Virginia Energy Policy Debate Heats Up

RICHMOND, Va. — The state of Virginia is becoming the center of an interesting debate about renewable energy and tax incentives. On one end of the spectrum, Governor Bob McDonnell has happily touted the award of an offshore wind technology demonstration grant to a Virginia utility company. At the same time, debate in the state legislature is heating up over a report by Attorney General Ken Cuccinelli, which indicates that tax incentives given to the state’s two largest utilities are increasing energy rates for customers without leading to the creation of new renewable power sources.

The report analyzes changes made to the state’s energy regulation policies by the Electric Utility Regulation Act in 2007. Cuccinelli explained that the Renewable Portfolio Standard (RPS), which was intended to compensate utilities for adding new renewable energy technology to their operations, wasn’t working as expected.

The Attorney General explained, “By and large, the utilities have not built any new renewable facilities to comply with the RPS goals, but instead, have primarily relied on Renewable Energy Certificates (RECs) from preexisting renewable facilities, including hydroelectric plants that have been in service for more than 80 years.”

Essentially, he’s arguing that the system wasn’t designed correctly, allowing utilities to claim the benefits of the rules without being forced to change how they act at all. To make matters worst, the utilities are able to use the RPS loophole for all capital investments, not just the renewable ones. This allows the utilities to get around rules related to their rate of return. Basically, Cuccinelli’s report indicates that the system was poorly designed and doesn’t incentivize the actions it was expected to, but instead allows rates to remain artificially high, without any renewable energy being added.

The state’s head attorney was careful to clarify that “while the report does contain recommendations for changes that will lower what customers pay to the utility companies, the report should not be viewed as a criticism of the utilities.

“Their conduct and decisions as reflected in this report are consistent with what reasonable companies would have done given the statutory framework that was put in place in 2007. The question going forward is, ‘Should Virginia leave them with all of those same incentives funded by ratepayers?’”

The report has been applauded not only by an environmental group, the Chesapeake Climate Action Network, but also by one of the utilities, Dominion Virginia Power. The difference is that these two groups are calling for the program to be modified so that the incentives do cause more renewable energy sources to be constructed, while the Attorney General has called for the incentives to be eliminated.

After hearing the report, the state General Assembly’s Commission on Electric Utility Regulation directed Cuccinelli to work with the two largest utilities in the state, Dominion Virginia Power and Appalachian Power, to come up with a compromise. The Attorney General has been ordered to return with a proposal by Jan. 16.

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