Steve Haner, a frequent contributor to this blog, says it is time for the General Assembly to un-do the freeze on base electric rates in Virginia.
A lobbyist representing the Southern Poverty Law Center, Haner lays out the case in a Richmond Times-Dispatch op-ed: Return to the regulatory approach before the 2015 rate freeze, put the State Corporation Commission back in charge of reviewing rates and setting profit (return on equity), and order power companies to return excess profits on a timely basis to rate payers.
According to a 2017 SCC staff review of Dominion Energy Virginia’s books, the utility would have had to return between $133 million and $177 million to rate payers, Haner says. On top of that, the public likely would be paying lower bills today. Dominion disputes the numbers, but argues that only a full evidentiary hearing before the SCC’s three judges would settle the issue.
Dominion acknowledges that its return on equity has been higher than normally allowed and that the time for ending the freeze has come. The utility proposes a measure — still vague at this point — that would plow back excess earnings into modernizing the electric grid in order to advance the goals of increased renewable energy and improved cyber-security.
Writes Haner:
The costs of modernizing the grid, of dealing with coal ash, of encouraging energy efficiency and meeting any new state air regulations are actually very strong reasons to return to the SCC-managed process.
Those are all future costs, irrelevant to whether Dominion earned excess profits in the past. The decisions over how to pay for those, over how many years, and with what profit margin for the company — all of those decisions can and should be made by the State Corporation Commission as well.
Bacon’s bottom line:
General Assembly debate will take place against a political backdrop far more hostile to the power companies than in the past, as many new elected senators and delegates refused to take campaign contributions from Dominion and, indeed, have expressed hostility to the corporation.
Haner has traditionally represented electricity consumers, and his main focus has been on rates. We also can expect a push from environmentalists and progressives to set tighter standards for coal ash clean-up and to topple obstacles to rooftop and community solar generation, among other issues.
It remains to be seen whether Virginia’s other utilities, primarily Appalachian Power Co., and the state’s electric cooperatives, will present a unified front with Dominion. For utility watchers, 2018 will be an interesting legislative session.
Update: I have amended this post to clarify a statement that read, “Dominion acknowledges that its rates have been high.” What I meant to convey is that Dominion has repeatedly acknowledged that the base rate freeze allowed it to generate profits above its allowed Return on Equity over the past two years (although always in the context that it was still at risk of reversing those gains should a hurricane or other major weather event strike). Spokesman Rayhan Daudani reminds me that Dominion’s typical bill is 14.9% below the national average. I have posted his full response in the comments.
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