Dominion get OK to add carbon market charge to bills

Published 10:00 am Monday, August 7, 2023

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By Charlie Paullin

Virginia Mercury

Despite Virginia’s pending withdrawal from a regional carbon market, residential Dominion customers will see an additional fee of roughly $4.44 on their monthly electric bills beginning Sept. 1 to cover the utility’s costs of participating in the market between July 31, 2022 and the end of this year.

The State Corporation Commission on July 12 approved a modified version of the company’s request to recover its costs for participation in the Regional Greenhouse Gas Initiative, or RGGI.

“The Commission notes its awareness of the economic pressures that are impacting all utility customers,” wrote the commission in its July 12 order allowing the fee to resume. “We are sensitive to the effects of rate increases, especially in times such as these. The Commission, however, must follow the laws applicable to this case, as well as the findings of fact supported by the evidence in the record. This is what we have done herein.”

Virginia is close to finalizing its withdrawal from RGGI following Republican Gov. Glenn Youngkin’s approval of a regulation repealing the state’s participation in the market. The regulation is set to be published in the Virginia Register July 31.

Following a 30-day public comment period, the regulation, which calls for the withdrawal to happen at the end of the year, will be effective within 30 days. But a legal challenge is expected from critics of Youngkin’s move, who say legislative action is needed for Virginia to pull out of the multistate network. 

RGGI, which Virginia joined at the beginning of 2021 following Democratic-backed legislation, requires electricity producers to buy allowances for the carbon they emit at quarterly auctions. The revenues from the purchases are then returned to states; in Virginia they are directed toward flood resilience and energy efficiency programs. 

State law allows utilities to recover the costs of allowance purchases from their ratepayers. 

Dominion initially recouped its costs through a bill rider that cost the average residential customer $2.39 per month. But in May 2022, Dominion asked regulators to suspend the rider due to Youngkin’s desire to withdraw from the market. The charge was halted July 31, 2022.

This December, the utility asked to restore the rider to cover costs it has incurred since July 31 and those it projects to spend on allowances until the end of the year, when Virginia is on track to leave RGGI. The amount Dominion asked to recover through Aug. 31, 2024 is $373 million, which would have equaled a $4.64 monthly fee on the average residential bill. 

But although the SCC approved the reinstatement of the fee, regulators reduced the amount Dominion sought to about $356 million because the utility’s estimates of allowances it would need to purchase were higher than what past data suggests.

Dominion had previously pushed back against any reduction in its request by saying over-, or under-, projections of future costs are standard parts of any rider proceedings, and that a later true-up proceeding could provide refunds for any overcharges.

The commission rejected that argument, saying “the specific costs excluded by these adjustments are not simply over-projections. Rather, all participants — including Dominion — agree that these specific costs were included in error; that is, these costs admittedly do not fall within the Company’s RGGI compliance obligations.”

Approval of the fee also received pushback from environmental nonprofit Appalachian Voices, which said allowance cost estimates should be based on projections of when the regional electric grid determines a fossil fuel unit owned by the utility can run at a cheaper cost rather than when Dominion itself decides to use the unit, a situation called must-run generation. 

Gregory Abbott, a former SCC staff member who argued on behalf of Appalachian Voices, said must-run generation could drive up allowance costs, increasing the amount of money the utility can recover from customers, 

But the commission rejected that argument, finding Dominion’s decisions to operate its units are reasonable and prudent.

“The allowance costs related to those must-run decisions are necessary to comply with the Company’s statutory duty to purchase allowances for every short ton of CO2 emitted from those power plants,” the judges wrote.

Reprinted courtesy of Virginia Mercury,