Neil Chatterjee: VPPs Can Work for Utilities and People, When Designed Right

As people fill their homes with devices that can produce or flexibly manage energy, grid operators have a huge opportunity.

Virtual power plants, sometimes called distributed power plants, aggregate these devices to provide the grid with flexible supply or demand reduction, while compensating the owners of those devices. It’s a rare win-win for consumers and the grid at a time of limited grid capacity and rising energy demand.

During his time as chair of the Federal Energy Regulatory Commission, Neil Chatterjee, Palmetto’s Chief Governmental Affairs Officer, promulgated FERC Order 2222, which supported the spread of VPPs. He spoke before Virginia’s State Corporation Commission to offer improvements to a VPP program proposed by Dominion Energy.

Listen to his comments or read the lightly edited transcript below.

The proven value of VPPs

Thank you so much for the opportunity to speak today on behalf of Palmetto Solar. My name is Neil Chatterjee. 

I'm the former chairman of the United States Federal Energy Regulatory Commission. While at FERC, I was proud to promulgate Order 2222 which opened up competitive wholesale power markets to compensate aggregated distributed energy resources for all of their attributes, and I believe created a pathway for VPPs. I'm here today to express Palmetto's strong support for Virginia's efforts to build a virtual power plant under the Community Energy Act, while also encouraging several targeted improvements to Dominion's proposed battery programs that we believe will make these pilots more successful, more scalable, and more beneficial for Virginia rate payers. 

At its core, this proceeding is about whether Virginia wants to lead or lag in the next generation of grid modernization across the country. Residential batteries and virtual power plants are rapidly moving from pilot concepts to core grid infrastructure. Customers are increasingly pairing solar with battery storage, not only because they want resilience and lower energy costs, but because they're willing to support the broader electric system during periods of peak demand and grid stress. Importantly, these resources can be deployed far faster than traditional generation or transmission infrastructure. 

We've already seen what's possible in states that have embraced these technologies. In California, VPP programs now exceed 700 megawatts of flexible capacity. In North Carolina, Duke Energy's Power Pair program is already nearly fully subscribed, and states like New York, New Jersey, Colorado, Connecticut, Vermont, Arizona, and others are scaling residential storage aggressively because they recognize these systems can provide real, measurable grid value. Virginia has the opportunity to do the same. 

Palmetto applauds Dominion and stakeholders for the substantial work that has gone into developing these programs. We support approval of the application, but with several necessary refinements to ensure these programs truly succeed and help achieve the Commonwealth's long-term clean energy and reliability goals.

Suggested fixes to the proposed program

First, the proposed residential battery targets are simply too small. Dominion's proposal allocates only 17 megawatts of capacity to the residential battery and income qualifying battery programs through 2030. That represents just 3.6% of the total proposed VPP capacity. To put that in perspective, Dominion projects this would support only about 650 participants per year across its service territory with more than 2 million residential customers. At the same time, battery adoption is accelerating dramatically. Virginia's residential storage market is already experiencing triple-digit growth. Tesla alone has reportedly deployed thousands of Powerwalls in the Commonwealth, and attachment rates between solar and storage continue to rise nationwide. We believe the commission should increase the residential battery target to at least 50 megawatts over the pilot term. That would still be moderate compared to peer programs around the country, but it would better align the program with actual market demand and create sufficient scale for meaningful grid benefits. 

Second, compensation matters. If we want customers to allow utilities to dispatch their batteries during critical grid events, compensation must reflect the value those systems provide. Customers are simply not purchasing batteries for the utility's benefit. They buy them for resiliency, backup power, and bill management. Participation in a VPP means asking those customers to share a portion of that flexibility with the grid. The current proposed compensation levels risk undervaluing that contribution. Palmetto supports increasing the performance compensation for the residential and IAQ battery programs consistent with the avoided cost analysis presented by other parties in this proceeding. Importantly, we believe emphasizing performance-based competition compensation is the right approach, because it ties incentives directly to delivered grid value. Ratepayers should pay for measurable performance, and these resources are capable of delivering. 

Third, transparency and market certainty are critical. We encourage the commission to require Dominion to publish monthly updates showing submitted applications, approved enrollments, remaining capacity, and budget utilization for these programs. Why does this matter? Because homeowners, installers, financiers, and aggregators all make investment decisions based on whether these programs appear stable and available. Without transparency, small program caps can unintentionally create uncertainty, wait lists, administrative bottlenecks, and ultimately discourage investment in Virginia's distributed energy market. Clear visibility into available capacity helps everyone plan responsibly and improve customer experience. 

Finally, we recommend removing the proposed requirement that customers participate in 80% of events during the first year in order to retain their enrollment incentive. That provision risks creating unnecessary administrative complexity and could negatively affect customer satisfaction. These programs should encourage participation, not create punitive structures that may discourage consumers from enrolling in the first place. 

On the promise of VPPs for Virginia

Commissioners, virtual power plants represent an enormous opportunity for Virginia. Done correctly, these programs can improve reliability, reduce system costs, defer expensive infrastructure investments, and empower customers to become active participants in supporting the grid, but achieving those benefits requires scale, strong customer participation and policies that encourage investment and long-term market confidence. 

Palmetto appreciates the opportunity to participate in this proceeding, and have also supplied published written comments for commissioner review. We look forward to continuing to support the growth of distributed clean energy and energy storage across the Commonwealth of Virginia.