The Virginia clean energy movement is at a crossroads. Proponents of clean energy in the Old Dominion must now choose to either team-up with monopoly utilities against customers, or unleash competitive forces that empower customers and lower the cost of clean energy procurement. On March 9, Virginia took a disappointing step towards the former when Governor Ralph Northam signed a sweeping energy bill into law. However, forward-looking companies have quickly followed with actions that provide a glimpse of a more promising future.

Spearheaded by Dominion Energy, Virginia’s largest monopoly utility, the new law erodes the ability of state regulators to police billions in utility expenditures and issue refunds to customers. Environmental and consumer groups initially decried the bill as allowing Dominion to regulate itself, but utility companies were able to gain support for the package by inserting measures to scratch the backs of clean energy advocates and a narrow set of key consumers. The package ultimately deemed 5.5 gigawatts of renewable energy in the public interest. However, this new policy is even worse than the flawed system of regulated monopolies – it circumvents the regulatory process that provides a degree of factual judgment as to whether new utility spending is in the public interest.

A key motivator behind the new law was to rescind a 2015 law that suspended regulatory review of utility rates. The old law allowed monopoly utilities to overcharge customers, rather than permit the Virginia State Corporation Commission to review and adjust rates to reflect the actual cost of service. While the new law grants $200 million in rate credits for Dominion customers, this falls well short of the $328 to $705 million in excess charges estimated by the Commission. Additionally, under the new law, excess charges can be directed towards investment in renewable energy or grid modernization, rather than going back to the customers.

Although ending the 2015 law is beneficial, the new law leaves the regulatory apparatus in worse shape than before 2015. The Virginia Poverty Law Center, a nonprofit advocate for low-income Virginians, noted that the new law leaves the Commission, “bound up with some very strict accounting rules and gives the utility ways to manipulate its profit margins and manipulate its spending so it will never be found to be excessive. It’ll never be ordered to refunds. It’ll never be ordered to cut its rates.”

While the new law puts clean energy advocates at odds with consumer advocates, a pathway to align customer and clean energy interests emerged last week. On March 21, Microsoft announced the largest corporate solar agreement in the country with two projects in Virginia. The company will serve as the anchor tenant, purchasing 315 megawatts of the 500-megawatt solar development. This win-win achieves the company’s internal energy goals and lets sPower, the competitive project developer, provide cost-competitive offers to other Virginians. Rather than socializing project costs and risk on captive customers through government decree, this voluntary action puts private capital at risk and expands low-cost clean energy choices for customers.

This is a move Virginia politicians should pick up. States with competitive generation markets drive innovative investment in low emissions technologies that rapidly drive out old, dirty generators. In turn, this competition is lowering customer bills and expanding their options. To the extent some forms of clean energy remain more expensive, states with retail customer choice ensure that only those willing to pay the green premium do so. As customer preferences evolve, this willingness is growing and competitive markets are lowering the premium.

Power brokers are salivating at the opportunity to open up Virginia to competition, as alternative suppliers can beat the rates of monopolies handily. Virginia is already a nominal retail choice state, but aggregation requirements and a five-year minimum stay rule create barriers to entry that stifle participation. Reduction or elimination of these barriers would be a good first step and an incremental gain for consumers and the environment. But Virginia should not stop there.

The key to aligning Virginia’s environmental and economic goals runs through competitive markets, not the coercive power of the state and utility cronyism. Ultimately, the state should free captive customers from the burdens of monopolies and let market forces determine supply arrangements. The only economic justification for monopoly regulation is for the transmission and distribution of electricity, and even those roles should use competitive procurement and explore transactive platform approaches.

It is time to reform Old Dominion utilities in a manner that puts them in their proper role – managing wires only. Doing so will give customers more choice and drive investment by competitive suppliers. If Virginia is to pursue an affordable clean energy future that fuels emissions reductions and economic development, the Old Dominion must embrace new competition and good governance.


Image credit: Casimiro PT



Featured Publications