2021 Dominion Rate Case Frequently Asked Questions

In its filing to the State Corporation Commission (SCC), Dominion requested a significant profit increase from 9.2% to 10.8%. If approved, this increase could result in billions of dollars of additional charges for Virginians. Furthermore, the utility monopoly estimates that it has overcharged customers by $132 million in the past four years, but the SCC reported in 2020 that Dominion overcharged customers by over $500 million between 2017 and 2019 (1)

Virginia is in the midst of an exciting energy transition. Our Commonwealth is making massive investments in clean energy and shuttering polluting fossil fuel plants. This rate case is the first opportunity in seven years to review the overcharges Dominion Energy has incurred since 2015, and prevent an unfair increase in profits to ensure the clean energy transition is affordable for all Virginians. 

Thanks to legislation supported by Dominion that heavily restricts the authority of the SCC, Dominion has so far escaped a rate decrease while overcharging Virginians by hundreds of millions. That’s why we are encouraging Virginians everywhere to make their voices heard in the rate case by submitting comments to the SCC asking them to deny Dominion’s request for an increase in profits. 

Want to know more? Check out these Frequently Asked Questions for a more in-depth look at Dominion’s rate case.

Topics

What is a rate case?
What’s in the filing and what are Dominion’s Requests?
What is going on right now in the triennial review and how can I participate?

What is a rate case? 

The rate case is a formal process wherein the State Corporation Commission conducts an in-depth analysis of an electric utility’ costs and revenues from the past three years. 

During a rate case, the SCC hears expert testimonies from the Office of the Attorney General, consumer and environmental advocates, manufacturer’s associations, and companies like Microsoft, and Costco, and the public to make three major decisions:

  1. The SCC will determine if Dominion, in the review period, earned above, below, or within its profit band, this is a 0.7% range above and below Dominion’s allowed profit level. For example, Dominion’s allowed profit currently is 9.2%, and its profit band is 8.5% to 9.9%.
    Based on the results of the analysis above, the SCC can order:

    1. A rate decrease if Dominion earned above its profit band; as well as a refund of 70% of the overcharges, while Dominion can keep 30%
    2. A rate increase if Dominion earned below the band
    3. No change to rates if earnings were within the band
      Two things to note: The 2018 Grid Modernization Act barred the SCC, from ordering any rate increase, and from ordering a rate decrease for more than $50 million, in this triennial review. Although rates can not change much, the SCC will have the opportunity to confirm whether current rates are set to overcharge customers.
  2. The SCC sets the profit or rate of return that Dominion is allowed to earn in the future, currently it is 9.2%. With the profit band, Dominion is allowed to automatically keep 0.7% extra above its authorized profit. This extra profit has been controversial since it is not attached or conditioned to performance or any other efficiency metric.
  3. Finally, Dominion projects its expenses to determine how much it needs from rates to cover costs and profits, in the next three years

What’s in the filing and what are Dominion’s requests ? 

Dominion argues that it only overcharged customers by $132 million between 2017-2020. It is also requesting a profit increase from 9.2% to 10.8%, which could result in billions of dollars of additional charges. Finally, it argues that current rates will generate a deficit of $121 million.

1. Massive profit increase 

Currently, Dominion is allowed to earn 9.2% on all its capital investments (coal plants, solar panels, offshore wind, distribution infrastructure, etc.) The utility is asking for an increase to 10.8%, which will increase the revenue Dominion recovers from customers. The SCC denied a similar request in 2019 and estimated it would have cost Virginians $1.4 billion over 25 years

Higher profits for risk free investments

This profit increase will not only apply to the base rate but also to the rate adjustment clauses (RACs) that Dominion uses to recover specific project costs. A higher profit for RACs is highly controversial. The profit a utility earns is supposed to reflect the  risk level of an investment, the more risk the more profit, however, RACs make capital  investments almost risk free. For example, if in a given year the utility sells less electricity than anticipated, the utility can request an increase in the RAC to make the utility whole. Thus, the utility is guaranteed to recover the costs and profits regardless of performance, sales,  pandemics, or hurricanes. With lower risks, profit should also be lower, thus RACs should pay a smaller rate of return  than the base rate(2) .

