Monday, July 15, 2024

Regulators Approve Request from Dominion to Drop RGGI Fee on Customer Bills

Dominion Energy offices in Richmond, Va. (Parker Michels-Boyce/ For the Virginia Mercury)

RICHMOND — The average Dominion Energy Virginia residential customer will soon see a charge of about $4.50 dropped from their bills. The fee was being collected to recover costs through the state’s participation in the regional carbon market.

On Monday, the State Corporation Commission, which regulates Virginia’s utilities, approved a request from Dominion to stop tacking the fee on customer’s bills to recoup the costs the utility racked up through participation in the Regional Greenhouse Gas Initiative (RGGI), which Virginia is no longer a part of.

“At this time, the Company states it is no longer accruing RGGI-related compliance costs and is collecting revenues to recover the costs already incurred,” wrote the commission in its order.

Dominion made the request last month after finalizing its costs for RGGI compliance following Virginia’s withdrawal from the market at the end of 2023, prompted by Gov. Glenn Youngkin’s regulatory action.

Although some Democratic lawmakers and environmental groups still say the withdrawal needed to be completed legislatively, Youngkin pulled the plug through the regulatory State Air Pollution Control Board because of the “hidden tax” he said the program created for customers.

RGGI is a market with 11 participating states that incentivizes the decrease of carbon-emitting electricity generation by requiring electricity producers to purchase allowances for each short-ton of carbon they emit.

In addition to the Virginia Clean Economy Act, which seeks to decarbonize the state’s electric grid by 2050, and the Clean Car Act standards, which ban the sale of new gas-powered vehicles starting in 2035, RGGI participation was seen as part of major policies to reduce emissions that scientists say is causing climate change’s damaging weather shifts.

In Virginia, the state’s utilities produce their own electricity, meaning Dominion had to purchase the allowances. The state also allows utilities to recover the costs of those allowances from their customers, which amounted to about $2.39 per month for a typical residential customer when Youngkin took office in 2022.

Because Youngkin had signaled his desire to leave RGGI prior to being elected, Dominion had paused collecting the rider fee in 2022, when the state’s exit from RGGI seemed imminent.  But the regulatory process of leaving RGGI was extended, and Dominion continued purchasing allowances for its Virginia City Hybrid Center that runs on coal and biomass, among other sources.

Last year, the utility petitioned for recovery of the costs it accrued during the extended withdrawal, as well as costs anticipated to arise until withdrawal was complete, leading to the $4.34 fee for residential customers using 1,000 kilowatt hours of electricity. Those fees helped Dominion to recover $346 million, about $10 million short of what staff projected the utility would need after reducing Dominion’s initial request of $373 million.

For comparison, Appalachian Power Company, Virginia’s second largest utility serving the Southwest Virginia area, had incurred costs of $341,000 in 2021, $275,000 in 2022, and approximately $180,000 as of July 2023, all for the utility’s Clinch River Plant. Teresa Hall, Appalachian Power spokeswoman, said the utility is no longer incurring costs for RGGI.

With the state having left the market in December, Dominion was on pace to collect $63 million more than it needed if the rider remained in effect from September 1 of last year until the end of August, as it initially requested to recover the allowance costs.

“Resetting Rider RGGI will immediately reduce the typical residential customer’s bill … with greater reductions for higher energy consumers in the residential, as well as commercial and industrial classes,” said Paul McLeod, director of regulatory accounting for Dominion, in testimony.

Dominion will zero out the rider by July 15 after seeing what is actually recovered through May 31, according to the SCC. Any minimal over- or under-earnings will then be recovered through the utility’s base rates and reviewed by the SCC during Dominion’s next rate case.

Environmental groups are suing the state for what they say was an unlawful withdrawal from the carbon market that has generated an unprecedented amount of funding for flood mitigation and energy efficiency projects. The revenues for the allowance purchases are returned to the states, where in Virginia almost $830 million has been funneled toward those projects.

The SCC noted in its order that it wasn’t opining on the litigation surrounding the state’s withdrawal from RGGI. The case is scheduled to have its next hearing June 24 with a new judge, after a long delay led to the previous judge in the case recusing themselves.

Democratic lawmakers attempted to reinstate Virginia in RGGI through the budget process this year, but the language was removed as part of the legislature’s compromise with Youngkin to pass a spending plan that was months overdue.

“We have to respond to our constituents … we will act,” said House Majority leader Charniele Herring, D-Alexandria, on Democrats’ initial push to reintroduce the state into RGGI despite the governor’s clear disinterest.

When asked if lawmakers would consider changing how Dominion can recover the costs of the allowances from customers, Del. Rip Sullivan, D-Fairfax, said, “let’s deal with the issue in front of us.”

Beating the same drum as before by calling RGGI a “tax,” Youngkin Press Secretary Christian Martinez said that the governor has been committed to lowering the cost of living for Virginians by removing the recovery of the costs on bills.

“[Monday’s] action by the Virginia State Corporation Commission is an important step forward in reducing costs for Virginians,” said Martinez.

Not allowing Dominion to recover a markup toward their profit level for the RGGI costs through their rider should be disallowed by the legislature, said Walton Shepherd, Virginia Policy Director for the Natural Resource Defense Council, considering the market lowered Virginia’s emissions.

“The air pollution that RGGI had improved will surely get worse again — making dirtier Virginia air one of Youngkin’s most ignoble legacies,” Shepherd said.

Brian Greene, an electric utility regulatory attorney with GreeneHurlocker, noted that if the court does find that the withdrawal from RGGI was unlawful, Dominion would be allowed to add the rider fees back to customers’ bills to recover its RGGI allowance costs again.

“You can look at that and say it’s big money put to excellent use, or you can say it requires ratepayers to pay more than they otherwise should,” Greene stated, of the revenues returned to the state. “The beauty is in the eye of the beholder.”

Virginia Mercury is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Virginia Mercury maintains editorial independence. Contact Editor Samantha Willis for questions: info@virginiamercury.com. Follow Virginia Mercury on Facebook and Twitter.

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