VIRGINIA CLEAN ECONOMY ACT SUMMARY & ANALYSIS OF MAJOR PROVISIONS

Virginia Grassroots Coalition Clean Energy Working Group

Engrossed
HB1526 February 10, 2020 Engrossed Version Bill lines Comments & Comparison to Original Bill
Energy Efficiency
Energy Efficiency Requirements. EE requirements, based on 2019 energy sales, for (a) 56-596.2.C SENATE Version Weaker. Increases EE targets
Dominion beginning in 2022 (.25%) to 5% in 2025 & (b) ApCo beginning in 2023 (.5%) to 2% in LL: 1784- based on 2019 energy sales for (a) Dominion
2025 1806 beginning in 2022 (.25%) to 2.5% in 2025 & (b)
ApCo beginning in 2023 (.5%) to 1% in 2025

SCC Oversight. Utility must provide to SCC proposed budget for design, implementation and 56-585.1 Original bill had no provisions for pilot program
operation including anticipated savings from each EE program. SCC shall approve petition for LL: 542- nor automatic determination of public interest,
EE program if it finds program in public interest. Permits pilot programs which are deemed in 552; 566- which in effect, removes SCC approval
the public interest if limited in scope and intended to determine whether a new program 569 authority.
would be cost effective.

Limits on Construction of Carbon Emitting Facilities. Prohibits SCC approval of construction LL: 593-633;
new utility-owned generating facility that emits carbon unless (1) utility has already met the 707-710
EE requirements; (2) SCC finds that supply side resources are more cost effective than
demand-side or energy storage; (3) SCC finds no threat to reliability of electric service.

Stakeholder Process. In developing portfolio of EE programs, utilities must use stakeholder LL: 1807-
process facilitated by independent monitor to provide “input” on (1) development of 1829
portfolio; (2) compliance with EE saving percentage requirements, (3) recommendation for
policy reforms to ensure “maximum and cost-effective” deployment of EE technology (4)
identification of best practice to evaluate and verify compliance with EE savings
requirements. Utilities required to use third party to evaluate and measure services to
determine net annual savings & total customer bill savings among other items. Findings must
be made in an annual report to SCC

Incentives for Exceeding EE Targets. Incentivizes utilities to exceed EE targets by allowing LL: 570-586
additional 20 basis points for each additional incremental .1% in any year above its cost
recovery and margins.
1
Requires large industrial customers to pursue EE goals. LL: 600-633

Renewable Generation
SUMMARY. Establishes annual requirements for utilities to generate renewable energy
through a mandatory Renewable Portfolio Standard (RPS) with 100% renewable generation
by utilities (by 2045 and 2050 depending on House of Senate bill); 5200 megawatts of
offshore wind; 16,100 megawatts of wind and solar with 1% from rooftop solar.

Phase Out Schedule for Carbon Generating Sources. Starting in 2021, energy from 56-585.5.C Improves Senate Bill which requires Dominion
renewable sources ramps up to 41% by 2030 and 100% by 2045 for Dominion; 30% by 2030 LL: 1339- to reach 100% by 2050.
and 100% by 2050 for APCo 1375
All retail suppliers much procure RECs from renewable energy standard “eligible sources.” LL: 1302- Engrossed bill appears to weaken the RPS in
1338 several ways. It removes Tier System in original
Renewable Energy Standard Eligible Sources: solar, wind, falling water – located within VA or bill which established (1) eligible renewable
PJM; waste to energy or landfill gas-fired generating resources in VA (but not forest or woody energy sources by category/tier and (2)
biomass); biomass-fired facilities operating in Commonwealth (1/1/20) that supply no more percentages the utilities must procure from each
than 10% of annual net electrical generation to the grid or no more than 15% of useful tier on an annual basis based on the size of
energy to any facility other than the manufacturing facility to which the generating source generation facilities (distributed, utility) and
is interconnection. location (in VA or in PJM.) Preference was given
to (1) sunlight, wind, anaerobic digestion and
Transition period from 2021-2024 where Renewable Energy Certificates (RECs) may come (2) facilities located in Virginia through annual
from renewable energy facility, defined in 56-576, as sunlight, wind, falling water, biomass, percentage purchase requirements established
sustainable or otherwise, energy from waste, landfill gas municipal solid waste, wave motion, for each tier. Biomass excluded as eligible
tides, geothermal – does not include energy from coal, oil, natural gas, nuclear power. renewable energy source. Tiering system
Includes the proportion of the thermal or electric energy from co-firing of biomass. During provided transparent, and enforceable tracking
transition period and thereafter, prohibits RECs come from renewable thermal energy mechanism.
facilities or energy equivalent facilities, biomass fired facilities outside the renewable thermal
energy facilities or energy equivalent facilities, biomass fired facilities outside the Give Away for Paper Plants. Rather than
commonwealth or biomass-fired facilities operating in Commonwealth (1/1/20) that supply banning biomass outright, there are specific
10% or more of annual net electrical generation to the grid or 15% of useful energy to any carve outs for West Rock and International
facility other than the manufacturing facility to which the generating source is Paper. Paper companies that burn biomass can
interconnection. get credited with eligible RECs that meet RPS
requirements. Carve outs appear to be in
perpetuity & were not in original bill.

