(The Center Square) – Virginia returned to a regional carbon market this summer with allowance prices about 153% higher than when the commonwealth last participated, increasing the cost of emissions allowances utilities can seek to recover from electric customers.
The Energy Commission of Virginia’s Regional Greenhouse Gas Initiative subcommittee reviewed allowance prices Monday, along with customer bill credits, spending of auction proceeds and possible policy changes for 2027. Virginia's auction proceeds on Sept. 9 were roughly $259 million.
RGGI requires covered power plants to obtain allowances for carbon dioxide emissions. Virginia resumed participation July 1 following budget legislation and statutory requirements signed by first-year Gov. Abigail Spanberger.
The Sept. 9 auction cleared at $37.65 per allowance, compared with $14.88 in December 2023, the last auction in which Virginia participated before leaving the program under former Republican Gov. Glenn Youngkin.
The latest auction sold about 28.5 million allowances and generated more than $1.07 billion across participating states.
“Current prices reflect two things: increased emission reduction ambition and increased demand growth,” said William Shobe, a research professor of public policy emeritus at the University of Virginia, in speaking to lawmakers.
He also pointed to Virginia’s return to the program and rapid electricity demand growth, including from data centers, as factors behind the recent increase. His presentation showed the supply of previously purchased allowances declining as the market tightens.
Utilities can seek commission approval to recover RGGI compliance costs from customers.
Dominion Energy Virginia has asked the commission to reinstate its Rider RGGI. A hearing is scheduled for Oct. 28.
The 2026-28 budget directs 45% of RGGI auction revenue back to residential, small general service and church customers through credits on their electric bills. The remaining 55% continues to support low-income energy efficiency programs, flood preparedness and administration of the carbon trading program.
Commission staff recommended keeping the current split in place for now while Dominion’s request is under consideration. Dominion has proposed issuing the credits quarterly and estimates it would approximately offset its initially proposed Rider RGGI charge.
The Department of Conservation and Recreation reported $274.7 million awarded through 263 flood preparedness grants, while another $178.6 million in eligible requests remained unfunded. Virginia was first in RGGI from 2021-23.
The Department of Housing and Community Development reported $274 million in accumulated RGGI money that helped finance nearly 11,000 affordable housing units across 152 projects. Another $45 million has supported repairs for 2,488 low-income households through the Weatherization Deferral Repair program.
Commission staff is also considering stronger reporting requirements for programs receiving RGGI money and recommended discussing additional policy changes at a second subcommittee meeting.