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SCC says EPA carbon plan could raise power bills in Virginia “substantially”

Complying with the EPA’s proposed carbon emission rules would likely cost Dominion Virginia Power customers alone an extra $5.5 billion to $6 billion, the State Corporation Commission’s staff said in an unusually bluntly worded statement.

The EPA’s proposed regulations would “increase substantially” the bills that all 3.6 million Virginia electricity customers pay for their power, the commission staff said, and could significantly affect the reliability of electric service.

The SCC staff anticipates electricity bills would go up significantly because the federal rules would require much of today’s electricity production be replaced with costly generation and expensive programs to decrease energy use.

“Those higher costs will be reflected in the electric bills paid by customers,” said the commission’s staff, emphasizing that statement with italic type.

The SCC staff made the statements in its official comments filed this week with the EPA on the federal agency’s proposed Clean Power Plan.

The U.S. Environmental Protection Agency’s plan, announced in June, calls for cutting carbon emissions from existing power plants 30 percent below 2005 levels by 2030 in an effort to fight climate change, improve public health and provide affordable energy.

Environmental groups took the commission staff to task over its views.

“The SCC staff analysis is just plain wrong,” said Glen Besa, director of the Sierra Club’s Virginia Chapter. “They’re playing politics with climate change science and they have no business doing that, and they’re bringing discredit on the commission.”

“It appears the staff has misread the rule,” said Cale Jaffe, director of the Southern Environmental Law Center’s Virginia office. “Analyses that we have reviewed show that Virginia is already 80 percent of the way to meeting Virginia’s carbon pollution target under the Clean Power Plan.

“Almost all of those reductions are coming from coal plant retirements and natural gas conversions that the utilities put in place long before the Clean Power Plan was even released,” Jaffe said.

The SCC staff said it takes no position on the broad policy questions involving carbon emission reductions on a national level, the best way to achieve those cuts, or whether the U.S. should have a national “Clean Power Plan.”

Its comments, the staff said, should not be construed as representing the views of the SCC’s commissioners, who may have to to decide on utility plans to comply with the federal rules. The staff answers to the commission.

The state’s economy and daily life largely runs on electricity. Virginia’s people, businesses and governments depend on having reliable electric service at reasonable rates, the staff noted. The SCC is the state agency charged with making sure they do.

The SCC staff said it made an “indicative cost analysis” of the incremental cost for Dominion Virginia Power to achieve the EPA’s carbon reduction goals. The Richmond-based power company is the state’s largest electric utility, serving two-thirds of Virginia electricity customers.

To make the carbon emission reductions called for in the proposed regulation, the EPA’s own model predicts that Virginia utilities will have to shut down fossil-fuel power plants reliably producing 2,851 megawatts of electricity, and replace that generation with just 351 megawatts of unreliable land-based wind power. “This raises alarming regional reliability concerns,” the staff said.

The power plants involved today ensure reliable service to Virginia customers, have years of useful life remaining, and cannot be replaced overnight or without regard for impacts on the electric system, the commission experts said. “It will be a challenge to meet federal reliability requirements during such a transition.”

Even if the operational concerns of replacing dependable fossil-fuel generation with variable, intermittent and “nondispatchable” – unreliable – wind and solar energy could be managed, the staff said, “there is still zero probability that wind and solar resources can be developed in the time and on the scale necessary to accommodate the zero-carbon generation levels needed” to meet the EPA’s mandatory carbon-reduction goal for 2020.

The state’s residents and businesses also will be responsible for paying the remaining costs for useful power plants the EPA rules would shut down prematurely, the staff said.

“Much of this investment has been constructed to comply with EPA consent decrees on which the ink is hardly dry,” the SCC staff said. “The federal government has, in essence, required Virginia residents and businesses to build a house, take out an expensive mortgage on it, and then directed that house be torn down.”

But, the staff said, “The expensive mortgage must still be paid off.”

By 2030, the EPA has said, its proposal would reduce carbon emissions from existing power plants nationwide by 30 percent below 2005 levels, while shrinking electricity bills about 8 percent through increased energy efficiency and reduced demand on the electricity system.

But, the SCC staff said, “Contrary to the claim that ‘rates will go up, but bills will go down,’ experience and costs in Virginia make it extremely unlikely that either electric rates or bills in Virginia will go down as a result of the proposed regulation.”

The prospective EPA rules also raise legal concerns, the staff said. No fossil-fueled power plant in Virginia currently meets the carbon emission rate proposed for the state, the staff said. But the SCC pointed out that the federal proposal imposes substantially more stringent emission requirements for existing power plants in Virginia than for as-yet-unbuilt new units.

Calling that effect of the rules “topsy-turvy,” the staff asked, “Would it be rational to require the current owners of automobiles or lawnmowers throughout Virginia, for example, to meet an emission standard that is 26 percent more stringent than required for the production of new cars or lawnmowers that must use the best available technology?”

The EPA’s proposed rules also fail to recognize substantial recent utility investments that have made big cuts in carbon dioxide and other emissions in Virginia, the SCC staff said. From 2005 to 2012, the staff said, Virginia utilities reduced their carbon emissions from generation facilities by about 40 percent through improving power plant efficiency, retiring old units and adding new natural-gas plants.