2
Beginning in 2025 – retail suppliers may use only RECs from RPS eligible sources. LL: 1381-
1384
Rooftop Solar must comprise 1% of RPS beginning in 2021 LL: 1377-
1380
Beginning in 2025 – 75% of RECS used by Dominion must come from resources located in LL: 1381-83
VA
Mandatory New Zero Carbon Generation Capacity & Cost Recovery. Between 2024-2035, 56-585.5.D Engrossed bill does not appear to have a
Dominion must construct or acquire 16,000 megawatts of sun or onshore wind generation LL: 1399- requirement that energy produced from new
capacity. (ApCo also has mandatory provisions) 1467 zero carbon generation will be used in Virginia.
RECs could be sold to markets, such as DC,
Should utility construct/acquire zero carbon generation facility and energy storage, utility willing to pay a premium
SHALL recover costs of such facilities either through rates or through Rate Adjustment Clause.
Original bill prohibited recovery of such costs
unless transparent, competitive solicitation
process and SCC finds such costs to be
reasonable and prudent. (56-585.2.F)
Engrossed bill appears to removes SCC review of
whether costs were reasonable and prudent.
Third Party Competition for Mandatory New Zero Carbon Generation Capacity. Both LL: 1412-
Dominion and ApCo must acquire 35% of mandatory new zero carbon generating capacity 1467
from facilities owned by 3rd parties.
Adding More Zero Carbon Generation Capacity. Utilities can construct/acquire additional 56-
zero carbon generation in excess of megawatt requirements, BUT subject to SCC review (56- 585.5.D.3;
580 and 56-585.1). SCC must “consider” factors including customer costs and whether need LL: 1473-
can be more affordably met through demand-side or E storage. 1480
Annual RFP for New Solar and Wind Resources. Utilities must undertake Annual RFP for new 56-
solar and wind resources. RFP must quantify need for energy capacity or RECS. RFPs must 585.5.D.3;
include specific items including determining the environmental impacts on air quality and LL: 1481-
carbon intensity of utility’s generation portfolio 1499
Annual Plan. Utilities must submit an annual plan between 2020 and 2040 and petition for 56-
approval for development of new solar and onshore wind generation and how it will meet 585.5.D.4;
energy storage project targets. LL: 1500-
1511
Deficiency Payments. If utility fails to meet RPS requirements, or if the cost of the RECs 56- Original Bill - Deficiency payments were tied to
necessary to comply exceed $45 per megawatt hour, then utility must pay $45 for each 585.5.D.5; tiers and were higher; utilities could NOT
recover those costs.
3
megawatt hour shortfall. Deficiency payments for failure to procure RECs for solar, wind, LL: 1512-
anaerobic digesters in VA - $75 per megawatt hour for resources 1 megawatt and lower. 1520
Deficiency Payment Proceeds go to DMME (1) 50% job training in historically disadvantaged 56-
communities; (2) 16% EE for public facilities; (3) 30% for renewable E programs in historically 585.5.D.5;
economically disadvantaged communities; (4) 4% admin costs LL: 1520-
1527
Falling Water Exemptions/Exceptions. In a sleeper provision, Dominion and ApCo are LL: 1333- Engrossed bill allows a variety of hydro-projects
permitted to count falling water projects in the PJM (outside of Virginia), as of 1/1/20, as 1338 located outside of Virginia to be counted in
qualifying as a Virginia located resource. perpetuity as meeting qualifying RPS
requirements. These projects were explicitly
phase out in the tiered system – falling water
For non-Phase 1 or Phase 2 utilities (ApCo & Dominion) Permits utilities to use RECs from exception does not add to increasing the
facilities that use hydro equal to or less than (1) 2.9% of total electric energy sold each year LL: 1316- amount of renewables that reduce carbon.
from 2021-2035; (2) 3.5 % of total electric energy sold each year from 2036-2042; (3) 4% from 1338
2043-2050
Retirement of Coal and Gas-Fired Generation Plants
12/31/24. Retire all generating units, 500 megawatts or more “principally” fueled by oil and LL: 1284- Exceptions weaken retirement of coal and gas-
all coal fired generating units. EXCEPTIONS: coal fired units jointed owned by coops or 1296 fired generation plant provisions. Need list of
owned/operated by Dominion in “the coal field region that co-fires with biomass.” plants that benefit from these exceptions.

