How to Rev Up Virginia’s New Climate Action Engine

Dominion Energy stripped the VCEA of its most serious, job-creating horsepower to get to carbon-zero in 2050: energy efficiency. Gov. Northam & the legislature must lower bills by restoring robust efficiency to the VCEA.

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The Virginia General Assembly made history this session in taking a huge, nation-leading stride toward curbing climate change by passing the Clean Economy Act (VCEA). With the Governor’s forthcoming signature, this transformative, far-sighted climate law will require Virginia’s power plants—most crucially Dominion Energy’s slew of new fracked gas-powered plants—to dial their carbon pollution down to absolute zero by 2050.

We can all celebrate this historic moment in Richmond. Tackling climate change head-on—and now—is the central humanitarian, public safety, and economic challenge of our generation. After years of inaction, moving to carbon-zero by 2050 is the kind of serious action we expect of our leadership.

But with that long-haul to zero by 2050 in mind, we also need to look under the VCEA’s hood to be sure its engine can go the distance.

Unfortunately, in the legislative process Virginia’s big new climate vehicle lost much of its primary horsepower—energy efficiency—essential for the long-distance drive to 2050. Energy efficiency is the best, cheapest, most direct, and most economy-and-jobs-boosting way to curb the dangers we’re seeing from climate change. And that’s why it was initially the VCEA’s primary means of driving carbon and bill reductions, all the way out to 2050.

However, when legislators should have doubled down on energy efficiency, they merely dabbled. But they have a chance to amp-up the Clean Economy Act in the next session. Let’s break it down. 

Most of the efficiency in early versions of the VCEA was gutted in the final measure. The most significant efficiency gains—those after 2025—were written out of the legislation entirely and instead punted to the State Corporation Commission (SCC) for a later, unknown decision on efficiency savings levels. The end result is a Clean Economy Act diminished to just one-fifth of the guaranteed efficiency savings it could have provided Virginia customers through 2030. Instead of creating certainty that efficiency is a permanent, long-term Virginia resource for the long-haul, the VCEA as passed is literally a half-measure, signalling to the utilities that a modest bump in efficiency through mid-decade will be enough.

So why would Virginia send our marquee climate vehicle off the assembly line with such a low-horsepower engine to get us to zero carbon in 2050?

The answer is unfortunately too simple: the domineering Dominion Energy didn’t like it, and Virginia lawmakers acceded, caving like they’ve done too many times before. We had hoped the new General Assembly would flex some muscle and stand up to Dominion, but sadly that didn’t happen on efficiency. Virginia’s utility business model is prehistoric—one under which Dominion’s pads profits by the more stuff they build and the more electricity their captive customers consume (instead of profiting off better, more efficient energy services for those customers).

Dominion’s death-grip on their Mesozoic business model is why, in total, at least 80% of the efficiency savings—and lower electricity bills—Virginians could have enjoyed over the next decade were stripped from the VCEA. This was a costly missed opportunity for lawmakers to send a long-term signal to our monopoly utilities, and one that was totally unnecessary. Dominion, like scores of utilities across the nation, could thrive on delivering major energy efficiency savings. But its dogged fixation on their outdated “build more-sell more” business model thwarted, for now, the opportunity for Dominion and Virginia’s economy to thrive and grow while delivering growing efficiency savings and lower total bills to their customers, all the way out to 2050.

The good news is this gutting of the bill can be partially fixed—immediately—by Governor Northam, by simply sending down an amended VCEA that restores some of the VCEA's efficiency horsepower. And for a more complete restoration of VCEA cost savings, legislators can deliver on their already-stated promise to revisit the hastily-finished package in 2021. That’s thankfully not too long to wait to fully restore the efficiency savings Virginians deserve, to not only drive down emissions cheaply but also deliver big cost reductions to Dominion’s captive customers.

Dominion’s VCEA Efficiency Reductions Hobbled Long-term Bill Savings and Local Job Creation

Dominion watered down what started as a deep commitment to efficiency as a permanent, foundational resource, to a modest near-term savings target, one moreover subject to an uncertain, SCC-directed standard post-2025.