2. Earnings results

Dominion reported a profit of 10.42% and overcharges of  $131 million between 2017 and 2020, this results contrast with the $507 million in overcharges the SCC reported from 2017 through 2019. The numbers Dominion presents result from using an accounting mechanism where the utility reduces its revenues by subtracting large costs all at once in the review period, instead of spreading them over 15-25 years, which is how it should be done. 

The company wants to use this accounting maneuver to recover $843 million in only four years of the review period:

  • $688 million associated with the early retirement costs for 15 fossil fuel units
  • $100 million for the replacement of automated meters with smart meters
  • $8 million related to coal ash cleanup
  • $47 million to severe weather costs

Delegate Suhas’ bill, HB528, partially fixed this by restoring the SCC’s authority to set recovery periods that best serve ratepayers for costs associated with the early retirement of fossil fuel generation facilities. With this law, it is the SCC that decides what is the most convenient recovery period,  instead of leaving the decision solely in the utility’s hands. However, more needs to be done in the legislative arena to expand SCC’s authority over the recovery periods of other significant expenses.

3. Revenue request for the future 

The utility argues current rates will generate a revenue deficiency of $121 million, a point that will be contested by several parties.

What is going on right now in the triennial review and how can I participate? 

Anyone can submit a public comment to the State Corporation Commission through October 22nd. Clean Virginia is mobilizing an effort to submit a record number of comments in opposition to Dominion’s unjust request for a profit increase, which could cost Virginians billions in additional charges. You can join the effort and submit a comment here. 

The State Corporation Commission is also accepting requests from any person desiring to offer testimony as a public witness. On or before October 20, 2021,  shall provide to the Commission name, and a telephone number to be contacted by the  Commission during the hearing to receive testimony. This information may be provided to the Commission in three ways: (i) by filling out a form on the Commission’s website, and typing the SCC case number PUR-2021-00058  (ii) by completing and emailing the PDF version of this form to SCCInfo@scc.virginia.gov: or (iii) by calling (804) 371-9141.

Below are the key dates of the triennial review. Highlighted in yellow(*) is when the public and the SCC will have new valuable information in the case, and green text(**) indicates critical dates for the public to participate.

 

*New Filing  On March 31, Dominion submitted an initial filling that was later replaced on May 18 with a modification.
Notice of participation as respondent  July 30. All parties that want to participate in the case as respondents shall notify the SCC. Respondents are allowed to submit expert testimony and evidence to counter-argue Dominion’s claims. So far, actors such as Appalachian Voices, the Department of Navy, Microsoft, the Virginia Poverty Law Center, and Costco notified to be respondents 
*Direct testimony filings from respondents  September 3. This is the deadline for respondents to submit their testimonies. This is a key part of the proceeding because respondents challenge Dominion’s requests and provide valuable alternative analysis. 
*Direct testimony from SCC Staff September 17. The State Corporation Commission has a body of experts that also submits testimony after studying Dominion’s filing
Dominion Rebuttal testimony  October 1. Dominion submits counterarguments to the testimonies the respondents and the SCC filed 
Public witnesses registration  October 20. All those interested can participate in the case as public witnesses need to register to give your name and the phone you wish the Commission to call during the hearing to receive your testimony.
**Public witnesses testimony  October 22. Beginning at 10 a.m., the Commission will telephone each person who has signed up to testify. Each witness will be allotted five minutes to provide testimony.
**Public comments  October 22. Any interested person may submit written comments. 
Evidentiary hearing  October 25 In the evidentiary hearing, the SCC Commissioners receive testimony and evidence offered by the Company, respondents, and the Staff.
*Final order  January 18.

 


1 Commonwealth of Virginia  State Corporation Commission, Status Report: Implementation of the Virginia Electric Utility Regulation Act Pursuant to § 56-596 B of the Code of Virginia (Richmond, VA: 2020), 3.

2Larkin and Associates, Increase Use of Surcharges on Customer Utility Bills (AARP:2012),12.