Home Climate change Biscuit Eaters, Ratepayer Regulation, and Virginia

Biscuit Eaters, Ratepayer Regulation, and Virginia

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by Morris Meyer

I was asked today about the Virginia Clean Economy Act (VCEA) repealing the 2018 SB 966 Grid Transformation and Security Act (GTSA) [1] and how that would affect energy efficiency. Utility code for rate-based regulation is thick and requires the skills of an energy engineer, a utility regulation lawyer, and an energy economist, to understand the implications of changes that are put into our utility code.

I will try to describe this in layperson terms.

Biscuit Eaters

Utility regulation has been complex and ratepayers have been on the back foot from the beginning.

From “Coal Wars: The Future of Energy and the Fate of the Planet” [2]

The energy crisis of the 1970s caused retail electricity rates to soar and drive utilities to embark on a huge program to build new power plants that burned domestic fuels – mostly coal and uranium.   As the capital costs of all that construction rose, regulators approved further hikes in electricity rates, leading to a vicious cycle of price increases and overbuilding, and sending several big IOUs to the brink of bankruptcy.  “Rate cases” – the process by which utilities appeals to regulars for price hikes to business and consumers — became drawn-out and contentious.   Utility lawyers profited, but electricity users (dismissive referred to as “ratepayers” or, in the immortal phrase of Witt Stephens, the Arkansas tycoon who made his first fortune at Arkansas Louisiana Gas Company, “biscuit eaters”) did not.  By the 1990s it was clear the system was broken.

Utilities, as large corporations have throughout the history of capitalism, responded with a wave of consolidation and acquisition that created an industry landscape similar to that of the reviled holding companies of the 1920s, where a few big power companies control power generation and wholesale electricity transmission across multistate regions.

Most electricity subscribers get charged for fuel (without profit).  Dominion has a guaranteed return on equity (shareholder profit) for generation, distribution, transmission, a wide range of riders.

Virginia Clean Economy Act

The Grid Transformation and Security Act (GTSA), passed in March 2018, has numbers for renewable energy (RE) and energy efficiency (EE) expressed in the terms “in the public good,” which gave legislators the warm fuzzies about having good things in the utility code, but without the time certain year by year that would drive real development.

So in the year afterward, Dominion – in its presentation to investors in August 2018 – only projected 240 MW of solar over three years.  80 MW per year for three years, against a 5,500-MW buildout, is less than one sixth of the rate to hit the full target.  See page 12 [3].   Having precision *and* target dates is vital.

So repealing the GTSA and inserting hard targets for RE and EE is much better than what legislators put together in 2018: namely “here’s some numbers Dominion, you figure it out”.

Note that the transmission underground provisions of GTSA got pulled out into SB 782 (Saslaw) [4].

The Virginia Clean Economy Act (VCEA), which has been introduced this General Assembly session, is much improved in terms of energy storage as compared to GTSA.  GTSA had pilots of 30 MW for Dominion and 10 MW for Appalachian Power (ApCo) that were only allowed by the utilities.  Dominion has applied for small pilots with the State Corporation Commission (SCC), but in comparison to the energy storage industry in the US, Dominion is years behind the curve.

VCEA repeals the GTSA with code that specifies that “That the eleventh enactment of Chapter 296 of the Acts of Assembly of 2018 is repealed”.   Chapter 296 is the GTSA enacted in 2018. [5]

The VCEA repeals dipping toes in the energy storage market for 2,400 MW that can be put onto the grid by the IOUs, their customers, third parties, or any combination of the three.  Energy storage is critical to allow uptake of variable RE (VRE) on the grid without peaking plant backup.

California won’t build another gas peaking plant ever, as plentiful VRE in combination with energy storage allows that state to use most of the RE without curtailment.  Note that energy storage in VCEA has provisions for thermal storage, which could cover data centers making ice at night and using that ice to cool down the data center during a hot summer day.  This would be a huge boon to shave summer daytime peak load, saving ratepayers money, and helping dispense with the need to build new gas plants for a handful of peak load hours.

Having energy storage with RE unlocks a distributed VRE grid.  A solar farm output looks like a bell curve with bites taken out of it when clouds go over.  A bit of storage smooths out the curve.  A bit more storage forms the curve extending output toward evening peak load.  Four hours of storage turns solar into firm capacity.

Adding day-ahead weather forecasting turns solar into a dispatched, firm capacity commitment that can go into the day-ahead capacity stack.

The 5,200-MW offshore wind generation in the VCEA, coupled with the already existing 3,000-MW Bath County pumped-storage hydro, is the big brother to distribution scale VRE with storage in Virginia.

Electric school buses charging vehicle-to-grid allows a school district to become a virtual power plant, by combining solar generation on school roofs with electric school bus charging stations to create a leveled, and scheduled VRE load.

Regarding repealing GTSA for the VCEA, the firm year-over-year buildout targets with penalties will move Dominion toward a cleaner grid future.

A well-described set of aggregate decarbonization steps will allow Virginia’s load serving entities to focus on renewable generation investments.

Dominion Moves

Beyond the vehicle-to-grid school bus initiative, Dominion has a few other spots of innovation that are positive and one that is entirely negative.

The market based rate tariff that allows Dominion customers to procure PJM power and deliver it to substations.  [6]. Approve.

Their residential time-of-use tariff seems particularly suited to residential storage applications. [7]. Approve.

Note that there are literally a few dozen folks in the Commonwealth that understand Dominion’s areas of innovation.  Someone needs to let these folks out of the cave.

Dominion has also pushed for a renewable energy tariff called Rider TRG that is running wood waste through coal plants.  Cutting down and burning up Virginia’s forests is not clean energy. [8]. The biomass provisions in SB 817 and SB 828 need to be pulled out.  Soot from burnt coal waste darkens glacial ice and accelerates climate change.  [9]

Performance Based Regulation

If you are weary of fighting over the specificity of utility code arcana over rates, there is an alternative that allows legislators to put value-based metrics into the Virginia code such that the Commonwealth load serving entities are incentivized to hit those metrics to earn profit,

Performance based regulation (PBR) lets legislators codify values to incentivize the utility with profit when they meet those value based metrics.

NREL has three reports on Performance Based Regulation.  [10] [11] [12]

Next Generation Utility Models

For an extra credit peak at what utility models might have in store, the New York Energy Research and Development Authority (NYSERDA) is a model to investigate.  NYSERDA provides stand up programs for utility model pathways that are being put into practice. [13]

A decentralized, distributed, digitalized, and democratized model is explored in [14] [15] [16][17].

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