12/31/28. Retire all biomass-fired generating units that do not co-fire with coal.

12/31/45. Retire all coal-fired generating units located in coalfield region that co-fires with
biomass. EXCEPTION. No retirement if facility can demonstrate at least 83% reduction in
carbon through capture and sequestration.

Catch All Exception. Utilities may petition SCC for relief if retirement would “threaten the
reliability or security of electric service to customers.” SCC “shall evaluate reliability” on case-
by-case basis.
Offshore Wind
Declares that 5200 megawatts of offshore wind by 2034 is “in the public interest.” 56- Original bill was significantly better in all
Dominion is entitled to cost recovery provided that the SCC determines they are reasonable 585.1:11; aspects.
and prudent. LL: 1195-
1263 Required Dominion to construct or purchase at
least 5200 megawatts of energy from offshore

4
 wind and place 2,600 megawatts into service by
2030.
Cost Recovery & SCC Review. SCC is required to determine whether costs are reasonable and LL: 1202- SCC authority to review approve costs is
prudent. However, costs are deemed reasonable and prudent if Dominion has complied 1220 essentially eviscerated. It must approve the
with competition solicitation requirements and the projected total levelized cost of costs submitted by Dominion provided they
energy….does not exceed 1.6 times the comparative cost… of a combustion turbine meet an absurdly high cost cap.
generating facility…
Original bill established that projects were
reasonable and prudent provided that (1) the
projects were subject to the bill’s comprehensive
competitive procurement procedures; the
developer met the bill’s qualified developer
requirements; Dominion diligently followed the
evaluation criteria and applied selection criteria
required by SCC regulations; the project provides
an equitable balance of risk and reward to
ratepayers, utility, and developers.

Cost Formula. While the full provision in bill is

technically complex & difficult to understand, it
clearly makes an improper cost comparison to
combustion turbines resulting in a much more
expensive megawatt/ hour than comparing it to
other offshore wind projects. If a comparison
were made to other offshore wind projects
operating in the US, it would reduce the costs
considerably.
Non-Bypassable Charge. Cost recovery allocated to all utility customers except low income, LL: 1221- This regressive charge is assessed regardless of
as a non-bypassable charge. 1224 the amount of energy a ratepayer uses from the
grid. If a ratepayer relies on 100% distributed
energy, for example, that ratepayer must pay
the full freight of the wind generation.
Competitive procurement. Competitive procurement is required for a “substantial” majority Original bill required highly detailed
of services and equipment associated with construction, involve 1 experienced developer, & competitive procurement process: (1) required
demonstrate econ development benefits to VA. (No SCC oversight of procurement process or Dominion to conduct annual solicitation to
detailed criteria) purchase from qualified developers RECs for a

5
 qualified offshore wind project; (2) established
factors to be addressed in each solicitation
including (a) detailed plans for securing permits,
interconnection approvals; engineering,
construction; (b) expected annual energy
production verified by 3rd parties etc; (c) budget
for each step of the process; (3) analysis of
impact on energy costs and rates and specific
planning procedures.

