Democratic Sweep Sets Up Confrontation with Corporate Giant That Has Loomed Over Virginia Politics for a Century

By Lee Fang, The Intercept

THE STUNNING VICTORY on Tuesday by Virginia Democrats, seizing control of both chambers of the state legislature and bringing the state under unified party control, sets up a new confrontation with a powerful adversary: Dominion Energy.

Dominion Energy, the privately owned utility company, has long cast a shadow across the state, buying favor in both parties as the most generous donor in state history, writing its own lax regulatory rules, and funneling consumer bills into billions of dollars of investor dividends and executive compensation.

The election results mark a turning point that will likely transform into a brutal legislative fight in 2020 over the future of energy policy, corporate consolidation, and climate change. Virginia Democrats were once just as loyal to the energy giant as Republicans, dutifully passing nine-figure tax breaks year after year for Dominion, alongside other giveaways directly requested by the company’s lobbyists. Dominion lobbyists have crushed attempts to allow consumers to use “net metering,” or the use of rooftop solar power to send electricity back to the grid in exchange for credits, and passed laws specifically crafted to dodge limits on pollution by coal power plants.

Over the last two election cycles, however, an increasing number of General Assembly Democrats have declared that they will reject campaign donations from Dominion and Appalachian Power, a subsidiary of another utility giant, AEP. Since 2017, the Democratic Party of Virginia has rejected Dominion money as well. In order to force the company to return money to consumers and comply with the demand to eventually generate all of its energy from carbon-free sources, Democratic legislators say they need to break free of Dominion’s political grip.

Gov. Ralph Northam has called for standards this year that would require utilities to eventually source 100 percent renewable energy over the next three decades. Now, with his first Democratic legislature, that may finally be feasible and enforced through law.

Clean Virginia, an advocacy group, boasted after the results last night that nearly 50 candidates who rejected Dominion money won elections, including many running in competitive seats.

“What’s important for progressive leaders in Virginia of all political affiliations to commit to is not allowing Dominion to write the clean energy script to benefit its own profit motives,” said Cassady Craighill, a spokesperson for Clean Virginia. “Virginia could reach Governor Northam’s ambitious and necessary clean energy goals lightyears faster if we didn’t rely on one monopoly with a captive customer base to implement it.”

Delegate Mark Keam, D-Vienna, a moderate incumbent in the legislature who adopted the pledge to reject Dominion money, sounded a note of caution. “It’s not enough to just have Democrats in charge,” Keam said. “It’s really important that Democrats who care about climate crisis who are willing to take a risk and do something big and bold are in charge of drafting our policies.”

The raw power and influence of Dominion is hard to overstate. President Donald Trump’s current attorney general, William Barr, is a former member of the Dominion board, and was paid $1.2 million in cash and stock for his time with the firm. Dominion paid over $1 million to SKDKnickerbocker, the Democratic consultancy led by Anita Dunn, Obama’s former communications director, to help advertise its controversial Atlantic Coast gas pipeline. In every year that the Virginia Public Access Project, a nonprofit campaign finance disclosure watchdog, has kept records, Dominion has been the largest or second largest corporate donor in state politics.

This year, in its capacity as a corporate donor, Dominion, along with its executives and lobbyists, handed out over $2.6 million in Virginia elections, largely benefitting the GOP. They also gave significant donations to some Virginia Democrats, including current Minority Leader state Sen. Dick Saslaw, D-Alexandria, a close ally of Dominion.

In a statement to The Intercept, the company defended its political giving record and business practices.

“Sound energy policy isn’t a partisan issue. It’s the result of conversation with stakeholders on both sides of the aisle, identifying problems and analyzing possible solutions to get the best outcome for the Commonwealth, customers and the environment,” said Dominion spokesperson Rayhan Daudani. “Over the course of our company’s 100-year history, we’ve had an excellent record of working with both parties to meet our customers’ needs, and we look forward to working with the newly elected and returning legislators in the coming session.”

The attempt to rein in the power of Dominion, which serves utility markets in Idaho, North Carolina, Ohio, South Carolina, Utah, Virginia, West Virginia, and Wyoming, comes as politicians across the country are contemplating the challenges posed by monopoly power and privately held energy utilities.

DOMINION HISTORY can be traced to the great anti-trust battles of President Franklin Roosevelt’s New Deal, when insurgent populist Democrats forced the breakup of monopoly transit and electric utilities across the country. When the bill to break up the “power trusts,” known as the Wheeler-Rayburn Act, was proposed in 1935, it sparked the most expensive and bitter lobbying battles to date. Consultants hired by the utilities flooded Congress with a quarter million fake telegrams, claiming to show opposition to the legislation from ordinary Americans. The utility monopolies spent $5 million, or close to $100 million today, to try to defeat the reform. They were unsuccessful.

Though it’s all but forgotten now, the corporation now known as Dominion played a central role in that fight. The Intercept reviewed Federal Trade Commission reports, congressional investigations, lobbying records, and news archives to piece together Dominion’s sordid history over the course of the 20th century: first as part of a rapacious monopoly trust, through its subsequent breakup in the 1930s, and its more recent reemergence as a dominant political interest group.

The official company history of Dominion claims various corporate ancestors, including the Appomattox Trustees, a company chartered by Virginia following the Revolutionary War to improve the navigation of state waterways for the transport of rum and tobacco and early trolley companies that once formed the basis of Richmond’s public transit system in the 19th century.

