Legislation that effectively eliminates two avenues for electricity customer choice in Virginia gets its first public hearing in a House subcommittee Thursday afternoon.
House Bill 2477, introduced by House Commerce and Labor Committee Chairman Terry Kilgore, prohibits additional customer choice if a utility’s overall demand is not growing more than two percent annually. That describes both Dominion Energy Virginia and Appalachian Power Company. It also requires customers who leave to keep paying non-fuel generation and transmission capacity related costs, things not previously charged to customers buying power elsewhere.
There are only three ways to break free of the Virginia monopoly electric service providers. Large industrial or commercial customers with a demand in excess of five megawatts can seek an alternative supplier. State law also creates an opportunity for a group of customers to aggregate their demand to reach that demand threshold and shop for electricity together.
The third route, open to all customers large and small, is the right to buy 100-percent renewable-sourced electricity from an outside supplier if the utility doesn’t have its own rate for such a product. That process is not changed by this bill. APCo now has such a tariff, closing that door, and Dominion was working on one but withdrew its application earlier this month.
The aggregation path to competition has been allowed for more than a decade, but the first commercial aggregation petition was approved for the Reynolds Group earlier this year. A series of such petitions have now been filed by companies including Costco, Wal-Mart and Sam’s Stores. All must make their case at the State Corporation Commission. State law will only allow customers representing one percent of the utility’s load to go elsewhere, and the SCC must reject a petition deemed harmful to the rest of the utility’s customers.
Departed customers do continue to pay utility distribution charges, since they continue to use the utility’s wires. Adding those generation and transmission-capacity costs mentioned in Kilgore’s bill reduce or wipe out the price advantage of competition.
Another impediment to seeking an alternate supply is once the large customer leaves, the utility can insist on a five year notice before taking it back. A Senate bill likely to draw utility opposition would reduce that to 90 days.
The argument against allowing retail choice is it imposes higher costs on customers remaining behind, which is why the load cap was imposed in 2007. In reviewing the pending petition of Costco, the SCC staff did not dispute Dominion’s assertion that loss of the 13 megawatts of load in the 27 aggregated accounts might add a few cents to the monthly bill of residential customers.
Patrick W. Carr of the SCC staff added: “…(Dominion) base rate earnings would be reduced. The latter impact could reduce customer refunds or customer credit reinvestment offsets and/or lead to higher base rates than would be necessary absent Costco taking service from a competitive service provider.”
Please, what refunds? In who’s lifetime? Those excess profits and the customer credit offset shell game are the reasons Costco wants out, according to Shay Reed, the energy buyer for the company who filed testimony in support of the petition.
“Under the current circumstances. Dominion’s overcharging and overearning are what makes Dominion so attractive to investors and so unattractive to customers,” she testified.
“From a customer’s perspective, Dominion should not be overearning in the first place. As a customer, Costco wants to pay cost of service rates that include a reasonable return. Dominion’s objection to any reduction of its overearnings helps explain, in my opinion, the raft of aggregation petitions now pending before the Commission. These are due, in my estimation, to the fact that there is no penalty to Dominion for over-earning.”
In other regions, she stated, the company has saved about 25 percent by opting for a competitive supplier. Reed did not reveal the savings expected in this case, but expressed confidence savings would come and noted Costco is not alone in that expectation.
“I believe that the eight aggregation petitions being considered by the Commission in 2018, as well as the huge potential cost impact if Dominion elects to fully Implement the Grid Transformation and Security Act, are compelling evidence that the aggregation petitions are sorely needed to send a strong price signal to Dominion that its multiple additions of rate adjustment clauses and its persistence in making new investments rather than providing base rate reductions or base rate credits are making its tariffs increasingly unattractive to its customers.”
The utilities have seen the signal. House Bill 2477 is probably not the response Reed was pointing toward, but is no surprise to Virginia Capitol veterans.
The impediments to retail competition imposed in 2007 were part of a negotiated compromise, which produced a bill intended to start with a full rate case to set fair and just prices, followed by regular reviews and regular refunds of any excess profits. Dominion set about breaking all those promises and handcuffing the SCC in subsequent years. There is no regulatory compact in Virginia anymore.
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