Bacon's Rebellion

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How Is the New Double Dip any Different from the Old Double Dip?

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James A. Bacon
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The House of Delegates passed its own version of electric-utility regulatory reform yesterday. The big news is that the House amended the legislative compromise struck between Governor Ralph Northam, the electric utilities, and other key stakeholders to ensure that it prevents the dreaded “double dip.”

Reports the Richmond Times-Dispatch:

The Virginia Attorney General’s Office and the commission have warned that the bill still restricts the ability of the commission to order refunds and lower base rates and also allows utilities to double charge for the grid and renewable investments: Once by canceling out refunds and again by including the projects in the rate base upon which they earn a profit.

“The governor’s office doesn’t believe that there is a double dip in the bill,” Toscano said Monday. “The entire Democratic caucus was taking the position that if there was no double dip in the bill like everyone has asserted, we will make sure the language is absolutely, positively clear.”

I don’t understand how this arrangement would differ substantively from the way rate regulation always worked. Permit me to express my perplexity with a hypothetical example:

Let’s say Dominion Energy Virginia wants to spend $100 million on burying distribution lines prone to disruption in severe weather events. That may or may not be a sound use of the money, but that’s not the question. The question is how Dominion would be compensated for that investment under the proposed new rules.

First, let’s assume that the utility is raking in excess revenue. Rather than rebate the excess to rate payers, Dominion gets to “reinvest” that money in a panoply of grid modernization projects of which distribution line undergrounding is one. Rate payers don’t get the money rebated to them. That’s the first dip. Then Dominion gets to build that $100 million investment into its rate base, and it gets to generate a return on investment — let’s say 10% for purposes of simplicity — until it is fully depreciated. Instead of rate payers getting to generate income on that $100 million, Dominion gets to pocket the income. That extra $10 million constitutes the double dip.

But that’s not the whole story! Under the pre-rate freeze regulatory regime that governed rate setting until 2015, Dominion would have filed for a rider, or Rate Adjustment Clause, to cover the $100 million capital investment of burying the power lines. As I understand it, Dominion also would have been entitled to recover not just the up-front capital but the cost of capital — about 10%.

Under the Northam-Dominion compromise, Dominion would not get to file a rider. Call that a reverse double dip. Rate payers would benefit the once because Dominion doesn’t get its $100 million back through a rider. And they would benefit twice because Dominion wouldn’t get to recover its cost of capital. In other words, it’s a wash. The only difference is that the expense is embedded in the “base” rates instead of in a rate adjustment clause.

Now, there are many other issues one might raise about the re-regulation legislation. Does it undermine the State Corporation Commission’s role overseeing electric utilities? Should the General Assembly declare massive “grid modernization” investments in solar power, wind power, pumped storage, energy-efficiency, smart grid investments, and underground burying of transmission and distribution lines to be in the “public interest,” thus lowering the bar for SCC approval? Great questions, let’s debate!

But double dipping? Dominion won’t get any more licks of ice cream than it did before — unless I am missing something. If I am, I beg you, please explain how the proposed new double dipping differs from the old double dipping. If your explanation makes sense, I will publish it on the blog.

Update: As you can read in the comments, Tom Hadwin and I went back and forth on this issue. Here is how I now understand it:

(1) Rate payers lose the $100 million rebate.
(2) Then the $100 million goes into the rate base, where it must be repaid to Dominion. (That’s the point I wasn’t comprehending before.)
(3) Plus ratepayers pay Dominion a 10% rate of return on the $100 million.
(4) Dominion does not file a Rate Adjustment Clause (RAC), saving rate payers $100 million.
(5) With no RAC, Dominion doesn’t earn 10%, and rate payers don’t have to pay it.

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24 responses to “How Is the New Double Dip any Different from the Old Double Dip?”

  1. TomH Avatar
    TomH

    Jim,

    Your example is not accurate. If the $100 million owed to ratepayers is not refunded. That is the first dip. The $100 million invested would go into the rate base (no RAC required). This allows the original investment to be recovered and paid to Dominion (the second dip because they are getting money back that was not theirs to begin with) plus a 30-40 year series of 10% returns on a depreciating equity base (another dip, since they risked no capital that required a return).

    This could be all coming to Dominion without any funds being put up by the utility, as shown in the example above. More likely, Dominion would use the ratepayers’ money as if it were their equity contribution (the new law basically treats it as that) and they would finance the remaining 50% with debt. The cost of interest on that debt would be paid for by the ratepayers.