In evaluating proposals, Dominion must consider

expected ratepayer impacts, financial risk
assumed by ratepayers, feasibility of
development, construction, operation plans, as
reviewed by independent expert.

Regulations. None Original bill required SCC to adopt regs

governing the competitive procurement and
approval process. Bill laid out extensive
requirements the SCC must incorporate in their
regulations governing competitive procurement.
See competitive procurement above
Energy Storage
2,700 megawatts of E Storage. Requires Dominion to construct/acquire 2,700 megawatts of 56- Original bill established mandatory interim
E storage capacity by 2035 (no mandatory interim targets) & construct more provided it 585.5.D.5; targets and required SCC to open up a
receives approval from Commission pursuant to 56-580 & 56-585.1. Competition: LL: 1528- proceeding to identify & develop mechanisms to
Procurement shall meet competitive protocols; 35% of E storage projects shall be owned and 1552 implement E Storage targets. SCC must engage
operated by 3rd parties. stakeholders in this process. Required SCC to
approve E storage systems.

Prohibited a single system from being used for

more than 25% of the storage target per year.
SCC must engage stakeholders. Utilities required
to report annually to SCC identifying efforts to
meet RPS goals and include a description of
efforts to meet E storage target including efforts
6
 to meet/exceed interim storage targets;
summary of all storage system projects for which
utility seeks approval in action plan or
distributed resource plan; description of how E
storage systems are being modeled and
considered in planning process; evaluation of
cost and benefits for deployment of E storage.
These procedural requirements and checks on
the utilities have largely been removed.

Regulations. Requires SCC to adopt regs to achieve deployment of E storage, include interim Original Bill required SCC to adopt regulations
target dates, and update existing utility planning and procurement rules. Regs shall include for implementation of energy storage. Regs
mechanisms to deploy E storage including competitive solicitations, behind the meter require: 10% or more of interim storage must be
incentives, non-wire alternative programs and peak demand reduction programs. The bill through distribution-connected systems;
does not include detailed requirements that must be included in the regs per the original bill. provisions to ensure 3rd party competition;
require inclusion of energy storage plan in the
utility’s IRP and demonstration of how it will
meet storage requirements. Regulatory
requirements established in bill have been
weakened.
Distributed Solar
Expands project size for net energy metering (NEM) from 1 MW to 3MW allowing larger 56-594 LL: Original bill included Shared Solar Provisions that
projects 1596-1600; would have allowed 3 subscribers or more, on a
1685-1689; single parcel of land to participate in net
Expands NEM by increasing the NEM cap to 6%, including 1% set aside for low income 1691-1714; metering. Removed
customers. Provides authority for SCC to raise cap after proceeding per below. 1714-1717;
LL: 1731- Removed language from original bill mandating
Requires SCC to conduct a NEM proceeding when 3% NEM in Dominion territory (2024 in 1754 that (1) the SCC liberally construe eligible
APCo territory) is reached to evaluate program including amount customers shall pay on customer-generator rights to undertake power
utility bills each month for using the utility’s infrastructure and the amount the utility shall purchase agreements to finance electrical
pay to appropriately compensate customers. Utilities will get their pound of flesh. generation; (2) 3rd parties entering into power
purchase agreements to provide financing be
Increased the threshold for standby charges from 10kw to 15 kw for residential systems in considered a utility; (3) 3rd party provider must
Dominion territory. meet 100% of the load requirements in order to

7
When utility notifies SCC that its received applications for 60% of its nameplate capacity be eligible for PPA. These provisions weaken
under the NEM, SCC shall open docket to (1) investigate cost/benefits of NEM; (2) establish Solar Freedom
cost avoidance by for customer-generators; (3) establish methodology for determining
compensation rate for excess generation. SCC must take into account (1) impact of NEM of Utilities get their pound of flesh by heavy
utility’s long term marginal costs of generation, distribution, transmission; (2) cost of service emphasis on losses they purport to incur from
implications of on other customers within same class, (3) direct and indirect economic impact grid support and revenue decline.
of NEM to Commonwealth and any other info it “deems relevant, including environmental Environmental and resilience are relegated to
and resilience benefits of customer-generator facilities.” considerations if SCC deems them relevant.

SCC may adopt rules or guidelines to administer NEM.

