Bills Would Prevent Ratepayer Refunds for Six Years, SCC Says

Lightning show

Proposals to overhaul Virginia’s system for regulating electric rates would provide no opportunity for the State Corporation Commission (SCC) to order refunds to rate payers until 2024 for Appalachian Power Company and 2025 for Dominion Energy Virginia, concludes a State Corporation Commission analysis of Senate Bills 966 and 967.

The SCC conducted the analysis at the request of Sen. Chap Petersen, D-Fairfax, who has advocated a return to the regulatory system that prevailed before the 2015 enactment of a rate freeze that has resulted in hundreds of millions of dollars of excess profits for the two utilities. Dominion has worked with legislators to advance a proposal that would return $1 billion to ratepayers over 10 years and replace biennial rate reviews with triennial rate reviews.

Key impacts on rate payers can be summarized as follows, states the analysis submitted by John F. Dudley, counsel to the Commission (quoting verbatim):

  1. There will be no opportunity to consider base-rate reductions or refunds to customers for at least six years, and then only if the utility over-earns for two consecutive three-year periods, effectively extending the current base-rate freeze further into the future.
  2. There may be only a partial return of reduction in federal income taxes currently being collected in base rates.
  3. The provision in current law that allows utilities to keep more than 30% of their excess earnings is continued.
  4. The legislation allows the utilities to keep future excess earnings (i.e. customer overpayments) and, rather than return them to customers, use them for capital projects chosen by the utility. In addition the utilities can charge customers for these same projects in base rates.
  5. The legislation deems certain capital projects to be “in the public interest,” thus impacting the SCC’s authority to evaluate whether such projects are cost-effective or whether there are alternatives available at lower costs to customers. This provision could potentially result in billions of dollars of additional costs that will be charged to customers in higher rates.
  6. An amount that appears to represent the customers’ portion of prior period excess earnings is returned to customers, but the amount has not been examined in a formal proceeding to determine its accuracy.

Dominion Energy Virginia has issued the following response:

This report analyzes a work in progress [that is] subject to change. We continue to believe a reinvestment model that transforms our energy grid and significantly increases the amount of renewable energy we produce is sound policy for Virginia. We have always said all tax savings should return to customers effective Jan. 1, 2018 and be appropriately adjusted by the SCC when the final IRS rules are available. To the extent that is not clear, we would support an amendment making it so.

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15 responses to “Bills Would Prevent Ratepayer Refunds for Six Years, SCC Says

  1. Good luck on any response but Dominions’ be able to be posted that doesn’t violate public profanity laws, signs and gestures.

  2. I love how corporate america takes full advantage of the time value of money for themselves yet delivers the complete inverse to their customers.
    How lucky America is to have such great corporate citizenship!

  3. This is not even a wolf in sheep’s clothing; it’s just the wolf! Chap Petersen is correct, we should go back to Chapter 10 (of Title 56) regulation, without ANY of the restrictions imposing annual review of this, biennial review of that, with this condition, that restriction. The SCC should have complete discretion to fix rates and services provided by public utilities to their customers (and to approve transactions between those utilities and any corporate affiliates) that are just, reasonable and non-discriminatory — period. Just start with the original Code Of 1919 provisions, which reflect the language adopted in dozens of States in the late 19th or early 20th century for utility regulation.

    The fact is, utility regulation is a balance between too little and too much interference. No utilities Commission wants to get sucked into micromanaging, or it will “own” the outcome. Yet, the utility’s respect for the Commission ultimately depends upon the knowledge that the Commission has complete AUTHORITY to dictate rates, services, policies, and utility transactions with affiliates — that is, to micromanage, if need be.

    The least likely source of good regulation — except perhaps on questions specifically referred to it by and framed by the Commission — is the legislature, Virginia’s GA.

    I know, expecting a legislator to use restraint in the exercise of power over something important to constituents is a lot to ask. But we’ve managed in other areas, like education and highways, to set up Statewide frameworks. Why not utilities, too?

  4. Well , you’re looking at a Dominion-written legislation.. were you expecting something else?

    I think this is Dominion’s way of letting people know whose really in charge!

    I’m surprised they haven’t ghost-written legislation to mandate power lines over the James and the Pipeline.. just take DEQ and other regulators out of those issues.. GET ER DONE!

  5. The legislation is indeed being re-written, and stakeholders met behind closed doors for hours today and I have no idea what happened. Yet. More meetings are planned. The last version I saw was marked “version 12.” It is hard to get excited about reading them in detail because more versions will follow.

    Some of the concerns expressed by the SCC may indeed be addressed but I doubt all of them will, not willingly. There is an interesting dynamic developing with the Governor, large customers and environmental activists all expressing commitment to restoring the SCC to a proper regulatory role, without the fat thumb of the utility holding down one side of the scale.

    • “There is an interesting dynamic developing with the Governor, large customers and environmental activists all expressing commitment to restoring the SCC to a proper regulatory role, without the fat thumb of the utility holding down one side of the scale.”

      The governor, large customers, environmental activists and …

      Sen. Chap Petersen

      As much as I rage at our state legislature I have to admit that there are a small number of GA members who consistently try to do the right thing. Chap Petersen is one of them Scott Surovell is another. As a person who usually votes Republican I find it interesting that the only honest brokers I consistently see in the General Assembly are all Democrats.

      Petersen for Governor, Surovell for Attorney General.