    The fair way would be to return all of the overcharges to the ratepayers. It is their money after all. The SCC should determine what an appropriate base rate should be under today’s conditions. And set rates that return that level of profit to Dominion. Dominion would propose new projects and the SCC would determine if they were prudent. Every year or two the SCC would examine actual profits compared to the allowed profits and either authorize refunds or tweak the rates to give the utility its fair returns.

    This isn’t that complicated in principle. Most every other state uses some variation of it. Virginia’s system has become more convoluted to obscure the process from public view and extract more from ratepayers while providing rhetoric that makes it sound like it is good for them.

    The new bill allows the utility to confiscate money from ratepayers and by finessing the rules, never repay it. This adds to their equity, thereby improving their coverage ratios (debt/equity) and could slightly reduce their cost of borrowing. Dominion Energy has been on an acquisition and building binge during the period of cheap money and is a bit over-leveraged.

    However, the need to avoid refunds and reduce regulatory oversight (at least six more years before the first possible refund) is a ruse. Utilities have the lowest cost of capital of almost any industry. Lenders look for a stable regulatory regime that assures a steady steam of revenues that will cover interests payments. A simpler, more transparent regulatory process would meet those requirements quite well.

    Update: Tom Hadwin responded in the comments, and we went back and forth, and here’s how I now understand the issue:

    OK, OK, Maybe I get it. You’re saying:

    (1) Rate payers lose the $100 million rebate.
    (2) Then the $100 million goes into the rate base, which has to be repaid. (That’s the point I wasn’t comprehending.)
    (3) Plus ratepayers pay Dominion a 10% rate of return on the $100 million.
    (4) Dominion does not file a Rate Adjustment Clause (RAC), saving rate payers $100 million.
    (5) With no RAC, Dominion doesn’t earn 10%, and rate payers don’t have to pay it.

    I get it… I think.

    1. James A. Bacon Avatar
      James A. Bacon

      I acknowledge that the Dominion approach is Rube Goldberg-esque. But I still don’t see how it hurts rate payers. Your explanation does not take into the account the fact that rate payers also benefit because Dominion does not file for a $100 million rider.

      Sure, rate payers don’t get a $100 million refund. But, then, they don’t get hit with a $100 million rider either. Explain to me why that’s not a wash.

  2. TomH Avatar
    TomH

    Because of instead of creating a rider, the $100 million goes into the rate base which returns the original investment, plus a return in the same way a rider would. This is the scenario I described in my comment. The ratepayers still lose their $100 million. And Dominion gets other people’s money paid back to them. For some reason Virginia has now established base rates for various T&D projects and operating expenses and RACs for new generation. This does give more flexibility to match a ROE with a particular type of asset, however.

    Greensville was awarded a 9.6% ROE in its approved RAC. If it had gone into the overall rate base instead, it would have received a 10% ROE. In both cases, the original investment is returned, plus repayment of all interest expenses, plus an authorized rate of return.

    I don’t understand why you are claiming that not allowing DEV to file a RAC is some sort of windfall benefit to the ratepayers. Dominion wins whichever equity bucket the investment goes in, because they have received free money. The ratepayers lose their refund no matter what.

    1. James A. Bacon Avatar
      James A. Bacon

      I still don’t get it.

      First of all, I’m not claiming that not allowing DEV to file an RAC is a “windfall” benefit to the ratepayers, which implies that the rate payers are better off. I’m saying it’s a back-handed way to give the $100 million in excess revenues back to rate payers so that rate payers come out even in the transaction.

      Here is the sequence of events: Rate payers lose the $100 million rebate. They also lose the use of that money (worth 10% to Dominion). But they avoid repaying the $100 million RAC and 10% that Dominion would earn on invested capital.

      To use your words, yes, rate payers “lose their refunds.” But they also get a $100 million investment in buried distribution lines without paying a dime through the RAC.

  3. James A. Bacon Avatar
    James A. Bacon

    OK, OK, Maybe I get it. You’re saying:

    (1) Rate payers lose the $100 million rebate.
    (2) Then the $100 million goes into the rate base, which has to be repaid. (That’s the point I wasn’t comprehending.)
    (3) Plus ratepayers pay Dominion a 10% rate of return on the $100 million.
    (4) Dominion does not file a Rate Adjustment Clause (RAC), saving rate payers $100 million.
    (5) With no RAC, Dominion doesn’t earn 10%, and rate payers don’t have to pay it.

    I get it… I think.

    1. TomH Avatar
      TomH

      I think Rowinguy did a good job of answering your question. But I wanted to be clear:

      Items (4) & (5) This does not save ratepayers the $100 million because in the original bill the $100 million would be added to the rate base, instead of a RAC, and be repaid in full, plus a 10% return. The ratepayers received no advantage from this scenario. That is why the bill was promoted as not requiring any new RACs and would provide stable rates (10% plus adders). It was a semantic sleight of hand making it appear that there was a benefit when none existed.