RGGI
Provisions entitled Clean Energy & Community Flood Preparedness Act 10.1-1329 &
1330
Provisions are incorporated into final regs adopted 4/19/19.
LL: 96- 169
DMME authorized to establish auction program to sell allowances into trading program
consistent with RGGI

50% proceeds used for low-income EE programs

45% proceeds used to assist localities and residents affect by recurrent flooding, sea level rise
etc. 3% trading/auction; 2% administer low-income EE programs

Requires no allowances issued for covered generating facilities from 2045 on

Fossil Fuel Retirements

Establishes a schedule to retire existing fossil-fuel facilities. 56-585.5; Original bill would retire (1) existing fossil-fuel
LL: 1282- generation no later than 12/31/24; (2) biomass
By 12/31/24, retire generating units “principally fueled by oil,” with a rate capacity in excess 1301 facilities by 12/31/28; (3) all carbon emitting
of 500 megawatts and all coal-fired units in Commonwealth. Exception: coal fired units facilities by 2045
jointly owed with a cooperative utility (Clover) or owned/operated by Dominion located in
coalfield that co-fires with biomass (Virginia City Hybrid Center).

By 12/31/28, retire all biomass-fired electric plants that don’t co-fire with coal.

8
By 12/31/30 – retire any coal-fired units in coalfield region that co-fires with biomass, Except,
if facility can demonstrate at least 83% reduction in carbon emissions through
capture/sequestration.

By 12/31/45 – retire “all other” units that emit carbon as a byproduct.

Utilities can petition Commission for relief from requirements

New CO2 Emitting Generation Facilities
No new generating facility that emits CO2 permitted unless (1) utility has already met EE 56-581.1 LL:
requirements and (2) need cant be met more affordably through demand-side resources or E 706-722;
storage resources. 730-734

SCC must consider the social cost of carbon in its decision. SCC given authority to adopt rules
to determine social cost of carbon.
Give-Aways to Utilities and Rate-Payer Impacts
Expensing the Retirement of Coal and Oil Generation Facilities. The 2018 Grid 56-581.1 Original bill provided ratepayer protections that
Transformation Act provided the utilities with right to have their rates evaluated for LL: 956-964 were removed. It eliminated provisions that
generation and distribution services during triennial proceedings “as recorded per the books forced the SCC to rely on the utilities unaudited
by the utility for financial purposes and accrued against income.” This means that the SCC numbers as contained in their books. It
must rely on unaudited numbers offered by the utility in evaluating rates. The 2018 Act removed language allowing the utilities to
permitted the utilities to immediately expense and write down the costs of retiring coal and expense and write down costs of coal, natural
oil plants. This provision allows the utilities to suppress overearnings and deny refunds then gas, or oil plants in the same year. These
they would have otherwise been overcharging customers. These costs should be expensed changes would have likely resulted in refunds or
over years with the net effect of spreading out the costs to the ratepayers. lower bills to rate-payers.
Offshore wind – see above discussion.
SCC Authority to Determine Reasonableness and Prudence of Costs Limited. For any facility LL: 2023- SCC ability to determine reasonableness and
constructed by utilities, SCC can ONLY review reasonableness of costs for INCREASES in the 2028 prudence of facility construction is stripped (see
total projected costs of construction. wind). Thus, all costs by facilities are in essence
recoverable with profit margins unless there’s an
increase in the originally projected construction
costs.
Enactment Clauses
Temporary Moratorium on New Carbon Emitting Generating Facilities. Secretaries of LL: 1997- Moratorium is strengthened by EE provisions
Natural Resources & Commerce and Trade must consult with SCC and solicit “appropriate 2008 that prohibit SCC approval of construction new
stakeholder” input, in order to make recommendation to the GA by 1/1/22 as to whether the utility-owned generating facility that emits

9
GA should permanently repeal the ability to obtain certificates of public convenience and carbon unless (1) utility has already met the EE
necessity for any new carbon emitting generating unit. Until that recommendation, SCC is requirements; (2) SCC finds that supply side
prohibiting any certificate for utilities to own, operate or construct new carbon emitting resources are more cost effective than demand-
generating units. side or energy storage; (3) SCC finds no threat to
reliability of electric service.

10