VIRGINIA ENERGY PLAN - 2022

Electric rates that exceed that of every one of our regulated neighbors hamper Virginia’s economic competitiveness.[1] For example, Virginia’s monthly household electric costs are nearly 12% higher than North Carolina’s.[2]

Outdated, protectionist energy laws forbidding energy consumers from moving from the most expensive energy sources, to the least expensive, limit consumer choice.[3] As a result, innovative technology – principally electric heat pumps[4] and other energy efficient products – is under-utilized in Virginia, in favor of outdated heating and cooling technologies, depriving Virginians of securing a lower cost-of-living.

The Virginia Energy Plan should recommend very simple regulatory and statutory changes, as well as private sector collaboration, to unlock lower costs-of-living through consumer access to the innovative technologies currently enjoyed by more competitive, neighboring states.

Economic Competitiveness and the High Cost of Living

Virginia pays the most expensive energy prices among every one of our regulated neighbors.[5] Poor energy efficiency performance makes that high cost of living worse, with our largest utility one of the lowest efficiency performers in the nation.[6] As a result of that competitive disadvantage, Virginia’s houses consume more energy than those in every one of our more competitive neighboring states.[7] 

High rates and high consumption have a very real impact on everyday Virginians: we pay among the top ten highest monthly electric bills in the nation.[8] That lack of economic competitiveness has only gotten worse, with our two largest electric utilities, in 2022 alone, raising monthly bills by double digits. Virginia’s gas utilities have similarly raised their rates, dramatically: right here in Richmond, for example, rates just increased by 40%.[9]

And those customers that rely on direct fuel deliveries have been even harder hit, with already expensive fuel oil and propane nearly doubled in cost.[10]

A lack of consumer choice and consumer access worsens Virginia’s lack of competitiveness.  Rather than an “all-of-the-above” approach that embraces energy resources equally – including domestic energy efficiency technology, Virginia is instead over-reliant on imported energy commodities, and subject to high global prices.[11] Most of Virginia’s electricity, for example, relies on expensive, imported methane, which drove the recent $20 per month rate increase on the average Virginian that uses 1,100 kWh per month.[12]

The soaring cost of these commodities will continue to hit Virginia’s bottom line. The price of methane  gas doubled in the past year, with futures trading at an all-time high.[13] That expensive fuel directly heats over a third of Virginia homes.[14] Fuel oil and propane, still used to heat over 1 in 10 Virginia homes, is even more expensive.[15]

The Virginia Energy Plan should prioritize blunting the impact of these high living costs by removing barriers to lower cost, more efficient technologies.

Consumer Choice and Utilizing an All-of-the-Above Approach to Attracting People to Virginia with Lower Costs of Living

The single best, yet most underutilized, tool to tackle Virginia’s high energy costs, is energy efficiency, especially state-of-the-art electric heat pumps to cool and heat homes. Heat pumps are far cheaper than the higher-cost technologies and fuels that currently inflate Virginia’s high cost of living.

Heat pumps, which operate like a refrigerator in transferring heat to both cool and warm homes, efficiently uses a compressor and coils, rather than traditional gas or propane or fuel oil heaters, or inefficient electric resistance heaters. Using heat pumps to heat and cool homes saves dramatically on the cost of living: even before gas, propane and fuel oil process skyrocketed in 2022, heat pump installations slashed winter heating costs by up to 64%.[16]

As for the upfront cost of efficient heatpumps, that just got even more affordable, with newly-available direct federal rebates of $2,000-$8,000.

However, heat pumps are not the only underutilized technology to lower Virginia’s cost of living and high rates.  More traditional energy efficiency measures – like HVAC upgrades and improved lighting and insulation -- are also underutilized. For example, Virginia’s largest utility only serves 3% of its customers with energy efficiency programs, despite having among the top 10 highest bills in the nation.

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Energy Plan Recommendations

To increase Virginia’s competitiveness and lower Virginia’s cost-of-living, we recommend the VA Energy Plan increase consumer choice through the following technological innovation in the energy sector.

• Statutory reform:

Remove outdated restrictions on consumer choice, by:

1. expanding access to efficiency technologies by removing the statutory, protectionist “fuel switching” ban in energy efficiency programs, so that Virginians may slash their energy costs by installing heat pumps; and

(2) expanding access to energy efficiency technology by increasing and making       permanent the energy efficiency resource standard for utilities, to lower electric bills and rates, along with several other related reforms.[17]

• Regulatory reform:

Fully tap the federal rebates for heat pump technology, by allowing electric utilities to offer that technology in their energy efficiency programs, as well as through Virginia Energy’s financing programs aimed at lowering energy costs.

• Private market partnership:

Virginia’s Department of Commerce & Trade must utilize energy efficiency workforce training newly available under federal programs.