This summer, Dominion Energy rejoined the Regional Greenhouse Gas Initiative, a carbon market designed to offset carbon emissions. Former Gov. Glenn Youngkin yanked Virginia from RGGI in 2023 and in her first speech to lawmakers in January, Gov. Abigail Spanberger announced the state’s imminent return to the program, a move cemented by legislation that took effect earlier this year. 

At the State Corporation Commission headquarters on Wednesday, the utility debated how to recover the cost of the carbon allowances from customers and how to implement the bill credit lawmakers allocated to offset the impact on ratepayers.

Ten states are part of the RGGI agreement to limit carbon and purchase permits for emissions. Virginia received over $800 million over the three years the state was in the program before the removal. State law previously required 50% of the funds go to low-income efficiency programs, 45% to the Community Flood Preparedness Fund, and the remainder to administrative costs.

Dominion was directed to rejoin the RGGI agreement by July 2026, forcing the company to participate in the September allowance auction before the cost recovery mechanism has been reimplemented. The costs of the program have been stacking up since then. 

The company projects for the next year, with the addition of the eight months the company has been back in the agreement, RGGI fees will total $1,179,089,492. According to SCC filings, Dominion will need approximately 35.5 million CO2 allowances for the period of July 1, 2026 though Feb. 28, 2028.

The so-called RGGI rider, the portion of customers’ monthly bills that are allocated to the cost recovery of these allowance purchases, is not anticipated to begin until March 2027. The amount is approved annually by the SCC.

The utility has offered two methods of how payments can be allocated to customers’ bills. One way is to add all 20 months of costs to bills without mitigation, which would mean a jump of about $13 a month for the average residential customer. 

A mitigation plan has been developed as the other method, to spread out the eight months that have not yet been recovered over a period of two years. That would make the monthly bill increase about $10. 

But environmental groups like Appalachian Voices, who are intervenors in the RGGI rider case, said at Wednesday’s SCC hearing that financing costs would add up with the delayed payment plan and tack on up to $17 million.

The carbon dioxide trading program is part of the commonwealth’s push to get public utilities to move away from fossil fuels as a key source of power generation. The cost of the carbon allowances has increased since the last auction the state participated in. Dominion projects carbon prices to be $37.04 to $38.32 per CO2 allowance over the July 2026 through December 2028 period.

With the spike in carbon allowance prices and with affordability a priority for the Spanberger administration, an amendment to address those challenges was tacked on to the state budget that was settled in late June. 

The amendment directs 45% of the funds that the state brings in from the RGGI agreement to be dispersed back to residential, small business, and church customers in the form of a bill credit, which energy officials estimate will almost totally offset the RGGI costs on bills.

The change will mean less money for the low-income energy efficiency, flood preparedness and climate change planning programs that it fueled in previous years.

Debates about exactly how the money from the state will be calculated and reinstated to customers through the credit bubbled up during Wednesday’s hearing. 

“It’s the companies’ understanding that a process has not been finalized at this point. But the current thinking by the Department of Environmental Quality is that they will use the prior quarter’s actual emissions as reported on the state’s website to determine that allocation,” Lisa Crabtree, the director of strategic planning for Dominion, testified.

Appalachian Voices and the Sierra Club’s attorneys argued that Dominion has continued to build out their fossil fuel portfolio despite the mandate to phase out carbon emitting energy sources. 

The utility has defended its resource plan that includes natural gas and renewable energy sources, dubbing both critical to “maintain grid reliability”.

The SCC will consider the methodology of reinstating the RGGI Rider to bills and implementing the bill credits that are mandated by the legislature in the coming months. The commission has until Feb. 5 to make a determination.