Al Weed | Does renewable energy in Virginia have to gouge the public?

Virginians want immediate government action to reduce greenhouse gas emissions. A recent survey by the Miller Center at the University of Virginia found that 55 percent of Virginians who see carbon emissions as a manmade problem, “strongly support” requiring electric utilities toproduce sizable amounts of renewable power. This would be power from sustainable sources such as solar, wind, biomass among others. Public support for renewable energy has led, in state after state, to mandatory renewable energy goals. Compared to other states, where utilities are leading the charge towards cleaner energy, our power companies are dragging their feet, when not actively obstructing progress.

Back in 2007 it had become clear that deregulation was not going to bring lower cost energy to consumers. Wary of another Enron, Virginia’s legislators reversed moves to open our energy market. They passed a bill that “re-regulated” the production and distribution of electricity in the Commonwealth. As always under regulation, utilities would be guaranteed to be able to charge enough to receive a fair rate of return on their investments. Yet legislators, influenced by the state’s utilities, approved a bill that gave away the farm on renewable energy production and competition.

After conservation and efficiency, the only way to reduce greenhouse gases is to use less coal and oil fueled energy. Virginia utilities should be fully capable of competing when everyone’s carbon emissions are limited, but they will need to be required to meet renewable energy goals and allow competition as much as possible. If renewable goals are not mandatory, few producers will make the investment needed to develop alternative energy. Limited investment means less competition which means higher prices. Bingo, say the utilities, renewable energy is just too expensive for our customers.

Much of this expense is driven by incentives from legislators to encourage utilities voluntarily to produce renewable energy. These surcharges amount to an out-and-out bribe. A bribe, moreover, made with

consumers’ money. Worse yet, since large industrial users are exempt from these surcharges, average families will pay the largest share of the bribe.

After “re-regulation” the State Corporation Commission, which sets utility rates, looked at the impact of voluntary renewable energy goals on customers of Appalachian Power. They stated that the incentives of this program could cost over $60 million more when compared to mandatory programs that some 25 other states have in place. Customers of Virginia Electric Power, by the same formula, would be paying over $350 million more. These are profits above and beyond the “fair rate of return” guaranteed.

If this weren’t enough, the same “re-regulation” process set back moves to make available 100 percent renewable energy to all Virginia consumers. Any company that offers a 100 percent renewable energy option may now exclude all competition from its service area. In 2008, Appalachian and VEPCO – the state’s two largest utilities – sought permission from the SCC to establish renewable energy monopolies.

The SCC rightly said that the energy choice these utilities were offering might make customers feel better, but did not represent 100 percent renewable energy. Still, with this anti-competitive provision in place, other renewable energy providers are reluctant to develop new customers when their efforts could be torpedoed by just one SCC approved filing. If Virginia is going to respond to the challenge of climate change our utilities will have to take a leading role. They will do this when the rules are changed to mandate development of renewable energy and conservation as the cost of doing business. We will all benefit when competitors are free to deliver the most efficient forms of alternative energy. It is heartening that at least two of the candidates for governor support mandatory renewable electricity goals.

 

– Al Weed is the chairman of Public Policy Virginia, a Charlottesville-based think tank working on climate change issues.


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