  6. Where is the Attorney General’s Office of the Consumer Advocate in this process? Where are the commercial and industrial associations? Why aren’t the economic developers screaming about the higher rates that this corporate welfare will create? Why are the editorial boards throughout the state silent about this theft from the public’s purse? Only Dominion shareholders and its top executives will benefit from this one-sided approach. States throughout the nation have been able to establish effective balancing regulatory structures that have existed for decades. Why are we having such difficulty in Virginia?

    I am baffled that this is even getting serious traction. In the 1770s, Virginians did not sit still while their interests were being subverted for the benefit of a few. Why are we so docile and sheepish today?

    There is a way for utilities to prosper and still reduce costs and serve their customers well. Tilting the table so strongly in favor of the utilities will have consequences at some time in the future I would think.

    Policies that affect the entire state should not be enacted by a small group. They should be discussed in the light of day for all to understand.

    • Tom:

      You have to understand how rigged the game really is in Virginia. It all comes down to the politicians for life we call General Assembly members.

      How do they remain politicians for life:

      1. Off year elections (one of three states) reduce voter turnout to the point that, in many districts, the incumbent’s rabid supporters are the vast majority pf those who show up at the polls. Virginia elections should be on the same day as national elections.

      2. No limits on campaign contributions (one of only 5 states). The flow of money to the status quo political class makes challenging very difficult.

      3. Gerrymandering (5th most gerrymandered state). Districts are drawn and redrawn to protect the interests of incumbents.

      4. Inadequate checks and balances. The one term governor (only state) and a judiciary directly elected by the legislature with no merit commission (one of two states) lets the politicians for life in the legislature do whatever they please.

      5. Inadequate power sharing with local government. Cities never within counties (only state) and a strict implementation of Dillon’s Rule (one of a handful of states) ensure that the General Assembly’s power will not be challenged by localities.

      6. SCC elected by state legislature rather than elected by voters or appointed by governor (only state) ensures that nobody comes between the Clown Show and their political contributions from the monopolies they purport to regulate.

      None of this is an accident. This is not coincidence. This is a well conceived structure to aggrandize the power of Virginia’s politicians for life in the General Assembly. Our current state constitution (1971) was written at the supposed end of the Byrd Machine. However, it was not the end of machines like the Byrd Machine. The 1971 constitution artfully replaced the dictatorial governor with a dictatorial state legislature which can be controlled by a very small number of legislators and is almost impossible for the voters to topple (absent a national backlash to one particular political party as happened last November … and that still didn’t topple the regime).

  7. I think Dominion is making the case that the utility world has undergone and still undergoing massive changes and they are being hindered from evolving and adapting by obsolete regulations and regulators who don’t acknowledge the changes and are still trying to regulate in the ways they always have.

    I’m not defending Dominions way of going about this.. it sounds like they have no confidence that the SCC would itself try to evolve it’s regulation in concert with changes ongoing in the utility industry.

    Even TomH has alluded to the changes in the industry and that regulators and legislators need to find a way for Dominion to be able to sustain itself and evolve it’s business model.

    That said.. Dominion is the 600lb gorilla and they are acting like a 600lb gorilla…

    • There is nothing on the utility wish list that the SCC would block. The utility just doesn’t want to be held to account for over-spending. As the SCC letter notes, Dominion’s first attempt to underground residential lines en masse would have involved a $2 billion capital investment but a $6 billion cost to consumers once interest and profit margins were added on over a very long re-payment period. SCC said no, cut it back. Take out the SCC and be ready to pay…

      I think Tom is talking about changing the underlying dynamic, where the utility is only allowed a profit on its capital investments. This creates a strong incentive to build, build, build – and when new plants are no longer needed, the utility starts rebuilding its grid – seeking the same steady profit. It is possible to give them different incentives and I agree those are worth exploring.

  8. Neither bill has as yet been subject to public hearing in the respective committee of the House or Senate.

    However, 40 some-odd utility related bills will be taken up tomorrow afternoon by a subcommittee of the Commerce and Labor Committee. Unlike committee meetings, subcommittee meetings are not being streamed online. Whatever happens in there will essentially occur in the dark, unless Steve gets a seat in the room

  9. totally true – this is not a legitimate public process but instead a classic swamp process.. i.e. ” we’ll let you know what’s in the bill after “we” ( the select participants) ..”decide”.

    Hell.. a LOT of bills that go through the GA.. the public doesn’t even know how they work until AFTER they pass!

    to be fair in this case.. do we have a state regulatory agency that is using rules that don’t fit the changes going on in the electric utility industry and resulting harm to Dominion and it’s business model?

    I don’t know. On one hand.. it looks like what Dominion is doing IS ..CRAVEN… but on the other hand..there seems to be a clear partisan division in the legislature.. on the proper role of the SCC.

    but what is exposed is the way legislation is made .. like sausage.. where the public is pretty much clueless to the process and only insiders really know what is really going on… not untypical.. that the public does not know what is in the legislation until the final version is passed.

    Heck, we even have legislators that say that:
    ( TMT will enjoy this):

  10. Just sent a blast email to the House of Delegates asking them to ask their colleagues on the key committee to hold off on voting on this “work in progress” at this afternoon’s meetings. Stay tuned!

    Of course the VA Chamber of Commerce issued an email alert to its membership asking them all to call their legislators in support of this wonderful legislation. There is nobody on that staff, and no one on its board not employed by Dominion, who actually understands this bill (or will take time to read the SCC letter.) As their lobbyist for three years I got used to the phrase: “We stand with our members.” One in particular, even when the thousands of other members are being clipped.

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