Dominion Energy wants Virginia's State Corporation Commission to let it recover roughly $1.18 billion in carbon-allowance costs from customers, a move that could push the average residential bill up by as much as $13 a month. The utility and advocacy groups sparred over the proposal and a competing mitigation plan before the commission on Wednesday, with regulators now facing a February deadline to sort out exactly how the costs — and any offsetting credits — will land on Virginians' statements.
A Years-Long Back-and-Forth Over RGGI
The fight traces back to Virginia's on-again, off-again membership in the Regional Greenhouse Gas Initiative, an eleven-state carbon market designed to curb power-sector emissions, according to Virginia Mercury. Then-Gov. Glenn Youngkin pulled the state out of RGGI in 2023, and Gov. Abigail Spanberger announced Virginia's return to the compact in January, a shift that the Mercury reports was cemented through legislation that took effect earlier this year, directing Dominion to rejoin RGGI by July. Dominion resumed buying allowances afterward, participating in the September 2026 auction as part of that mandate.
Dominion's petition asks the commission to update and reinstate its rate adjustment clause, known as Rider RGGI, under Virginia law, according to a filing with the Virginia State Corporation Commission. As reported by Cardinal News, Dominion filed to recover approximately $1.18 billion in projected and actual RGGI allowance costs — a figure the Mercury pins at $1,179,089,492 covering the rate year beginning March 1, 2027, plus eight months dating back to July 1, 2026.
What It Could Mean for Monthly Bills
If the commission lets Dominion recover all 20 months of costs at once beginning in March 2027, the average residential customer's bill would rise by about $13 a month, or roughly 8%, per Cardinal News's reporting on the filing. Dominion has also floated an alternative mitigation plan that would spread the unrecovered eight months of costs over two years instead, a softer approach Cardinal News says would raise the average bill by $10.36 a month rather than the full amount. The Mercury similarly describes Dominion's two options as adding all 20 months of costs upfront, versus the utility's own mitigation plan, which it estimates would add closer to $10 monthly.
Appalachian Voices argued during Tuesday's proceedings that financing costs under that delayed-payment approach could tack on up to $17 million in additional expense, according to the Mercury. Dominion says it needs roughly 35.5 million CO2 allowances to cover the period from July 2026 through February 2028, and projects allowance prices of $37.04 to $38.32 per ton through 2028 — projections that track closely with what's actually happening at auction. RGGI's most recent sale, the 73rd auction, cleared at $37.65 per allowance and generated $1.08 billion for participating states, according to the Regional Greenhouse Gas Initiative, with Virginia supplying 5.74 million of the allowances sold after resuming participation on July 1.
Credits Could Soften the Blow, But Details Remain Unsettled
Virginia's 2026 budget directs 45% of the state's RGGI revenue back to residential, small-business, and church customers as bill credits, the Mercury reports, and energy officials have estimated those credits could almost entirely offset the rider's cost on customer bills. That budget amendment, added in late June, also reduces funding for low-income energy efficiency, flood preparedness, and climate-change planning programs that previously drew on RGGI proceeds. Virginia has received more than $800 million from RGGI during its three years in the program, according to the Mercury, money state law has allocated primarily toward low-income efficiency programs and the Community Flood Preparedness Fund.
Exactly how those credits will be calculated is still being worked out. Dominion witness Lisa Crabtree testified Tuesday that the utility understands the credit process has not been finalized, and that the Department of Environmental Quality is considering using prior-quarter actual emissions reported on the state website to determine how credits get allocated, per the Mercury's account of the hearing. The commission will need to settle on a methodology for both reinstating the rider and implementing the legislatively mandated credits, and it approves the RGGI rider amount annually.
Environmental Groups Push Back on Dominion's Energy Mix
Attorneys for Appalachian Voices and the Sierra Club argued at Wednesday's hearing that Dominion has continued expanding its fossil fuel portfolio even as state mandates call for phasing out carbon-emitting energy sources, the Mercury reports. Dominion's resource plan includes both natural gas and renewable energy, and the utility has described natural gas as critical, alongside renewables, to maintaining grid reliability.
The numbers underpinning the debate have moved sharply since Virginia last sat out of RGGI. The last auction before the state's 2023 exit cleared at just $14.88 per allowance and raised less than $500 million across all 11 states at the time, according to The Virginian-Pilot. Allowance prices have climbed roughly 14% a year on average since 2012, per an energy expert cited by the same outlet, and Dominion now projects purchasing 51 million allowances through 2028 as the program's emissions caps tighten from nearly 70 million tons in 2027 down to 18.5 million tons by 2033.
Virginia's own emissions trajectory adds another layer to the debate. The state's power-sector carbon emissions rose from about 25.5 million tons in 2023 to 33.3 million tons in 2025, according to Inside Climate News. That increase comes even though Virginia's carbon pollution fell 10% during its earlier three years in RGGI, from 28.5 million tons to 25.6 million tons, per Appalachian Voices. Cardinal News previously reported that the commission first allowed Dominion to charge the average residential customer $2.39 a month for carbon costs, and approved a $4.44 monthly charge in July 2023 as Virginia prepared to leave the program; Appalachian Power customers saw their bills rise by only 2 or 3 cents monthly.
The State Corporation Commission must make its determination on the rider and credit methodology by Feb. 5, 2027, with Dominion's proposed Rider RGGI anticipated to take effect that March. Until then, how much of the $1.18 billion bill actually reaches Virginia ratepayers — and how much gets clawed back through credits — remains an open question the commission has yet to resolve.
