13 Billion Reasons McAuliffe Should Disregard Dominion’s Gold-plated Electricity Boondoggle

In proposing the equivalent of buying a Ferrari to take a trip to the grocery store, Dominion Virginia Power’s latest energy plan is off the rails. It is neither a serious proposal for how to prudently spend their customers’ money, nor a rational approach to tackle climate change in Virginia.

To put it bluntly, Dominion’s proposed energy plan (or IRP) is chock-full of errors, flaws, and misjudgments, but one thing comes through loud and clear: its plan is all about dramatically boosting company profits by asking its hundreds of thousands of Virginia electricity customers to pay for unnecessary and overpriced construction.

That’s wrong. Virginians can’t afford Dominion’s plan. And the state doesn’t need it.

So as Governor McAuliffe continues work writing his own state plan to cut dangerous carbon pollution from the state’s #1 source—power plants—he should not look to Dominion’s IRP for any guidance on meeting the Clean Power Plan’s targets for reducing carbon pollution in Virginia. Likewise, the Governor should ensure the state regulators responsible for ultimately deciding what does and doesn’t fly in the IRP—the SCC—know that Dominion’s proposal is grossly inconsistent with his climate goals and his vision for a clean energy expansion in his New Virginia Economy.

The Good

McAuliffe’s best bet to reduce total climate change pollution in Virginia, as well as reduce Virginia’s energy prices, is simple: lower carbon pollution using the tried and true methods already being widely used in Virginia and beyond—low-cost clean energy—in order to lower carbon pollution from all power plants, whether they are plants already built or plants built in the future.

Virginia is already slashing its carbon pollution by moving away from the oldest, most outdated and dirtiest forms of energy. As for the U.S. EPA’s Clean Power Plan, every reputable, transparent analysis to date shows that the required carbon reductions remaining can be made easily in Virginia, and at low cost.

This ability to readily meet the CPP in Virginia is driven by 3 main factors:

• First, planned coal retirements along with the modest amount of additional renewable energy and energy efficiency needed inside the state to comply;
• Second, the continued low fuel prices and renewable energy expansion that is already delivering more and more low-cost and low-carbon energy all across the national electricity grid;
• Third, the ability to tap market-based approaches with other states to deliver the lowest-cost pollution reductions.

Numerous analyses point to the same thing: these three factors will make reducing carbon to meet the Clean Power Plan in Virginia readily achievable, if the state makes just a modest reduction in its carbon pollution and adds a modest amount of energy efficiency and zero-carbon wind or solar energy. And by doing these three things together, the CPP will actually lower customers’ energy bills.

The Bad

Dominion’s IRP, in stark contrast, outlines a gargantuan, $13 billion energy plan to reduce total carbon pollution that asks its customers to pay for a Ferrari, when it already has a finely-tuned car that can safely—and more affordably—get everyone to the store and back in time for dinner.

Here are the main items in the customer-funded gift basket Dominion is asking for, just so that it can modestly reduce total carbon pollution under a mass-based plan that covers both existing and future power plants:

• another new natural gas plant on top of the 3 large new multi-billion dollar ones customers are already paying for (when building no new plants at all would be sufficient to comply);
• a whopping 7,000 MW of solar (when less than a third of that would be sufficient for purposes of CPP compliance);
• the shuttering of every single one of their coal plants in the state (when modelling shows no additional coal retirements above business-as-usual market forces are necessary); and
• by far the biggest of these sticker-shockers, a brand new nuclear unit. That last one is not only entirely unnecessary, but would be so expensive that virtually no one else in America is seriously proposing to build one.

To be clear, ramping up clean solar energy at the scale proposed in Dominion’s IRP may be worth considering, especially considering how fast the cost of that technology continues to fall. But claiming that level of buildout is needed for purposes of CPP compliance can’t be taken seriously. Rather, we see throughout the IRP an effort to skew outcomes that would support Dominion’s preferred and ultimately more expensive approach to CPP compliance—known as the “dual rate” approach. NRDC and many other stakeholders see that as a winner for Dominion but a loser for consumers and the environment.  

The Ugly

This misguided and unnecessary gold-plated IRP plan that would ask Virginians to cough up a whopping $13 billion to tackle carbon pollution from current and future plants is founded upon three fundamental errors in Dominion’s assessment (some of which are errors we’ve seen before):

First, Dominion is under a mistaken impression that Virginia needs to make a dramatic and steep reduction in carbon pollution in order to comply with the Clean Power Plan. That’s wrong.  Virginia is one of the few states with a 2030 reduction target that is actually an increase above their baseline level, at a total allowed increase of 8% in emissions from 2012.

Second, Dominion is under the mistaken impression that Virginia needs to build several expensive new power plants, and one extremely expensive nuclear energy facility. That’s dead wrong. Most of the lowest cost and carbon-free electricity Virginia needs will be readily available, thanks to already-planned for changes and additions to an evolving electricity grid.

Third, Dominion’s analysis forgets that their regulators—both at the SCC and at the DEQ—are obligated to protect Virginians’ health and their pocketbooks. Dominion’s proposal does neither.

Let’s look closer at each of these errors in Dominion’s IRP in turn:  

Error # 1

In proposing an expensive $13 billion dollar IRP to reduce total carbon pollution, Dominion overlooks all the analysis already done that shows that to be the exact opposite of what is needed.

