VCEA Energy Efficiency Policy Comes Up Short

The Virginia Clean Economy Act (VCEA) is making its way through the 2020 General Assembly. The bill would move Virginia toward carbon free electric generation by mid-century. Among other clean energy policies, it includes elements that address energy efficiency.

Energy efficiency is an area where Virginia has lagged compared to other states. So, there is a lot of potential for the Commonwealth to make-up ground on decarbonization by aggressively deploying energy efficiency programs. Unfortunately, the substitute bill that was introduced on Thursday, February 6, comes up short.

The VCEA (HB 1526) includes three components that would improve energy efficiency:

  1. The bill builds on the energy efficiency program requirements that were created by 2018’s Grid Transformation and Security Act (GTSA, SB 966). For these programs:
    • It mandates specific energy efficiency savings for APCO and Dominion beginning in 2022 and going through 2025. Beyond 2025, the State Corporation Commission (SCC) is to set incremental savings targets every three years based on what the SCC deems is feasible and cost effective. (See below for more details.)
    • It increases from five to 15 percent the share of the costs of energy efficiency programs that are to be allocated to benefit low-income, elderly, and or disabled individuals or veterans.
    • It adds third-party verification and reporting requirements.
    • It retains the GTSA requirements that APCO and Dominion spend at least $140 million and $870 million on energy efficiency programs between 2018 and 2028, respectively.

  2. The VCEA would establish the Percentage of Income Payment Program (PIPP) which caps the cost of utility bills for low-income Virginians at 6% of income (or 10% for for homes heated with electricity). This program also would fund energy efficiency and weatherization for Virginians who participate in the program. Rate payers would pay for the PIPP via a universal service charge set by the SCC. (Section 63.2-806).

  3. The VCEA would allocate fifty percent of the funds generated as the result of Virginia joining the Regional Greenhouse Gas Initiative (RGGI) to low-income energy efficiency programs administered by the Department of Housing and Community Development (DHCD). These programs are not detailed. DHCD is given authority to determine how these funds are used. (Section 10.1-1330)

Each of these three programs will improve energy efficiency and each allocates resources to disadvantaged communities. With respect to decarbonization, the most critical program is the utility mandate because this has the greatest potential to cut emissions. Since Dominion Energy supplies power to more than 60% of Virginia, I took a closer look at what the energy efficiency requirements of the VCEA would mean for Dominion and its customers.

The VCEA would require that Dominion’s energy efficiency programs achieve the savings shown in the table below between 2022 and 2025. Savings beyond 2025 are not defined and are to be set by the SCC.

(% of 2019 MWhr sold)
Estimated Efficiency Savings 
(in MWhr)
VCEA Mandated Energy Efficiency Savings for Dominion Energy

If we adjust the required savings shown in the above table based PJM’s projected demand growth for Dominion, and then normalize our projections based on expected population growth, these savings equate to 4% per capita reduction in energy use by 2025 compared to 2019 energy use. If we assume that the average annual savings after 2025 are 2% of the prior year’s sales, then by 2029 the program would yield about 11% reduction in per capita energy use.

To put Dominion’s figures in context, Maryland’s energy efficiency program, EmPower, which became law in 2008, generated close to 10% savings in its first five years and nearly 15% in per-capita energy reductions in its first ten years. Again, the VCEA would only require Dominion to save about 4% in its first five years and 10% its first ten. The targets for APCO are even less aggressive than those for Dominion.

The RGGI funded programs and the PIPP will improve the overall energy efficiency results a bit and address acute areas of need. However, the size of these programs is not clear and there is no stipulation for them to achieve any specific reductions. So, we should not assume that they will bring us on par with what other states have accomplished.

Although the VCEA makes efforts to improve Virginia’s position with respect to energy efficiency, its goals are underwhelming. Virginia is starting its energy efficiency programs more than ten years after Maryland and other states implemented similar programs. With lessons learned in other states, there is no reason not to assume that Virginia can meet or exceed what those other states have accomplished.

We should not be aiming for an energy efficiency participation trophy. At a minimum, we should target 15% energy use reduction within ten years and consider how we might accelerate our efforts to hit that 15% mark even sooner.