Virginia Mercury: August 4, 2021

Lawmakers ask SCC to analyze Dominion rates with an eye on refunds for customers

Eighteen Virginia legislators are asking state regulators to analyze what refunds Dominion Energy customers might receive and what electric rates would be if regulators weren’t bound by provisions in state law that are favorable to the large electric utility’s bottom line. 

“This is Dominion’s first rate case since 2015 and the first since the passage of the VCEA,” the lawmakers wrote in a July 21 letter,  referring to the 2020 Virginia Clean Economy Act that set Virginia on a course to make its electric grid carbon-free by 2050. “The utility is retiring nearly a billion dollars in fossil-fuel-fired power plants and embarking on a new era in energy investments. The massive scale and time horizon for these investments warrants a full analysis that ensures reliable service at a fair price for Virginia ratepayers.” 

The letter asks the State Corporation Commission to conduct a “prospective analysis” as part of its ongoing review of Dominion’s earnings and rates, the first since 2015. 

Specifically, it asks the SCC to assess two questions. First, what refunds might customers be entitled to if regulators didn’t have to accept Dominion’s accounting for certain costs, approve reinvestments of certain over-earnings or allow the utility to keep 30 percent of any over-earnings? And second, what rates would the SCC set if it didn’t have to align its rate of return with returns set for peer utilities and if it could “ensure that rates were just and reasonable while allowing the utility the opportunity to recover its costs plus an authorized rate of return”? 

Broadly, the request is “for a straight comparison of rates both (1) under the SCC’s current legislative shackles, and (2) under traditional ratemaking,” wrote Del. Lee Ware of Powhatan, the letter’s sole Republican signatory, in an email. 

Del. Sally Hudson, D-Charlottesville, who spearheaded the letter, said the legislators’ ask is intended to show regulators there is a “sincere appetite” to understand how current laws are affecting electric utility rates and earnings. 

“Now is a very convenient time to produce these estimates,” she said. “The letter is mostly a way to make sure that the information that might be needed … can be surfaced and addressed.” 

Dominion spokesperson Rayhan Daudani said that “if the legislators want the SCC to do the analysis, then it’s up to the SCC.” 

In a statement, he noted that “Virginia is on the path to a clean energy future due to the regulatory utility framework and supporting legislation in the commonwealth.”

Resolving ‘uncertainty’

Virginia has a notoriously complex approach to regulating its electric utilities, one that Dominion consultant John Reed called “unusually specific” in testimony filed with the State Corporation Commission this March as part of Dominion’s rate review. 

The “Virginia regulatory framework has many features which significantly distinguish it from the structures of other states. First, the Virginia framework reflects a far greater degree of specificity than in most other states,” he wrote. However, that framework “still provides the commission with the latitude to adapt to changing circumstances and relies on the expertise of the commission and its staff to apply their judgment to the facts before it,” he said. 

A coalition largely made up of progressive Democrats and a handful of Republicans in the House of Delegates disagrees. For the past two years these legislators have been pushing for regulatory reforms that they say would give the State Corporation Commission broader discretion in its decision-making, returning power it traditionally held after years of legislative intervention. 

“Dating back to 2007 and every two or three years since then, the legislature has passed legislation taking commission discretion away, which has almost uniformly harmed ratepayers,” said Will Cleveland, an attorney with the Southern Environmental Law Center and an outspoken advocate of regulatory reform. 

The letter “says to me the General Assembly wants to create utility policy based on the commission’s expertise rather than on the utility’s lobbyists,” he said. 

The legislature remains divided, however. Despite strong bipartisan support in the House, every regulatory reform effort proposed during the 2021 General Assembly session was struck down by the Democrat-led Senate Commerce and Labor Committee, a panel stacked with senators who are major recipients of utility campaign contributions.

Among the committee’s stated concerns was uncertainty over how the changes to state law would affect Dominion’s 2021 rate review, a worry the 18 lawmakers’ letter to the SCC said a prospective analysis would address. 

“We are writing to you now in hopes that you can help resolve the General Assembly’s uncertainty and inform future legislation,” they wrote. 

“If the commission does conclude that future rates should be lower than the commission currently has authority to implement, the General Assembly could authorize the commission to set those proper rates in 2022,” the letter continued. “We are asking the commission to undertake this analysis now … so that all parties have a fair opportunity to present their best case for what future rates would be under the traditional cost-of-service model used for every other utility in Virginia.” 

Ware cited 2020 legislation committing Virginia to phase out fossil fuels in favor of renewables as another pressing reason to compare the outcomes of different forms of ratemaking. 

“This clarity for ratepayers is more important than ever with the dramatic costs coming with both retiring fossil fuel plants and the costly investments required by the (VCEA),” he said. 

During the 2021 regular session, Senate Commerce and Labor also agreed to ask the dormant Commission on Electric Utility Regulation, a group of six delegates and four senators that has not met since 2017, to discuss several of the reform proposals outside of the confines of a legislative session. 

Despite that agreement, the body has not announced any plans to reconvene since the legislature last adjourned on March 1.

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