the companies.

In filings with the SCC over the past few months, numerous gas and electric utilities have asked to raise rates to make up for rising fuel costs, as well as others like lost COVID-19 revenues from forgone late fees and inflationary pressures.

Roanoke Gas Company “is experiencing significant inflationary pressure on costs and prices for labor and benefits, insurance, pension, and bad debt, among other operating and maintenance expenses,” attorney Timothy E. Biller wrote in one filing. 

Columbia Gas of Virginia, which serves about 285,000 customers in the eastern and central regions of Virginia, is asking for an average monthly residential bill increase of 12.37%. Roanoke Gas, which serves about 63,500 customers around Roanoke, is seeking a $2 residential customer charge increase. Southwest Virginia Gas Company, which serves about 4,300 customers around Martinsville, is seeking a rate increase that would add roughly $7.88 to the average residential customer’s monthly bill. Virginia Natural Gas, which serves 312,000 customers in Tidewater Virginia, received an increase that would affect average monthly customer bills by $12.88.

“Despite our best efforts to keep costs down, the Company has experienced substantial increases in costs along our entire supply chain for capital, goods, services and personnel which has resulted in the need to seek a base rate increase,” testified Paul Nestor, president and CEO of Roanoke Gas Company.

Dominion and Appalachian Power have also sought rate increases to cover spiking fuel costs. In September, the State Corporation Commission approved an increase for Dominion that added roughly $14.93 to the average residential customer’s monthly bill. Appalachian Power is seeking about a $20 monthly bill increase.

The Dominion request sought to cover a $1 billion gap between expected and actual fuel costs for 2022 and almost $2.3 billion in projected costs for the year between July 2022 and June 2023.

According to a 2021 long-range plan filed by Dominion, natural gas constituted 40% of the fuel used for electricity generation that year. Nuclear accounted for 29%, while renewable energy sources like solar accounted for 4%.

“The mix is going to noticeably change as we add more renewables,” Dominion Energy spokesperson Craig Carper said.

Municipal utilities

The municipal utilities, meanwhile, have adjusted their rates more periodically to avoid cost increases and, more recently, reflect subsiding fuel costs.

In Richmond, the purchased gas cost, which is passed directly on to customers, almost doubled between January and July 2022. It has since decreased to reflect what Richmond Department of Public Utilities spokesperson Rhonda Johnson called “actual market conditions” but remained 15% higher than the prior year in January 2023.

Charlottesville, in contrast, has seen gas bills fall by about 1.2%: This January, the average customer bill was $52.63 total, compared to $53.27 in January 2022.

Comparatively, the city of Danville purchased their natural gas for this winter at more affordable times, when it was about $5.50 a unit. Over the summer, costs spiked to $8 to $9. Costs lowered to about $7 a unit in December.

“It’s kind of like an insurance policy,” Danville Utilities Director Jason Grey said

Lending a hand

All of the utilities offer varying levels of energy assistance, from monthly bill payment plans to weatherization programs.

On a larger scale, the state offers several ways to help with utility payments.

Utility customers in crisis or emergency situations can get financial help like bill payment assistance, security deposit coverage and fuel assistance funding to help pay for heating bill costs through the Virginia Department of Social Services.

Typically, $7 million in federal funds are allocated for crisis benefits, which are available to people facing a utility cutoff or broken heating equipment, according to an email from DSS. There were almost 1,000 applications for crisis assistance between the program’s opening in November and late December.

For fuel assistance, Virginia typically gets $45 million through the federal Low Income Housing Energy Assistance Program, or LIHEAP, said the department, but this year it got $50 million. That money is funneled into a state program called Energy Assistance. There were 128,000 applications for fuel assistance this year, with over 107,000 approved by late December.

“The number of applicants for fuel assistance has increased about 5% over last year,” said the department in its email. In recent years, about 10% of Virginia households that use natural gas as a heat source have gotten fuel assistance. Overall, about 65% of funding recipients use natural gas.

On the weatherization side, the Department of Housing and Community Development oversees Virginia’s Weatherization Assistance Program, which provides financial assistance for home improvements such as heating and cooling upgrades and insulation installation or air sealing to ensure heat is generated efficiently and contained within a home.

Last year, 1,075 Virginia households received about $20 million in services through the Weatherization Assistance Program, according to department spokesperson Amanda Love.

Weatherization Assistance Program funds are also federally sourced, with $4.4 million from the U.S. Department of Energy and $14 million from the U.S. Department of Health and Human Services.

Virginia has also received over $225 million for low-income energy efficiency programs from the state’s participation in the Regional Greenhouse Gas Initiative, a multistate cap-and-invest program under which electricity producers must buy allowances for the carbon they emit. The proceeds from the purchases are then returned to the state.

From that funding, $45 million has been allocated to the Weatherization Deferral Program, which pays for repairs to homes that make them ready for weatherization efforts, and $115 million to an Affordable and Special Needs Housing program that is geared toward building homes. An additional $11.4 million has gone toward repair assistance for homes in the town of Hurley damaged in catastrophic floods in 2021.

Virginia received $272,646 for the Weatherization Readiness Fund, which also goes toward making homes ready for weatherization upgrades, as part of 2022 annual appropriations from the U.S. Department of Energy.

Program changes

Some advocates say Virginia can help shield customers from the volatility of global energy markets through utility regulation reform.

For Wiggins of the Virginia Poverty Law Center, that includes reviving the state’s Commission on Energy Utility Regulation to assist with crafting policies for state oversight of publicly regulated utilities.

Instead of relying on a part-time legislature to take up reforms in the complex energy sector, Wiggins said a year-round commission could give deeper consideration to proposals such as factoring in a cost of living index to account for rents when structuring rates. Bills mandating two commission meetings per year are still alive in the final days of this session.

The state could also bulk up its utility cutoff protections, said Kidest Gebre, communications and campaigns manager for the grassroots group Interfaith Power and Light. Del. Irene Shin, D-Fairfax, filed a bill this session to prevent utilities from disconnecting services to residential customers for not paying bills during a state of emergency — a proposal she also put forward in 2022 — but it failed in committee.

“It’s a long haul to change over the system,” Wiggins said.

Wiggins said improvements can also be made to how bill assistance funding, particularly through LIHEAP, is doled out. Application windows are short, she said — requests for assistance during heating emergencies have to be made between the first workday in January and March 15, for example — and “funding does run out very quickly.”

On the federal level, the recently passed Inflation Reduction Act offers a variety of tax credits to install new, more efficient technologies like heat pumps.

But a decision to electrify a home depends on a family’s economic circumstances.

“It’s something that [low-income] families can’t actually afford to do,” Wiggins said.

That’s where funding from RGGI is a game changer, said Chelsea Harnish, executive director of the Virginia Energy Efficiency Council. While federal funding can only be used to cover a portion of each weatherization and energy efficiency project, she said, state programs funded by RGGI dollars can be used to cover the entirety of upgrades. Projects have included repairs of 52 low-income houses in Shenandoah County and roof and new heating and cooling system installations in Crewe.

One recent report from Virginia Commonwealth University’s L. Douglas Wilder School of Government and Public Affairs found that if Virginia stayed in RGGI through 2030, improvements could be made to 100,000 to 130,000 low-income homes under the state’s energy efficiency programs. That could result in $68 to $82 million in customer bill savings per year, an average of $676 per year per household, researchers found.

Virginia Mercury is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Virginia Mercury maintains editorial independence. Contact Editor Sarah Vogelsong for questions: Follow Virginia Mercury on Facebook and Twitter.

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