In a six to one ruling, the Virginia Supreme Court ruled that the General Assembly does possess the right under the state constitution to put limits on the State Corporation Commission’s ability to regulate electric utilities. As a practical matter, that means that the multi-year freeze in base electric rates for Appalachian Power Company and Dominion Energy Virginia will stay in effect.
The Old Dominion Committee for Fair Electric rates, representing major industrial customers, the VML/VACO APCO Steering Committee, representing local government, and Karen E. Torrent, a Dominion customer, had challenged the freeze, which they claim lock in electric rates at levels that otherwise would have required potentially hundreds of millions of dollars to customers.
While giving the General Assembly “wide latitude to determine the standards” that must be used in setting rates, argued the Old Dominion lawsuit, “The Constitution reserves for the Commission — and the Commission alone — the power to set electric utility rates.
By suspending biennial reviews and prohibiting the Commission from changing base rates (except at the utility’s request, on a temporary basis,” the plaintiffs argued, state code “unconstitutionally ‘fixes the base rates that a utility will charge its customers for a period well into the future, and deprives the Commission of any power to reduce or otherwise regulate those rates.”
In an opinion written by Justice Elizabeth A. McClanahan, however, the court majority upheld the General Assembly’s primacy over the SCC. Under the 1902 Constitution of Virginia, the SCC did not enjoy constitutional authority to set rates — authority was bequeathed by the General Assembly. The 1971 constitution did provide constitutional authority to the SCC, but “subject to such criteria and other requirements as may be prescribed by law.”
The General Assembly has limited the SCC rate-setting authority at least twice before the 2015 rate freeze. In 1999, in enacting the Virginia Electric Utility Restructuring Act to introduce competition among providers of electric generation, the legislature capped base rates for electric utilities for seven years. In 2007 when the General Assembly ended the deregulation program, lawmakers required a rate hearing every two years and prescribed that the SCC could not order a rate reduction unless it found that the utility had excess earnings in two consecutive biennial reviews.
“We have repeatedly stated in other cases since the passage of the 1971 Constitution of Virginia that the Commission’s authority to regulate the rates of electric companies has been ‘delegated’ to it by the General Assembly under various legislative enactments,” McClanahan wrote.
Justice William C. Mims wrote a dissenting opinion: “I reject the premise that the rate-making authority granted to the Constitution is subordinate to the General Assembly.” The majority was wrong in this case, and it was wrong in previous cases when it upheld the same principle, he declared. “The General Assembly may impose standards and prerequisites the Commission must adhere to when exercising its power and duty to set rates. It does not mean that the General Assembly may suspend that power and duty.”