Last night, the House Labor & Commerce Subcommittee #3 narrowly (5-4, with Del. Mark Keam abstaining) passed Del. Cliff Hayes’ HB1664 (see video, below), which:
“Provides that, prior to January 1, 2034, (i) the construction or purchase by an electric utility of one or more offshore wind generation facilities located in federal waters that interconnect directly into the Commonwealth and having in the aggregate a rated capacity of at least 5,200 megawatts or (ii) the purchase by an electric utility of energy, capacity, and environmental attributes from offshore wind generation facilities described in clause (i) owned by persons other than an electric utility is in the public interest.”
Now, one might think that making “at least 5,200 megawatts” of offshore wind generation facilities “in the public interest” sounds great, right? Yeah…except that, when it comes to Virginia energy policy, particularly anything having to do with our old friends at Dominion, nothing’s quite as simple as it seems. In this case, here are some serious questions, concerns and issues, just for starters:
- This is a standalone bill on offshore wind, *not* part of a broader, comprehensive clean energy bill, such as the Virginia Clean Economy Act (VCEA) or Green New Deal (GND). Is there any reason to do it that way, rather than making broader energy policy for Virginia as a whole?
- The bill’s also aimed specifically at helping Dominion Energy project, which is probably why Bill Murray from Dominion was the first person speaking last night in support of the bill, not surprisingly in favor of the bill. That alone should raise major red flags, as it looks like the Virginia General Assembly feeding a monopoly utility’s bottom line. So here’s a question: does this bill give Dominion a blank check, or is there anything in here that requires Dominion to build this offshore wind in the most cost-effective manner?
- It’s good to hear offshore wind developer Ørsted’s representative refer to the need to “create the guard rails necessary both to ensure that projects are as cost-effective as possible, as well as making sure that the Commonwealth is extracting as much economic value out of these projects as it can,” it’s less reassuring that he also refers to “the language…still a work in process [sic].”
- Looking at that language, what I see is the following: “Any project found to be in the public interest pursuant to this section, subject to guidelines established by the Commission, shall (i) be subject to competitive procurement, (ii) involve at least one qualified developer, and (iii) demonstrate significant economic development benefits within the Commonwealth, including capital investments and job creation.” Is that sufficient to ensure that “projects are as cost-effective as possible” and/or that the Commonwealth “is extracting as much economic value out of these projects as it can?” Perhaps I just don’t trust Dominion, for whatever strange reasons (heh), but I’m…uh, skeptical, let’s just say.
- Also note that the representative from the Virginia State Corporation Commission (SCC) who spoke on this bill last night also gave me pause, as she talked about how the impact of this $7.8 billion offshore wind project on a typical residential bill in 2027 would be $13/month (or $156/year). And that would be the case “whether or not the offshore wind ever generates any electricity.” Wait, what?!? So Dominion can spend billions of dollars, charge it all to ratepayers, and not even generate any electricity? Such a deal! Or not.
- But seriously, why isn’t there some competition/bidding on this massive project? And how does the cost of this project compare to other U.S. offshore wind projects in early stages of development? Let’s look at Massachusetts, where in September 2018, “The winning bid was from Vineyard Wind, a joint venture of Copenhagen Infrastructure Partners and Avangrid Renewables, and one of 27 bids from three bidders (the three entities holding offshore wind leases off Massachusetts). And that winning bid was really—impressively—low…$64.97/MWh.” How will the cost per MWh of this project compare to that price, which, again, was in September 2018, and is probably even lower today?
- Another state up the coast, in this case New Jersey, in June 2019 also closed on an offshore wind project. The result: “Denmark’s Ørsted won New Jersey’s first offshore wind solicitation with a 1.1-gigawatt project known as Ocean Wind, the largest offshore wind project to secure a development deal with a U.S. state to date. Ocean Wind will be built 15 miles from the Atlantic City coast, with construction expected to begin in the early 2020s and finish in 2024. The New Jersey Board of Public Utilities said Ørsted will receive offshore renewable energy certificates* worth $98.10 per megawatt-hour in the project’s first year of operation, lifting the average residential customer’s monthly bill by $1.46. The project will generate enough renewable power for the equivalent of half a million homes.” So…I dunno, but this sounds both faster and cheaper ($1.46/month extra for a residential customer in NJ vs. $13/month extra here in VA) than what Dominion’s talking about. Why is that?
- Also, as the Attorney General’s representative said last night, they’re leaning to “oppose,” because of several concerns. Clearly, the AG “recognizes the benefits” – as almost all of us do – of large-scale offshore wind power development here in Virginia. BUT having said that, the AG’s office also noted that it has “a statutory duty to represent ratepayers.” And in that context, the AG’s office testified that the price tag for this project is VERY high – “equal to the current rate base value of all the company’s generation right now.”
- The AG’s office also said its “key concern” is with language in this bill which “deems upfront…all costs to be reasonably and prudently incurred and requires the SCC to approve cost recovery from customers.” As the AG’s office representative explained, “normally, utility commissions/regulators make factual findings and hold proceedings and they make the ‘reasonable and prudent’ determination, and that’s kind of the ratepayer protection before utility commissions.” In stark contrast, “this bill does away with that protection for what would be a first-of-its-kind project in North America.” Which means, if the project runs into problems, cost overruns, etc., “the ratepayer is on the hook,” even if the project doesn’t generate a kilowatt-hour of power. Right now, as the AG’s office explained, “all the risks are on the ratepayers” in this bill, and at the minimum it needs measures added to “spread that risk.” The AG’s office also referred positively the Fair Energy Bills Act (HB1132) introduced by Delegates Jay Jones and Lee Ware, which “would go a long ways towards helping kind of reset the company’s rates…”
- Let’s be clear: I’m deeply committed to moving Virginia to a 100% clean energy economy, with offshore wind development being a big part of that. BUT I am also deeply skeptical of anything/everything Dominion Energy does – and for very, very good reasons, after watching this company in operation for many years. Again, I’m also not clear why this is a standalone bill that seems designed specifically to give Dominion a blank check, and which doesn’t – for instance – push Dominion on energy efficiency, which as I’ve explained a million times, is the least-cost electricity generation resource. Unless and until all the problems in this bill are addressed and fixed, I’d encourage the Virginia General Assembly to reject it.
- The bottom line is the General Assembly needs to pass serious, comprehensive energy policy, not just standalone measures which feed a monopoly utility’s bottom line. Yes to wind power, no to blank checks for Dominion!