The true trajectory of the firm started in 1904, when a number of Virginia railway companies and power utilities ran into financial trouble. Sensing an opportunity, Frank Jay Gould, the son of infamous Gilded Era robber baron Jay Gould — known perhaps best for his quote, “I can hire one half of the working class to kill the other half” — used his family’s fortune to buy up Virginia rail, power, and transit firms in receivership.

Gould established the new company, Virginia Railway and Power Company, in 1909, and appointed his cousin William Northrop as its first president. In 1925, an investor group led by a firm called Stone & Webster purchased the corporation from Gould, and began merging the company with power utilities throughout Virginia and North Carolina using a holding company based in Delaware. The investor group, using its Delaware holding company, not only controlled the firm first formed by Gould, which had been rebranded as Virginia Electric & Power Co., or VEPCO, but also electric utilities in Georgia, Florida, Louisiana, Texas, Wyoming, South Dakota, Nebraska, Colorado, Kansas, Missouri, Iowa, and Washington. In addition, the company owned toll roads and other corporate assets in Massachusetts and beyond.

The mergers came at a time when a small number of investors were gobbling huge swaths of the economy and exploiting the concentrated power to extract exorbitant utility rates from consumers. In Washington state, for instance, the same holding company that controlled VEPCO used its local utility, Puget Sound Traction, Light & Power, to lobby for laws that restricted public ownership of utilities.

The House Judiciary Committee’s Subcommittee on the Study of Monopoly Power found that the Stone & Webster-controlled monopoly served no economic sense other than the enrichment of its investors, given its utility properties were not “interconnected or economically capable of interconnection with those of any other such company.” The company, the report noted, had been administering utilities in New York City offices that were as far as 3,100 miles from their customers.

The monopoly-busting New Deal law, the Public Utility Holding Company Act of 1935 — the official name of the Wheeler-Rayburn Act — instructed the newly formed Securities and Exchange Commission to break up the holding companies, forcing electric utilities to divest from concentrated geographic areas and comply with an array of state and federal regulations designed to prevent economic exploitation of consumers.

The law splintered VEPCO from the Stone & Webster cartel. Though the company filed successful lawsuits with the federal government to merge with a smaller utility in Virginia, as well as to block competition from nonprofit utilities, the company remained a largely state-based utility through much of the 20th century. The rapid expansion of the firm did not return until the deregulation era of the 1990s, at which point the business had rebranded as Virginia Power and Dominion Energy.

The company had long enjoyed influential status in state politics, counting the elite law firm Hunton & Williams (now known as Hunton Andrews Kurth LLP), at which Supreme Court Justice Lewis Powell, author of the “Powell Memo” charting business political strategy, served as partner, as its registered lobbying firm in Richmond. But the push to deregulate the utility started in Virginia in late 1997, when then-Dominion Board Chair Thomas Capps consolidated control of the company and pushed the legislature for a series of changes that rolled back state rules that required the company to reduce customer rates.

The company tapped state Delegate Kenneth Plum, D-Reston, whose largest lifetime donor has been Dominion, to sponsor legislation to deregulate the company. In 1998, Capps blamed low profits on state regulators, promising political changes that could result in higher returns. “We know how to make money,” Capps told shareholders, according to the Richmond Times-Dispatch. “All we have to do is get the regulators off our back.”

After deregulation passed in 1999, Dominion continued to push for a variety of laws to boost shareholder profits at the expense of ratepayers and taxpayers. In 2007, the company proposed a partial re-regulation, with a special clause that allowed the utility to charge consumers for new power plants with much larger guaranteed profits for Dominion. The company also won special legislation in 2013 to write off $400 million in storm-related costs and $300 million the following year to cut its own taxes using the partially completed North Anna power plant.

Dominion has flexed its muscle on the federal level and in other states in which it operates, as well. In 2005, Dominion spent over $500,000 to help push through President George W. Bush’s Energy Policy Act, which repealed the New Deal limitations on utility holding company consolidation. Last year, Dominion hired former Gov. Jim Hodges to help secure regulatory approval to purchase of SCANA, the largest utility in South Carolina — a deal that finalized in January. Over the last decade, the company has lobbied regulators to win a series of mergers and acquisitions across the country, with utility and energy assets in half a dozen states.

IN ANTICIPATION OF the Democratic sweep, Dominion has released a series of press statements touting its commitment to climate change policies and renewable energy. Last year, the firm agreed to a deal to invest some excess profits into clean energy, but with the caveat of further limiting the power of state regulatory agencies to review its conduct.

“Legislators who want to make fast progress on climate change by adopting a renewable energy standard, challenging Dominion’s unnecessary gas pipeline, or reforming its ironclad monopoly, will face severe resistance,” said David Pomerantz, executive director of the Energy and Policy Institute, a utility energy watchdog group.

“Now that reformers have real power,” said Pomerantz, “the question is: will they stand up to Dominion and its allies, or buckle and take the path of least resistance?”

On a conference call with Dominion investors on Friday, an analyst from J.P. Morgan Chase & Co. asked if the company’s management had concerns that the “political environment in Virginia” could shift, and specifically about the upcoming legislative elections. Thomas Farrell, the chief executive of Dominion, dismissed any concerns about trouble ahead.

“We have a long history of working with whatever party is in the majority in whatever of the two houses, with Democratic governors, Republican governors, Democratic leaders, and Republican leaders,” said Farrell. “So don’t expect any changes to our plan.”