A groundbreaking new report from Clean Virginia has found that most Virginian ratepayers are paying an average of $250 more each year on their energy bills than they should. The calculation analyzes how Dominion and APCO — two utility monopolies that provide service to more than 8 in 10 Virginians — are charging their ratepayers not only for energy use and delivery but also to subsidize excess corporate profits, executive pay, lobbying, campaign contributions, and more.
The report proposes how legislators and Virginia government agencies can eliminate this so-called “Dominion Tax” and put hundreds of dollars back in the pockets of Virginia consumers and businesses through a reform agenda to confront Dominion’s outsized influence in Richmond.
In this report, Clean Virginia examines why Virginians are paying higher energy bills than they should and, specifically, what portion of monthly bills are not directly related to the generation, production, or delivery of energy to Virginia’s consumers. We call this calculation of excess costs the Dominion Tax.
Dominion Energy Virginia (Dominion) and Appalachian Power Company (APCO) are the two largest utility monopolies in Virginia. More than 8 in 10 Virginians rely on these companies for their electricity, with Dominion and APCO providing energy for 67.5% and 14% of Virginia ratepayers, respectively. As public service utilities, they were granted monopolies by the state in their service areas in exchange for building the massive and complex infrastructure required to provide power in those regions, and to guarantee energy delivery to all ratepayers. As monopolies, they are free from the price-setting mechanisms of market competition. Because there are no market forces to drive down costs, determining the price Dominion and APCO charge for energy is the responsibility of the government, specifically the Virginia General Assembly and the State Corporation Commission (SCC).
Over the past two decades, the General Assembly has passed a series of new laws that have changed how electric utilities operate and the mechanism through which the SCC determines the “fair” market prices for electricity.3 The most significant change came in 2015 when the General Assembly froze rates at artificially high levels and curtailed normal oversight of how much Dominion and APCO are able to charge customers. These corporations lobbied successfully for two new laws in 2015 (SB 1349, the so-called “Rate Freeze Law”) and 2018 (SB 966, the Grid Transformation and Security Act) that suspended the normal biennial review of their rates, preventing the SCC from lowering rates or mandating ratepayer refunds in cases of overcharging. As a result of these two laws, Dominion has kept, on average, over $350 million each year since 2016 in over-earnings — money in excess of what the SCC determines as reasonable profit. Historically, the vast majority of this money would have been refunded to ratepayers. Dominion and APCO have seen consistent returns of approximately 13 – 14% and 11%, respectively and have kept rates high by funneling profits into high-earning capital projects, without having to demonstrate their value to ratepayers.
This report identifies how much Dominion and APCO’s policies and practices cost Virginian ratepayers above the normal cost of providing electricity, even after allowing these companies a traditionally reasonable rate of return as set by the SCC in a rate review case. These excess costs amount to an average of $254.20 annually for Dominion ratepayers and an average of $89.20 annually for APCO ratepayers. The excess costs to ratepayers come in many forms, but the following eight categories best establish the different measurable ways in which Dominion and APCO unnecessarily drive up costs for ratepayers:
We call these excess costs the Dominion Tax and the “APCO Tax” — the amount each consumer is forced to pay their utility monopoly in excess of the corporation’s reasonable allowed profit. These taxes are the result of an abuse of state-sanctioned market control and are enabled by outdated regulatory structure, insufficient campaign finance and ethics laws, and weak consumer protections. Over the past two decades, many legislators in the General Assembly have consistently supported legislative efforts by Dominion and APCO to create a permissive environment for these abuses.
This report concludes with Clean Virginia’s recommendations for legislative changes that will repeal the Dominion Tax and lower energy bills for all Virginians, as well as policy suggestions to help fix the legalized corruption that allows Dominion and APCO to effectively write their own rules in Virginia’s political system.
These recommendations include: