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V
irginia
C
apitol
C
onnections
, S
ummer
2015
12
All of the members of the Virginia
General Assembly are very proud of
the Commonwealth’s consistently high
ranking as one of the best places to do
business in our country. We’ve earned
this recognition from distinguished
organizations such as CNBC and Forbes
in large part because of our abundant,
reliable and consistently low-priced
supplies of energy.
So we were understandably concerned
last summer when the U.S. Environmental
Protection Agency released its draft Clean Power Plan for reducing
carbon dioxide emissions from existing power stations. The draft
rule imposed extremely strict carbon limits on Virginia—a goal
that is twice as strict as the goals for West Virginia and Kentucky
and 46 percent stricter than the one for Maryland.
We were even more alarmed in October when the State
Corporation Commission Staff, in its comments on the draft rule,
warned that the regulation could lead to widespread shutdowns of
power stations—particularly those operating on coal—and huge
price increases for energy customers throughout Virginia. The staff
reported—in what it termed “conservative” assumptions—that the
draft rule would likely impose between $5.5 billion and $6 billion
in compliance costs on Dominion Virginia Power alone—and that
those costs would ultimately be borne “by residents and businesses
of Virginia.”
Faced with these warnings, most members of the General
Assembly knew we had to act to protect our consumers, maintain
price stability and give our utilities enough time to deal with this
harsh regulation. We knew that we couldn’t hope and wait to see
if the EPA, somehow, issued a less costly and more sensible final
rule later this year. So beginning last fall, the Senate Commerce
and Labor and House Commerce and Labor Committees began
meeting to evaluate the situation and seek ways to keep reliable
and low-priced energy available in the Commonwealth.
The result was Senate Bill 1349, which I had the honor of
sponsoring during the 2015 session.
The legislation, in its final form, was approved by strong,
bipartisan majorities in both the Senate and House of Delegates and
signed into law by Governor McAuliffe. During its course through
the General Assembly, the legislation underwent numerous changes
and was repeatedly revised as various stakeholders reviewed it and
offered their input. Frankly, as is usually the case with legislation,
the end results didn’t please everybody. But I—and most of my
fellow senators and delegates—believe it goes a long way toward
protecting Virginia electric customers during this very uncertain
period. Here are some reasons why.
• First, it freezes a huge portion of customer bills for Virginia’s
two largest utilities—Dominion Virginia Power and Appalachian
Power Company. This portion is called base rates; they cover
many utility costs and expenses and make up about 60 percent
of the average residential customer’s monthly bill. Under Senate
Bill 1349, no matter what impact the final Clean Power Plan has
on our utilities and their power stations, these rates cannot be
increased during this transitional period. It runs through 2019 for
Appalachian, 2020 for Dominion.
• During this transitional period, utilities—not their customers—
must bear all the costs associated with the premature closure of
power stations due to the federal carbon rules. We will work to
keep these plants open and running, but we are under no illusions.
The continued operation of thousands of megawatts of coal-fired
generating capacity serving our state has been cast into doubt by
the Clean Power Plan.
• Also during this transitional period, the utilities will absorb all
the costs for repairing their systems and restoring power after
severe weather events and other natural disasters. Major storms
such as hurricanes can result in hundreds of millions of dollars in
utility system damage. During the transitional period, customers
will not be responsible, through higher rates, for any of these
costs.
• Senate Bill 1349 also promoted rate stability for many Virginia
consumers through a significant reduction in Dominion Virginia
Power’s fuel factor, the portion of consumer rates used to recover,
on a dollar-for-dollar basis, the cost of the fuel used to generate
electricity in power stations. Senate Bill 1349 directed Dominion
to write off $85 million in fuel expenses it incurred during 2014
but had so far not collected. It also directed the State Corporation
Commission to implement as soon as practicable a reduction in
the Dominion fuel factor to reflect the write-off, as well as other
planned adjustments in the rate. The Commission approved the
reduction and Dominion implemented it on April 1. Residential
customers immediately saw their monthly bills go down about
5.5 percent; for commercial and industrial customers, the fuel
factor cut produced monthly savings from 7 to 10 percent.
Beyond price stability, Senate Bill 1349 took several
other important steps to promote a sound energy future for the
Commonwealth—even as we face harsh, and in my opinion,
discriminatory and unreasonable regulations.
• It directs our investor-owned utilities to file with the Commission
each year long-range plans for meeting their customers’ needs
and serving them reliably.
• It requires the utilities to set up pilot programs to provide energy
assistance and weatherization services for low income, elderly
and disabled individuals. These are the groups that will be hit
hardest by any large rate increases caused by the federal carbon
regulations.
• Finally, it recognizes the importance of renewable energy in
meeting the Commonwealth’s energy needs and helping it comply
with future carbon regulations. The bill authorizes our utilities to
build or purchase up to 500 megawatts of solar-powered facilities
within Virginia’s boundaries. Operating at full capacity, these
solar arrays could meet the energy needs of 125,000 homes.
Renewable energy cannot take the place of more conventional
generation –but they will help ensure the Commonwealth has a
diverse mix of electric generating units as we deal with the new
environmental regulations.
Senate Bill 1349 will not end all the uncertainty associated with
federal carbon regulations. But I believe it will be an important
measure to help ensure that Virginia remains a lower-cost energy
state and a good place for doing business, even as these new rules
take their final form.
Member of the House of Delegates: 1992-2001; Member of the
Senate: 2001- District 7 includes part of Virginia Beach and
Norfolk.
General Assembly, Governor Act to Promote
Electric Rate Stability, Boost Renewable Energy
By Senator Frank Wagner
V