Direct Energy has launched a bid to expand its foothold in Virginia's burgeoning renewable energy sector after it, along with other competitive suppliers, was shut out from further growth more than a year ago among smaller businesses and residential customers.

Direct Energy, now a subsidiary of NRG Energy, is seeking a hearing before the State Corporation Commission (SCC) as it mounts a challenge to Dominion Energy's control over the renewable energy market.

Dominion won permission from state regulators last year to institute a 100% renewable energy tariff, which effectively requires residential customers and most companies seeking a renewable power package to go through Virginia's dominant utility.

But Dominion is now seeking approval from state regulators to modify that agreement. And that, in turn, has opened the door to a challenge from Direct Energy, which acts as a middleman between wind, solar and other renewable energy producers, and companies and other customers seeking to decarbonize.

Direct Energy, in its Sept. 24 request for a hearing, argued the SCC should revisit its decision last year in favor of Dominion and reopen the market so that "customers … may purchase 100% renewable energy from competitive service providers."

"There's nothing more expensive than allowing Dominion to control all decisions around the green economy," said Ron Cerniglia, NRG Energy's director of strategic alliances, in a statement.

"Dismal" enrollment numbers

Dominion won a pair of regulatory and legal victories last year that gave the utility control over the renewable power purchase market for residential customers and smaller businesses without the kind of large power load — more than 5 MW — that would enable them to shop on their own.

For this segment, Dominion is now the sole player, able to offer not just a 100% renewable option, but also other packages with varying degrees and percentages of renewables, Dominion spokesperson Rayhan Daudani said in an email.

The State Corporation Commission gave a green light in July 2020 to Dominion's request for an all-renewable tariff, which effectively bars competitive suppliers like Direct Energy from signing up additional customers in the utility's load zone except for the largest customers with loads of 5 MW or more. 

But there are restrictions on how far companies can go when it comes to shopping for alternatives, as Walmart found out when it tried to aggregrate demand at all its stores and use that to get a more advantageous deal.

In July 2020, the Virginia Supreme Court handed Dominion a major win when it turned down Walmart's bid to aggregate the electrical load of its stores in the state.

The court backed state regulators in their refusal to allow Walmart to shop for renewable power by putting its stores in a single power contract, arguing the law also gave the State Corporation Commission the discretion on whether to approve such requests.

In turning down Walmart's request, the SCC argued letting the retail giant shop for 90 MW of renewable power would cause rates to go up for customers at both Dominion and Appalachian Power, a subsidiary of American Electric Power.

A spokesperson for Walmart declined to comment, saying the retail giant has "nothing material" to add.

"There are effectively two ways to get out from under your utility's thumb, both of which are now closed," said Will Cleveland, senior attorney for the Southern Environmental Law Center, referring to either contracting with a competitive supplier or, for those with larger loads, aggregating demand from various facilities and shopping independently. 

Still, lawyers for Direct Energy are looking to revive one of those avenues as they seek a hearing before the SCC in hopes of reviving Virginia's competitive supply market for renewable energy.

In its filing with state regulators, Direct Energy characterized enrollment in Dominion's 100% renewable tariff as "dismal."

While Dominion's renewable energy portfolio has the potential to accommodate 45,000 residential customers or "their commercial equivalent," only 2,438 had signed up as of June 14, 2021, Direct Energy wrote in its filing.

By comparison, over 12,000 customers had signed on with competitive service providers for a 100% renewable energy option by the time Dominion won approval last year from state regulators to effectively end further enrollment in these alternate programs.

In addition, about 6,860 customers "were waiting to be enrolled by Dominion to take 100% renewable energy service from competitive service providers on July 2, 2020, when Dominion filed its approved Rider TRG tariff and prevented them from doing so," Direct Energy said in its Sept. 24 filing.

Direct Energy's activity in Dominion's market is now limited to working with larger companies and industrial users with 5 MW or more of demand who want to shop indepedently.

"We are respectfully asking the SCC to conduct a hearing given it is clear that after one year of availability, Dominion's customers have clearly rejected the opportunity to enroll in a one-sized fits all renewable power product and there is no evidence that this number will grow," Direct Energy continued.  

Contrary to how it has been portrayed by Direct Energy, its renewable energy offering been a success, Dominion said in a filing with the SCC,

"We've had over 3,000 customers subscribe to this offering in just a short amount of time and continue to enroll new customers nearly every day," Dominion spokesperson Daudani said in an email.

While not specifically referring to Direct Energy, Dominion also took aim at competitive service providers.

"By comparison, the Competitive Service Providers did not sign up any residential and small business customers over several years," Daudani wrote. “Deregulation has been a failure in many other states. Virginia’s regulatory framework provides Dominion Energy customers with stable rates below the national average, excellent reliability and an industry leading renewable portfolio.”

More options needed?

Outside groups, though, have expressed concern over the elimination of potential renewable energy options for business and residential customers in Virginia.

"We were disappointed to see the approval of this," said Cassady Craighill, communications and advocacy director at Clean Virginia. "We have been supportive of any steps in the direction of offering customers more options."

Craighill said her organization is also concerned about the makeup of Dominion's renewable portfolio, saying it includes a biomass plant, "which most people would not consider clean."

Still, whether Direct Energy succeeds in getting its hearing before Virginia regulators will hinge on more technical arguments.

In its application to update its 100% renewable tariff agreement, or Rider TRG, Dominion told state regulators it plans to maintain its current rate of $3.98 per MWh.

However, Dominion said it also plans to track the true, market value of the renewable service it is providing, arguing its calculations peg it at $6.91 per MWh.

Dominion said it would cover the difference between what customers are paying and the true market cost of the renewable power.

Seizing on this, Direct Energy contends the introduction of the higher number, the $6.91/MWh, represents such a substantial change that it amounts to a new agreement, as opposed to an amendment.

Dominion does not specify in enough detail how it would cover the difference between the rate it is charging renewable customers and the real cost, and whether it would truly hold harmless customers who are not participating in the program, Direct Energy said in its filing with the SCC.

In response, Dominion countered that Direct Energy has failed to offer "any valid reasons" why the State Corporation Commission should hold a hearing on the issue.

The utility said it has not made any changes in its portfolio of renewable power sources, nor is it changing the rate it will be charging customers.

As far as who picks up the tab, Dominion said company shareholders will cover the difference between the rate Dominion will charge residential and business customers enrolled in its 100% renewable offering and the actual market cost.

The SCC's staff, in an Oct. 8 report, said it does not oppose approval by the commission of Dominion's application to update its 100% renewable energy program, the utility said.

"Direct Energy is merely attempting to delay approval of this straightforward update Application to protect its own financial interests as a competitive service provider," Dominion said in its response filed with the SCC.