Gov. Glenn Youngkin’s administration is seeking a regulatory route to remove Virginia from the Regional Greenhouse Gas Initiative by the end of next year. The reason? Utilities are passing on to consumers costs associated with participation in RGGI.
One legislator, however, wants the General Assembly to change how utilities such as Dominion Energy pass along those costs, asserting that adding them to the base rate could help customers by prompting more scrutiny from regulators. RGGI is composed of 11 states in which energy producers trade emission reductions for credits or they buy credits to emit carbon dioxide past a capped amount. The goal, proponents of the market say, is to incentivize energy providers to use fewer fossil fuels over time. In 2021, Virginia received $228 million for flood protection and energy efficiency programs.
Current state law has allowed Dominion Energy to pass the costs on to its customers. The Youngkin administration says this is just cause to exit RGGI.
At a recent presentation to the state’s air pollution control board, Travis Voyles, acting secretary of natural and historic resources, called RGGI “an unnecessary economic and regulatory burden for Virginia.”
Dominion has recovered costs through a rate adjustment clause attached to customers’ monthly bills. These clauses are colloquially referred to as “riders.” Dominion estimates that the RGGI rider averages out to a $2.39 increase to monthly bills.
“There’s no free lunch. Any regulated utility is going to pass every single cost that it has on to ratepayers,” said Walton Shepherd, policy director with the Natural Resources Defense Council.
But those costs could be reflected in customers’ base utility rates rather than an added expense, he said.
At a recent air pollution control board meeting, member Lornel Tompkins pondered why Youngkin is targeting Virginia’s participation in RGGI rather than finding a solution to the riders first.
“A lot of the issues with RGGI are based on the General Assembly’s direction and laws or rules to operate,” she said.
“Why are we not going after the General Assembly to change the rules rather than taking away something from the state that is turning out by some factors to be a positive?” she added.
This is why Del. Sally Hudson, D-Charlottesville, thinks the General Assembly could work on legislation to require Dominion to recover RGGI compliance costs through its base rates.
“Any legislator who is serious about lowering the cost to customers of RGGI should support legislation to put RGGI in the base rate,” Hudson said.
It’s also something the company is already doing since it halted the RGGI rider this summer.
In its filing to the SCC asking for the suspension, Dominion wrote that its request “is driven by the anticipated withdrawal of the Commonwealth from the RGGI program and the interests of its customers in reducing [rider] related charges.”
The Richmond Times-Dispatch reached out to Dominion for comment on why it requested a suspension of its RGGI rider. Spokesperson Craig Carper declined to comment on that specifically, but said that the company is “focused on operating reliably, safely and affordably.”
He added: “We are proud of having rates below the national average, strong reliability and a leading clean energy portfolio.”
Some say suspending the rider means that Dominion might not have needed to implement it in the first place.
“The law may technically allow a surcharge, but this filing shows it was never necessary,” Will Cleveland, a senior attorney with Southern Environmental Law Center, said in a statement at the time.
“If Dominion really cared about its customers, the monopoly would have complied with Virginia’s carbon-reduction program all along without any increase in customer costs,” he continued.
Requiring RGGI costs to stem from base rates would be more fair, Hudson said.
That’s because the utility is subject to State Corporation Commission review every three years. The triennial reviews can assess if the company has been charging too much or too little.
Last year, it was reported that Dominion had earned more than $1.1 billion over a fair profit from 2017 to 2020 — resulting in refunds to customers.
Youngkin’s bid for a regulatory route is his latest attempt to remove Virginia from RGGI.
He first signed an executive order in January calling for the development of an emergency regulation for the air board to vote on, in an effort to pull Virginia out of the initiative. Environmental and legal groups argue that it’s actually the General Assembly’s purview to remove Virginia — not the governor’s.
RGGI is among a slate of environmental laws that Democrats passed when they held the majority in the House and Senate. Republicans took control of the House in the 2021 elections.
“Democrats have long advocated for clean energy and affordability,” said House Minority Leader Don Scott, D-Portsmouth. “We will focus on ensuring the policies we have passed will not be unwound.”
Should efforts to remove Virginia from RGGI clear the Republican-controlled House, Democrats hold a 21-19 edge in the Senate.
Meanwhile, the air pollution control board is composed of gubernatorial appointments on staggered terms. Youngkin’s forthcoming regulatory process could end up with an air board vote in his favor.
Shepherd of the Natural Resources Defense Council anticipates legal challenges would soon follow.
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