  4. Steve Haner Avatar
    Steve Haner

    First, let’s review the utilities’ obvious goals:

    1) No more rebates of excess profits, including the excess profits already gained in 2015 and 2016 (they are making a $200 million return, but that is not everything.) If they earn 12-14 percent ROE, despite the target of about 10 percent, they keep it all.

    2) No risk of a base rate reduction, which the SCC report clearly indicated is a strong possibility in the next rate case. From 2007 the game has always been – protect the base rates against a reduction, which might spook Wall Street.

    The “customer credit reinvestment offset” as provided in the bill, even the amended bill, effectively accomplishes both goals. By merely making the kind of investments they would routinely make, admittedly a bit more aggressively, they get to keep 100 percent of the excess profits which they otherwise would have to share. Damn good return on investment.

    Now on those investments the utility has always had a choice to make on whether to recover the cost in base rates or through a stand-along RAC. That has always been their option on everything. Until now, they chose – chose, mind you- to use the RAC process because it was safer. Now that they have massive excess profits built into their base rates ($426 million the SCC estimated) and now that the GA might tell them, “hey! Keep those excess profits and go have a nice time!” they are now willing to consider putting those projects back into the base rates. The incentive now is – prevent rebates and prevent a rate reduction. The offset credit scheme responds to that incentive.

    Does that save me money versus them using a RAC instead? Just the opposite. It cost me my refund dollars and all future refund dollars. It locked in excessive base rates. RACS will still rise! The bill clearly states that should these investments EXCEED the value of the owed refunds, the utility can go right out and create a RAC. It will do so. RAC’s already exist for residential undergrounding, for energy efficiency, and I am sure those will grow rapidly under this bill. Even at $400 million per year, the excess profits are unlikely to cover all these coming costs.

    But with the House bill fixed, I’m fine. NOW THAT WE HAVE PASSED THE AMENDMENT, you are correct, for consumers it makes little difference if they do these investments in base rates or a RAC. The language taken out was the “double dip”, the permission to recover the full cost of the investment plus interest and profit from ratepayers. Again. Now instead of saying the SCC “shall” allow a second recovery, it says it “may not.” With the amendment you are correct that things are okay.

    Which is why they must get rid of the amendment somehow. Stand by for their next move, coming Monday.

    Their third goal of the bill is to gut the authority of the SCC overall, and those amendments are identified and percolating. If passed they will have no impact on the utility’s growth plans except to make sure everything is done reasonably and prudently. Two words the stockholders hate.

    If I show up with three walnut shells and one pea, Jim, keep your wagers low because clearly you can be taken by this game….

  5. James A. Bacon Avatar
    James A. Bacon

    As I appended as an “update” to the original post, I have a new question:

    What does it mean to say that the $100 million is being added to the “rate base”? The rate base normally consists of operating expenses. Under this proposed schema, capital investments are, in effect, being converted into operating expenses. Are we then correct in assuming that Dominion will be allowed to earn a 10% return on investment on the sum?

  6. Steve Haner Avatar
    Steve Haner

    You are now getting into the weeds of regulatory accounting because first there is the “rate base”, which is the total value of capital assets tied to the generation and distribution of energy, and then there is the “revenue requirement”, which includes operating costs, debt payments, interest on debt, and the allowed return on equity – which is tied to the value of the rate base. It is the revenue requirement approved by the SCC which determines rates, and which the SCC said in September seems to be $426 million lower than rates provide. Meaning Dominion collects $426 more than it needs to operate and earn the allowed profit.

    So adding an asset to the rate base which is financed by debt or equity or some combination means the revenue requirement goes up. Assets do come out of the rate base as they are depreciated or even retired.

    Now, in building grid additions now the utility often seeks and gets a financial contribution from the particular customer or customers being served. A developer, a new factory, etc. The entity being served might kick in a contribution to the cost of the project. With our amendment, I think the “credit offsets” will work like that – contributions from customers that will provide assets OWNED by the utility but not included in the rate base for a second recovery with profit.

    Tom or Acbar are probably more familiar with this….

  7. Rowinguy1 Avatar
    Rowinguy1

    A utility’s “rate base” is everything it has a capital investment in, under ordinary circumstances. All of this investment in equipment used to generate, transmit and distribute electricity earns a rate of return established by the regulatory agency.