There is no need for Virginia ratepayers to pay Dominion for so many extraneous new plants, when a modest amount of pollution reduction is all that is necessary to comply with the CPP:

PJM, the operator of the electricity grid that includes Virginia and every one of Dominion’s plants there, found that its vast electricity interconnection grid (the largest in the world) is on track to comply with the Clean Power Plan without the drastic buildout proposed by Dominion. This is simply due to low fuel prices and business-as-usual growth in clean, renewable energy, already the fastest-growing source in the country.  

Even next door West Virginia, which is almost exclusively coal-fired and thus a vastly higher carbon polluter emitter, recently concluded that the King Coal state can comply with the Clean Power Plan with no discernible effect on their coal generation capacity. The reason is simple: there are already sufficient pollution reductions from announced coal retirements and new clean energy underway across the country to deliver the necessary cuts in carbon pollution.

Yet Dominion’s proposal misses these other analyses completely when it instead proposes shuttering every single one of their coal plants. That intentional stranding of assets includes their newer, relatively efficient coal plants, as well as a big one across the state line in West Virginia, which even the Mountain State itself says is not necessary.

Lastly, extensive power sector modeling of the CPP (in which NRDC took part) also shows that Dominion’s drastic plan bears no resemblance to what is actually required by Virginia: the Commonwealth has already achieved so much of its compliance obligation that it would likely make the carbon reductions required by the Clean Power Plan even in absence of the federal regulation (see figure 1, right).

By concluding that so many new plant builds and plant closures are needed for CPP compliance, Dominion appears to be analyzing a Clean Power Plan that is, simply put, not the one that currently exists for Virginia, nor the one that has already been more accurately analyzed by others.

Error # 2

Dominion’s IRP disregards the existence of one of the largest machines built by humans—the interstate electricity grid—in their suggestion that ratepayers pay for so many unnecessary new plants.

That national grid, which of course includes all of Virginia in its continent-wide footprint, is precisely why Dominion doesn’t need to build new plants: transporting cheaper and often cleaner electricity from elsewhere was the entire point of building out our vast and sophisticated transmission network.

That is also precisely why PJM found Clean Power Plan compliance to be so readily achievable for Virginia and other states: electricity doesn’t recognize artificial state boundaries, and the cheapest and cleanest electricity already flows across state borders every day, every hour, every second (every 6 seconds, to be exact, which is how often our electricity grid is adjusted to meet fluctuations in supply and demand). 

Despite this, Dominion’s IRP proposes so many new builds that the flow of cheaper electricity into the state would essentially halt, and the Commonwealth would then instead buy power exclusively supplied by Dominion, at a higher cost. The net result: Virginians’ electricity bills go way up.

(These generation capacity amounts, while not specified in the IRP itself, can be easily calculated using this compliance assessment tool.)

This proposal to turn Virginia’s back on one of the world’s largest and already-functioning machines is akin to proposing that Virginia build its own island of a cell phone system, despite the fact that the national cellular network we currently have is working just fine.

Lastly, Dominion’s analysis also overlooks the ability to utilize energy efficiency to obviate the need to build entire new plants. At a dismal 0.02% annual electricity savings, Virginia currently ranks 47^th in the nation for energy efficient reductions of energy waste, far behind every neighboring state and every southern state except the Pelican State. Dominion proposes to continue that lackluster performance, by reducing cumulative energy demand over the next 15 years by only 0.64%. In contrast, an achievable, moderate ramp up to just 1% per year would ultimately result in a cumulative 6.94% decrease in demand in 2030 (leading states have already proven that ramping up to a 2% annual savings is imminently achievable and in the consumer interest). Dominion’s plan, instead of investing in commonsense measures to cheaply reduce energy waste, proposes to simply build unneeded new plants.

Error # 3

Dominion’s energy plan overlooks the obligation by Virginia’s economic regulators—the SCC—to ensure that Dominion’s plan rely on least-cost measures to meet the needs of its customers.

In filling a Christmas tree of an energy plan that would sink $13 billion of unnecessary steel in the ground, Dominion is asking their regulators to willfully disregard their least-cost principles. Robust analysis of the CPP shows the compliance costs for the entire region (of VA, WV, PA, OH, and NJ) to reduce carbon pollution from existing and future power plants could be less than one-fifth of Dominion’s cost of $13 billion, which is a price tag for Virginians to pay alone. Since Virginia homeowners and business operators would pay for that boondoggle, it is unlikely their regulators would approve Dominion’s plan while adhering to their fundamental consumer protection principles.

Dominion’s environmental regulator—Governor McAuliffe’s DEQ—is tasked with protecting human health and reducing climate change pollution. Dominion’s plan falls short here as well: depending on the approach, Dominion proposes to instead increase carbon emissions beyond Virginia’s final pollution target for new and existing plants by about 16 to 20 million tons in 2030, despite McAuliffe’s commitment to tackle climate change and reduce the state’s carbon pollution. (These pollution figures, while not included in the IRP itself, can be calculated using this compliance assessment tool.)

In conclusion, it’s the duty of state regulators in Virginia to protect both the pocketbooks and health of all of the more than 8 million Virginians. Dominion’s IRP would accomplish neither; it would only create a great deal of profit for the power company.

So when the SCC and Governor McAuliffe kick the tires of the pricey Ferrari Dominion outlines in its IRP, they’ll know a lemon when they see one.