A Fresh Start for Clean Energy in Virginia

There’s reason to celebrate in Richmond today, for both the climate and the consumer, as we turn the page on an outdated regulatory model that was becoming a drag on Virginia’s economy. 

Significant energy legislation now sits at Governor Northam’s desk for his signing that will vault the state out of the energy efficiency laggard category, with smart investments of over $1 billion in efficiency in the next decade. That will pave the way for the state to finally lower its rising electric bills, create the jobs that make the economy hum along more smoothly, and reduce costly climate change pollution from power plants.

Just as important, the state will see significant investment in cost-effective renewable energy development. This too will not only reduce harmful carbon pollution, it will slash fuel costs and move the state away from the old model of building carbon, capital, and fuel intensive fossil fuel based power plants.

Lastly, the law will give Virginia an exciting opportunity to modernize its grid by incorporating technology that maximizes the use of renewables, battery storage, and demand response, all to optimize the use of the grid for lower costs and lower pollution. These measures include the two-way information flow of smart meters, to send and receive the price signals to deploy the most cost-effective resources.

These three investment priorities—energy efficiency, renewable energy, and smart grid modernization—add up to a watershed moment in the Commonwealth. No more continued increases in unnecessarily high electricity bills to underwrite overpriced, fossil-and-fuel intensive central station generation that pads utility profits at Virginians’ expense. Virginia has decided to instead invest in the future of energy, which is already being achieved in many other leadership states. 

Before the final bill made its way to the governor, it underwent a series of changes, strengthening investments for energy efficiency, particularly for low-income customers, and protecting consumers from potential overcharges of certain project costs. Those improvements to the legislation puts Virginia in a much stronger position to advance energy efficiency measures, lower customer bills, and reduce climate pollution compared to the status quo.

The legislation is not perfect. Some consumer advocates contend the legislation doesn’t include a sufficient level of refunds of overearnings achieved by Dominion Energy as a result of the very ill-conceived “refund freeze” the utility foisted on the Commonwealth in 2015. The new bill does provide a $200 million refund back to Dominion customers for over-earnings, but some advocates would prefer the regulators at the State Corporation Commission (SCC) to determine the exact amount of money Dominion received from over-charging its customers and have that full amount refunded outright.

This is understandable as a matter of process. The SCC may very well have ordered more refunds than $200 million. It also could’ve ordered less.

In any event, it is important to weigh the incredible advances that will be made in Virginia in terms of energy efficiency and clean energy with this legislation, while also remembering the fact that Virginia’s regulatory regime was, until now, broken. That broken system resulted in higher costs (with Dominion bills increasing by a third over the last decade), and increasing levels of pollution in our air. Until today, utilities were greenlighted to build a seemingly endless succession of polluting, expensive power plants on the dime of everyday Virginians who didn’t need or ask for them. At the same time, the SCC (and sometimes the utilities themselves) refused to invest instead in a panoply of energy efficiency measures (think LED lightbulbs and weatherizing energy inefficient homes and businesses) that would have not only reduced costs and pollution, but would have eliminated the need for all those new power plants in the first place.

This law upends that outdated and old-fashioned business model, and will instead spur more clean energy, significantly increase investment on energy efficiency measures, including for low-income and multi-family residents, and truly optimize and modernize the electric grid. Overall, these will deliver greater consumer gains than simply returning those dollars to consumers and returning to that broken system.

It’s difficult to break the logjam of decades of regulatory complacency that steadily increased costs, even while the rest of the nation sees declining electricity cost and use. But thankfully, this legislation is the kind of sweeping measure that, with enough diligence and follow-through, should usher in genuinely transformative results.

Here are some specifics highlights of the legislation:

Energy efficiency

• Over $1 billion in investment in energy efficiency programs deemed by the SCC to be worthy of investment, with a significant portion dedicated to low-income customers.
• Eliminates the primary regulatory roadblock to increasing energy efficiency in Virginia, the harmful RIM test.
• Increases low-income energy efficiency investment by Dominion to $13 million per year.
• Creates a stakeholder process to ensure Virginia’s energy efficiency portfolio is robust and well-planned for maximum savings.
• Improved energy efficiency review process within the utilities’ regular Integrated Resource Plans.

Renewable energy

• 5,000 MW of solar and wind made priority generation resources, by being deemed to be “in the public interest.”
• Opens up Virginia’s growing solar market to non-utility businesses, by requiring that 25% of solar energy be third-party owned.
• Large distributed solar projects of up to 50 MW are declared to be “in the public interest.”
• An important offshore wind pilot project of 16 MW declared to be “in the public interest.”

Grid transformation

• Smart investment in a wide array of transformation projects must be approved by the SCC.
• Clears the way for battery storage pilot projects.
• Ensures smart grid transformation projects are not crowded out by grid hardening investment.