Virginia Mercury: October 18, 2021

Dominion, attorney general and SCC staff reach deal in contentious rate case

If approved, customers would see $330 million in refunds and a $50 million rate reduction.

by Sarah Vogelsong, Virginia Mercury

Dominion Energy announced Monday evening that it has reached a settlement with Virginia’s Office of the Attorney General and public utility commission staff to resolve disputes in its ongoing rate review, the first since 2015. 

The commission staff and the attorney general have alleged the utility, Virginia’s largest, raked in almost $1 billion in excess profits between 2017 and 2020. 

Under the settlement, which must still be approved by the State Corporation Commission, customers would receive $330 million in refunds and a $50 million reduction in rates going forward. The going-forward rate reduction is the maximum amount allowed by law under the 2018 Grid Transformation and Security Act. For the average residential customer, Dominion estimated that those figures would translate to a refund of approximately $67 and a monthly bill decrease of about 90 cents. 

Dominion would receive a slightly higher return for its shareholders with a 9.35 percent return on equity compared to the current 9.2 percent rate. The electric utility had requested a return of 10.8 percent. 

Additionally, using another mechanism created by the Grid Transformation and Security Act, $309 million in the company’s revenues over the past four years will be used to offset costs of the Coastal Virginia Offshore Wind pilot and expenses related to the rollout of smart meters and a customer information platform. 

In a late Monday afternoon news release, Dominion characterized the deal as “a balanced, reasonable and cost-effective approach.” 

“This is a consensus outcome, and it allows us to make sure all of the involved parties have reached a decision that puts the customer’s interest first,” said company spokesperson Rayhan Daudani, who said negotiations over the agreement had been underway for “the past couple weeks.” 

The review, which began in March, represents regulators’ evaluation of the electric utility’s earnings over the past four years as well as an assessment of whether its rates should be adjusted going forward. While Dominion’s rates were previously reviewed by the SCC every two years, the 2018 Grid Transformation and Security Act revised that framework to every three years while also lifting a rate freeze instituted by the General Assembly in 2015, purportedly in response to fears about the costs of then-President Barack Obama’s Clean Power Plan. 

Besides the Office of the Attorney General and SCC staff, other signatories to the agreement announced Monday include the Apartment and Office Building Association of Metropolitan Washington, Costco, Direct Energy, Kroger, Harris Teeter, the Virginia Committee for Fair Utility Rates and Walmart. 

Nine other groups that are participating in the review did not sign the agreement but are not opposing it. They include Appalachian Voices, Calpine, Chaparral, Constellation New Energy, the Department of the Navy, Microsoft, PJM Power Providers Group and Shell Energy North America.

Will Cleveland, an attorney with the Southern Environmental Law Center representing Appalachian Voices, said that under the settlement, customers would get “about as big a refund as was possible under the law” but that reforms to state laws governing utility regulation are still needed.   

“This is as good as the bad system we have will allow, but we can improve the system,” he said. 

Regulatory reform has been a hotly debated topic during Virginia’s past two regular legislative sessions, with a more progressive faction of Democrats joining with some Republicans across the aisle to combat what they see as state laws that are overly favorable to Virginia’s two largest investor-owned electric utilities, Dominion and Appalachian Power. 

These utilities’ rates are regulated differently than those of other utilities in the state as part of a complex framework established in 2007 when Virginia abandoned a short experiment with deregulation. 

A 2020 law could decide whether Dominion customers get zero or $372 million in refunds

Especially contentious in the current review has been the impact of a 2020 law known as House Bill 528 that returned to state regulators the right to set the period over which the utility could recover the costs of power plants that had been retired early. 

Dominion argued that over $680 million in such costs should be recovered all at once, reducing the pool of excess earnings available for refunds, and, in its most recent filings, disputed whether the law applied to the current case at all. 

In return, SCC staff, the Attorney General’s Office and Appalachian Voices contended that the costs should be recovered over much longer periods of time to ensure that customers received refunds and rate reductions. 

Under the settlement announced Monday, the cost recovery period for the retired plants would run through 2023. The $330 million refund due to customers would fall between SCC staff’s calculation of $312 million and the Attorney General’s and Appalachian Voices’ $372 million figure.  

Settlements in utility rate cases are not unprecedented, with Dominion most recently agreeing to one to conclude its 2009 case. 

Hearings before the SCC on the rate review are scheduled to begin Friday. 

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