Virginia is Back in RGGI

Last week, Circuit Judge C. Randall Lowe ruled that governors and their agencies “may only do that which is permitted by statute. … As such, the only body with the authority to repeal the RGGI Regulation would be the General Assembly…Therefore, the court finds that the attempted repeal of the RGGI Regulation is unlawful, and thereby null and void.”

On July 10, 2020, Virginia formally adopted the CO2 Budget Trading Program (Part VII of 9VAC5-140) for the power sector to implement a carbon emissions trading and reduction program as authorized by the Clean Energy and Community Flood Preparedness Act (Article 4 of Chapter 1219 of the 2020 Acts of Assembly). The rule allowed for full participation in the Regional Greenhouse Gas Initiative (RGGI) to reduce carbon dioxide (CO2) emissions and make emissions allowances available for sale through an auction program that power producers use for compliance purposes. Proceeds from allowance sales are returned to Virginia to fund grants for climate mitigation and resilience programs in certain communities. 

RGGI is a carbon-trading/ cap program that is already in place in ten New England states. The RGGI reduces carbon emissions from fuel fired power plants by putting a price on carbon. At the time that then Governor Northam signed the bill into law his administration stated that “joining RGGI will create nearly $100 million in revenue each year.” This money does not appear out of thin air, the actual source of the RGGI revenue will be increased power rates since the cost of the carbon allowances is part of the rate base for electricity and will be passed onto consumers. 

With the growth of data center power use, the increase in fees and thus funding will probably be higher. Because of the captive nature of their ratepayers, the power-generators can and will fully pass on costs to consumers. Under the law signed by Governor Northam, RGGI proceeds go to grants programs for some communities and not to rebates to all rate payers.  RGGI fails to achieve its goal to reduce carbon emission as a carbon “cap-and-trade” system because it lacks any incentive for power-generators to actually reduce carbon emissions. Meanwhile demand for more and more electricity in Virginia is growing at an unprecedented rate due to data centers. 

Other states participating in the RGGI program designed their systems to provide rebates to their ratepayers, in Virginia the program operates as a hidden tax (and rather inefficient way to do it) on consumers and businesses in which the funds are disbursed through grant programs. Virginia consumers were originally told that the program would not increase their energy bills, but this is untrue. This is an inefficient method to tax and distribute funds for the benefit of some Virginians without achieving the intended greenhouse gas emission goal.

The compliance costs of RGGI program participation will be submitted by Dominion Energy and approved by the SCC, as they have in the past, and will impact electricity rates.  These costs will be directly related to the cost of allowances, along with other charges allowed under current law and regulations. Allowance prices have varied significantly in the past, and future prices will continue to vary.  Four other RGGI participating states provide electric bill assistance to customers using some of their auction proceeds which Virginia does not. The RGGI saves some Virginians money by ensuring  that all Virginians pay higher electric rates. 

Maybe the data centers should pay all of the RGGI fees since they are the reason Virginia cannot reduce it’s emissions. Buried in the Dominion Energy Integrated resource plan IRP is the fact that the carbon intensity of the Virginia electric grid increased 37% from 2023 to 2024. Though Dominion’s IRP attributes the increase in carbon intensity to the increase in use of natural gas, that is not completely true. The generation mix changed from 2023 to 2024 to halve the purchased power and triple the coal generation. That would do it.

This is from an appendix in Dominion 2024 IRP