That missed opportunity is hard to overstate. The post-2025 efficiency gains that Dominion Energy removed could have delivered average bill reductions of over $17 a month by 2030. And, by rewarding Dominion for delivering those customer service benefits, the VCEA in the process would have ushered in a low-carbon, low-cost approach, that would have freed the Virginia economy from our far costlier “build more -sell more” business model.

The pocketbook benefits would be mirrored by lowest-cost climate benefits: the VCEA’s original efficiency targets would have delivered over a third of the carbon reductions—from efficiency savings alone—required under Virginia’s 2030 RGGI reduction target; all while lowering the average household electric bill by over $17.

And because efficiency upgrades—like new insulation and HVAC upgrades—cannot be outsourced, we’re also blowing a key local job-creation measure (you can’t retrofit a Virginia home, church, bigbox store, apartment complex, or office tower from overseas).

Instead of these pocketbook, carbon, and job creation benefits, in their place are more meager provisions that will deliver additional savings that are only about one-fifth of those in the original package, or about $3.50 a month by 2025.

Dominion’s weakening amendments didn’t stop with stripping out the VCEA’s most significant, post-2025 savings. Dominion also watered down the VCEA with the insertion of a “double-counting” loophole that permits Dominion to meet about half of the 2025 standard with already-planned efficiency programs.

The 2018 Grid Transformation and Security Act (GTSA) required a relatively modest ramp-up of basic efficiency programs, in return for another massive, multi-billion dollar customer-funded spending spree by Dominion. Due to a definition change that Dominion tucked into the VCEA, Dominion’s efficiency commitment under the GTSA will meet about half of the (already watered down by Dominion) VCEA efficiency targets. The definition change does so by permitting Dominion to count savings from already-installed, business-as-usual  GTSA efficiency programs toward subsequent annual savings requirements. While it is absolutely fair for utilities to receive some credit for efficiency that lowers electric bills, watering down efficiency savings by half is simply a bridge too far: the extent of Dominion's “double dip” into previous GTSA commitments defeats the primary purpose of setting a new standard, which is to ensure monopoly utilities deliver additional bill reductions beyond what they would under already-existing law and commitments.

Thankfully, disallowing this efficiency “double dip” is easily rectified by a simple two-word Governor’s amendment to the VCEA.

The Governor and Legislature Can Make Simple CEA Upgrades to Rev VA’s Action Engine Back Up for the Long Haul to 2050

Even despite Dominion’s shenanigans in monkeying up the VCEA, make no mistake: the clearest long-term benefit of the Clean Economy Act is its 2050 zero-carbon marker. That landmark milestone remains intact and with all its teeth. Just as important, the VCEA still includes a multitude of cost-lowering, job-creating tools to help achieve that target over the long-term: rooftop solar, utility scale solar along with big land-based and offshore wind, battery storage, factoring in the society-wide cost of carbon pollution in future resource decisions. The transformative potential of these resources and policies cannot be overstated, and must be celebrated.

But despite having that solid chassis and a clear roadmap to 2050, the Clean Economy Act still came off the line missing its most serious horsepower for a three-decade long-haul. That is why robust, post-2025, and permanent energy efficiency targets must be restored to the VCEA.

Thankfully, legislators are well aware that they sent the VCEA out of the garage with key customer-protection components missing, and that they’ll need to do some significant but straightforward fixes under the hood when they join us back in Richmond next year. They can do just that, first and foremost, by fully restoring post-2025 efficiency standards, to tell Dominion loud-and-clear we expect them not just to dabble in energy for the next few years, but to double-down, permanently, on customer bill savings and the cheapest carbon reductions.

In the meantime, for a more immediate fix in the next few weeks, the Governor must amend Dominion’s efficiency “double-dip” with a few key phrases, to fully restore efficiency as the near-term engine to drive both carbon and costs down, and local job creation up.

With quick action from the Governor, and subsequent 2021 action from the legislature next session, Virginia can finally get serious about efficiency. In doing so, Virginians will have even more cause to celebrate climate action that delivers not just lower carbon, but lower costs to all.

About the Authors

Walton Shepherd

Virginia Policy Director, Climate & Clean Energy Program

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