Regional Greenhouse Gas Initiative (RGGI) Involves Some Costs for Electricity Bills

Regulators approve Dominion bill increase for participation in carbon trading network

From an Article by Sarah Vogelsong, Virginia Mercury, August 5, 2021

Virginia utility regulators on Wednesday signed off on the costs of Dominion Energy’s first year of participation in a regional cap-and-invest program for carbon emissions from power plants, which is expected to increase the average residential customer’s monthly bill by about $2.39.

But while concurring with the opinion, Judge Judith Jagdmann warned the General Assembly of “potential costly duplications that may impede” the legislature’s goal of making the state’s electric grid carbon-free by 2050.

Wednesday’s order from the State Corporation Commission, which oversees the state’s large electric utilities, approves nearly $168 million in costs Dominion expects to accrue as a result of purchasing carbon allowances in auctions held by the Regional Greenhouse Gas Initiative between Aug. 1, 2021, and July 31, 2022.

Under RGGI, participating Northeast and Mid-Atlantic states agree to a cap on the number of allowances available at auctions, with each allowance covering one short ton of carbon dioxide emissions and the cap decreasing annually. Those allowances are then auctioned off four times a year to electric plants with a capacity of 25 megawatts or more, and the proceeds are distributed back to the states where the plants are located.

In Virginia, state law directs 50 percent of auction proceeds to low-income energy efficiency programs and 45 percent to the Community Flood Preparedness Fund, which assists localities and residents in dealing with recurrent flooding and sea level rise.

While Gov. Ralph Northam’s administration estimated in 2020 that the state would receive about $100 million annually from RGGI, high allowance prices in the last two auctions have quickly outstripped projections, netting Virginia $89 million overall.

Joining RGGI was one of Virginia Democrats’ top-line environmental goals when they assumed control of the General Assembly in 2020. Republicans in the legislature had previously blocked the effort.

Cost estimates for participating in the program have varied widely over the years.

State Corporation Commission Judge Judith Jagdmann (Photo by Ned Oliver/Virginia Mercury)
In 2019, the State Corporation Commission estimated participation would cost the average residential customer an extra $7 per month. The Virginia Department of Environmental Quality said it would save such a customer 54 cents per month. In February 2020, when the General Assembly was debating RGGI, senior Dominion Energy executive Bill Murray quoted an average monthly cost of $1.22 for the first five years of participation.

By the time Dominion filed its application to recover costs with state regulators, the estimate had settled at $2.39 per month.

Through 2045, when the Virginia Clean Economy Act mandates that 100 percent of the power Dominion generates must come from renewables and nuclear, RGGI participation will cost an estimated $3 billion for Dominion’s Virginia ratepayers, according to utility and commission staff calculations.

These costs “are in addition to the requirements and associated costs” of the Virginia Clean Economy Act, which are expected to be significant, Jadgmann notes in her concurrence.

Among its provisions, the VCEA calls for the utilities to develop more than 16 gigawatts of solar and onshore wind, as well as more than 5 gigawatts of offshore wind and almost 3 gigawatts of energy storage, while transitioning their fossil fuel-dependent fleets to renewables.

The consideration of RGGI costs “raises the question of the need for two separate and distinct modes for achieving carbon reduction,” wrote Jagdmann.

Because “the VCEA plainly states that” Dominion will need to source all of its energy from renewables by 2045, “it remains unclear whether the significant cost required for participation in an additional cap-and-trade program — which is expected to cost customers billions of dollars — are necessary for Dominion’s and Appalachian’s ratepayers to bear in order to achieve the General Assembly’s carbon reduction objectives,” she said.

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See also: The Regional Greenhouse Gas Initiative Is a Model for the Nation | NRDC, July 14, 2021

Since its 2009 launch, RGGI has saved consumers hundreds of millions of dollars on energy, with billions more in savings to come; created thousands of new jobs; and improved public health while helping to cut carbon pollution from the region’s power plants in half. RGGI’s well-documented success shows how flexible, market-based approaches to cutting power plant pollution benefit everyone. The program is a model for other states and regions hoping to reap economic, health, and social benefits in the transition to clean energy that we need to solve the climate crisis. Because the RGGI states have agreed to continue cutting carbon pollution through at least 2030, the program’s many benefits will continue for years to come.