Virginia Rejects Renewable Energy Rider

The Virginia State Corporation Commission has rejected an electric utility’s plan to implement a voluntary renewable energy rider, under which participating customers would be able to purchase their full requirements from renewable energy generators. The commission found that the utility, Appalachian Power Company, had not established that the rate proposed under the rider was just and reasonable. 

In seeking approval of the optional charge, the utility had claimed that the reasonableness of the proposed rate was not relevant to the commission’s review under state law. The company contended that the cited law, which governs renewable energy programs, requires the commission to approve tariffs for electric energy provided 100% from renewable energy. 

In dismissing that line of argument, the commission agreed that the law directs it to authorize such tariffs for the state’s electric utilities. But importantly, the commission pointed out, the statute does not set forth any explicit standard of review, nor does it include any express limitations on what the commission may decide is relevant to such a review. 

The commission related that Appalachian Power’s filing had presented little detail on its proposal other than bald assertions that participation would be totally voluntary and that the associated rate would be cost-based (and likely to decrease as new renewable resources come online). That is, the commission said, the company made virtually no effort to establish the propriety of its proposed rider rate, which equated to 8.961 cents per kilowatt-hour. 

The commission noted that several parties had entered objections to the proposed rider. Among their concerns, which the commission described as legitimate, were that (1) the proposed rate for participating customers is approximately $15 per megawatt-hour (MWh) more than would be the cost of power purchase agreements (PPAs) for the same renewable energy; and (2) the price of $72 per MWh is much higher than prevailing market prices for renewable energy. 

In concurring with the opponents, the commission remarked that the pricing design proposed by the utility was based largely on the weighted average cost of its own renewable PPAs, which cost currently exceeds the cost of the utility’s overall generation portfolio. Moreover, the commission observed that Appalachian Power’s pricing plan also includes components for the opportunity cost of not selling or optimizing the renewable energy certificates or credits associated with the renewable PPAs. 

In further support of its conclusion that the charge as proposed was not reasonable, the commission pointed out that revenues collected through the rate rider would not match the actual costs associated with the renewable energy portfolio exactly, because the output of the renewable sources is variable and unpredictable. Re Appalachian Power Co., Case No. PUE-2016- 00051, Sept. 13, 2017 (Va.S.C.C.).