By Kendl Kobbervig and Kidest Gebre
In May, Virginia’s largest electric utility monopoly asked State Corporation Commission regulators to raise bills anywhere from $15 to $24 a month for the average energy customer. Dominion Energy already charges its 2.5 million Virginia customers, many of whom live in Hampton Roads, some of the highest electricity bills in the nation. If regulators grant the electric utility’s request, expenses will increase by up to $288 a year for the typical household, a sum high enough to push families into making tough decisions between rent and utility bills. Four Virginia cities, three of which are in Hampton Roads, rank in the top 10 for highest evicting cities in the nation. Working families already struggling to make ends meet will soon face another economic headwind thanks to a broken utility regulatory system.
Dominion claims that it needs the bill increase to cover a $3.3 billion gap between expected and actual fossil fuel costs due to the war in Ukraine, inflation, and the pandemic. While money is tight for all Virginians, families already on the brink of economic hardship will pay the highest price for Dominion’s overreliance on fossil fuels. Instead of holding Dominion accountable for fuel costs, current rules shield the utility by allowing it to pass 100% of the costs along to its customers. Even before recent economic shocks, 75% of Virginia households reported unaffordable energy expenses. This “energy burden” crisis disproportionately affects low-income families and communities of color who are more likely to face tough choices between paying rent or paying electricity bills.
Decades of reckless investments in fossil fuels have made Dominion even more vulnerable to global fuel market disruptions. Because regulators are powerless to prevent the utility from passing fuel costs to customers, Dominion has no incentive to make cost-conscious investments, minimize fuel use or transition to renewables. On the contrary, in the last decade, the utility has doubled down on fossil fuel investments, adding four massive, baseload gas plants and the $1.8 billion Virginia City Hybrid Energy Center, one of the last coal plants to open in the country. Today, that plant makes up one of the largest charges on customer bills. In fact, according to Dominion itself, only one of the utility’s eight coal plants was projected to provide “economic value” to customers, even though those customers are the ones stuck paying the bill. And now that fossil fuel prices are soaring amidst global turmoil, the utility is only adding to the energy burden by forcing Virginians to shoulder those costs alone, leaving its profits, executive pay, and shareholder dividends untouched.
The good news is that it doesn’t have to be this way. Other states have advanced measures that hold utilities accountable for fuel costs by aligning incentives with customer benefit. In 2018, the Hawaii Public Utilities Commission approved a sharing mechanism that splits the risks associated with fuel price volatility 98% and 2% between customers and the utility. In Vermont and Oregon, utilities have taken on 10% of the risk for fuel price volatility as far back as 2006 and 2007, respectively. Similar risk-sharing measures in Virginia could encourage more customer-focused utility performance and a swift, affordable transition to renewables.
For now, the laws governing Virginia’s utilities leave regulators with a single option: to soften the impact to customer’s bills by deferring fuel cost recovery over a three-year period rather than over a single year. Customers will still take on 100% of fuel costs, but they’ll just pay for those costs over a longer period of time. This lose-lose situation is not an accident, nor is it a one-off. And until the state passes legislation to more fairly balance the interests of customers and utilities, Virginians will continue to pay the price for Dominion’s shortsighted planning.
Kendl Kobbervig is the Advocacy and Organizing Manager at Clean Virginia. Kidest Gebre is the Energy Justice Organizer at Virginia Interfaith Power and Light.