The large retail establishments seeking to aggregate their electricity demand and take their business away from Dominion Energy Virginia have not been dissuaded by a February ruling that went against them. One of the petitioners in that case is seeking reconsideration, and the petitioner in another major case has sharpened its argument that the State Corporation Commission erred.
If the policy goal is now to slow demand, to prevent the need to build more utility-owned plants in Virginia, isn’t this the better and more reliable path? The utility-managed demand response efforts funded by ratepayers aren’t having much impact, as previously reported.
The SCC ruled on February 25 that if large retailers Walmart and Sam’s Club took their load off Dominion’s service, that would produce a major shift of costs toward other customers, mainly residential customers, and thus would harm the public interest.
Walmart was back March 13 with a petition for reconsideration, asking the SCC if it can take some but not all its stores to a third-party supplier.
“… if only a portion of Walmart’s load was aggregated, the adverse impact identified by the Commission in its Final Order would be mitigated and therefore could fall within the realm of the Commission’s statutory discretion to conclude that the reduced impact is not contrary to the public interest (and is consistent with the public interest),” wrote attorney Carrie Harris Grundmann in her petition (here).
Target Stores, which started its effort after Walmart and Sam’s Club (several others are pending), filed supplemental testimony later in March after it read the February 25 opinion. It also noted that it would accept a partial aggregation if it could not take its full load away from Dominion but added a very pointed rebuttal to the earlier decision.
“Public interest” is a fickle thing. The General Assembly has deemed it in the public interest to discourage Virginians from using electricity by various means, including cash incentives. A major case over those demand management programs is also pending, with the energy efficiency and environmental advocates quite open in their desire to reduce Dominion’s sales. Their stated goal is to reduce the need for new generation plants (of the fossil fuel variety.)
If taking electricity load away from Dominion by those methods is a good thing (debatable, but it is in the law), then why is it against the public interest to allow this herd of major retail customers to leave Dominion’s monopoly corral? The amount of energy savings achieved by the energy efficiency programs is speculative up front and hard to measure even at the end. Many of the customers involved happily increase their usage at the same time they accept the incentives (bribes) for joining the programs.
Should Walmart, Sam’s Club, Target, Costco and the others depart, the amount of Dominion energy not used is substantial, not speculative, and the change in demand is easy to measure. Enough of them leave and it is conceivable that some proposed power plant might not be needed down the line. That outcome is a fairy tale under the “energy efficiency” scenario.
And, as is pointed out in the very interesting supplemental testimony from Target, Dominion is protected when big customers leave because it can keep selling any power it produces, but they no longer use, to other users outside Virginia through the PJM regional electricity market. Holly Lahd, Target’s Lead Program Manager for Energy, has done some deep research on that.
She estimates the millions of dollars Dominion would earn selling the energy not used by Target into PJM, and notes – correctly – that the profits on off-system sales are split 75 percent to ratepayers and only 25 percent to the company. That is not true of company profits on sales to its own customers. That’s one of the remaining benefits to ratepayers from the 2007 re-regulation bill.
“In Dominion’s 2018 fuel factor case Dominion witness Scott Gaskill testified that, in 2017, it was often more economic for Dominion and its customers to purchase power from the PJM market instead of generating energy using Dominion’s system resources due to relatively low PJM market prices. In other words, PJM market prices were lower relative to Dominion’s self-generation costs and lower than in previous recent years. If Dominion sold the energy associated with Target’s 2018 load, using the same method described above, I estimate Dominion could have received $4.2 million in revenue,” Lahd writes.
If the SCC finds in its scheduled 2021 review that Dominion has earned excess profits that must be shared with its customers, Target will not get its share and those dollars will be allocated among the remaining customers. Given Dominion’s history of finding ways to evade rate reductions and refunds, Target may not be giving up much. But the SCC staff cited that as a downside for other consumers if Target left, when it indeed might be an upside.
And she dismisses a complaint in Dominion’s testimony in the Target case that its investors and the Wall Street analysts would be dismayed by the defection of a large number of commercial customers.
“I am confident that the investor community is well aware that Dominion, compared to other investor-owned electric utilities, operates in a very favorable regulatory environment. For example, Dominion can recover numerous types of expenditures through rate adjustment clauses (“RACs”), which allow for the guaranteed recovery of costs while earning Dominion’s authorized rate of return. Additionally, the authorized rate of return for RACs and base rates cannot be set lower than the average earned returns of a “peer group” of southeast utilities.”
The worst of all four-letter words in Dominion’s view is risk. It is supporting the various efforts to reduce its load through energy efficiency programs because it controls and profits from the programs, it is allowed under the law to eventually collect “lost revenue” payment for the power it doesn’t sell, and (perhaps) it knows the programs do not really change much.
The effort by these medium-size commercial customers to aggregate their demand to a level above 5 megawatts, large enough to escape from the monopoly and its political stranglehold on the rate making process, represents actual risk. Selling the power into PJM is not guaranteed, the price is set by the market and not by a compromised General Assembly. Any profits need to be shared- no games with reinvestment credits. Dominion’s resistance is logical.
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