    “Base rates” are the component of charges to the customer wherein this investment and return are recovered. ALSO recovered in “base rates” are all prudently incurred operating expenses, depreciation, payroll costs, taxes, etc. Jim, you misunderstand the difference between these two terms when you say, above, that “rate base normally consists of operating expenses.”

    Usually, utility bills comprise base rates and a fuel cost adder. Fuel is a utility’s largest single expense that is almost completely beyond its power to influence and is normally repaid by customers dollar for dollar, with no return component added. It’s a pass-through in other words.

    Beginning in 2007, with the Reregulation Act, Virginia created a third component to the customer’s bill, the rate adjustment clauses (RAC). These were designed to protect utility earnings by requiring dollar for dollar recovery, PLUS RETURN, for large new capital projects, costs incurred to comply with environmental regulations, costs of energy efficiency programs implemented by the utility, and all transmission-related expenses billed to the utility by its RTO (PJM, in both Apco and DVP’s case). As originally passed, there was not a RAC for putting distribution lines underground. That gift came to the utilities in a 2014 amendment to the Code. DVP now has about a dozen RACs for various projects it has built, programs it is running, its new transmission investments, etc. For utilities not operating in Virginia, all this investment goes into rate base and is recovered from the base rate component of customer bills.

    Tom has correctly laid out how the unamended bill permitted double recovery.

    1. James A. Bacon Avatar
      James A. Bacon

      Thank you for the clarification. I did not properly understand how base rates were constructed.

  8. TomH Avatar
    TomH

    Even with the double dip excluded by the amendment, there are still many provisions in the bill that will add profits to the utility and cost ratepayers hundreds of millions, if not billions in excess charges.

    The debate stirred up by double-dipping distracted legislators from the other handouts to utilities included in the bill.

    Just delaying the review of actual returns vs allowed returns to two consecutive 3-year periods before a refund is allowed gives a minimum of six years of interest-free use of ratepayers money, and it could be longer.

    The SCC said they are not sure all tax reductions will find their way to the ratepayer.

    All of the ash disposal costs seem to get passed on without any evaluation of whether some should be paid by shareholders.

    The undergrounding of all or part of the Amazon transmission line provides Dominion with the opportunity for increased profit because putting 230 kV transmission underground costs 10-15 times more than overhead lines and has lower reliability and half the life span. If it is primarily for Amazon, they should pay all or most of the cost and any contribution from them should not be included in the rate base.

    Distribution undergrounding also increases the total profits for the utility because the rate base increases. The latest proposal from Dominion was for a $270 million investment for 244 miles of distribution lines (over $1 million per mile). Estimates for some of this work were more than 6 times the typical prices for other utilities. That and the fact that the expense was many times higher than any savings from avoiding outages and storm cleanup convinced the SCC and AG that these expenditures were not in the public’s interest. Yet without any evidence, the GA says that such investments are in the public interest (although the threshold for approval in now below $750,000 per mile). Let the experts do their work. If Dominion can show that it pays for itself, the SCC should approve it. If not, no approval.

    There should no longer be 1-2% increases in the allowed rate of return for building new power plants. If we keep such incentives we will continue to see proposals for new plants that we don’t need. Maintaining 10% ROE in an era of low interests rates is already a bonus to utilities. For the past 10 years when this rate of return should have been adjusted downward, the utilities were granted legislative largess paid for by citizens and businesses in Virginia.

    Utility-scale solar development requires no legislative prompting. It is the lowest cost source of generation today and the price is falling by 50% every 4-5 years. Having a utility build it, a 13.2% rate of return is added to the cost from all of the adders, plus the extra expense of the transmission connection. It would be cheaper and add more reliability to the grid if half of the amount was distributed throughout the distribution system at customer sites and installed by third-parties.

    The coal-field pumped storage project is another handout to the utility at customer expense. In 8-10 years, when this project might be available, batteries will cost 1/4 of what they cost today (and they are currently cost-effective in many grid applications). Locating storage in numerous locations throughout the grid adds to reliability and resiliency. A single large pumped storage project located far from Dominion’s service territory requiring added transmission costs is much more expensive (increasing profits), less efficient, and less useful for grid purposes.

    Energy efficiency is usually done poorly by utilities. Dominion was ranked last out of 32 major utilities in this area for the past several years. Rather than give millions to Dominion for a low-grade job, we should invest less for a much greater result using firms that specialize in reducing energy use in our public buildings and substandard housing stock.

    Taking money from ratepayers to fund the Energy Share program doesn’t make sense. Ratepayers lose and Dominion gains from a tax deduction and higher revenues. It would be better to use the same or less money to improve the energy efficiency of the substandard housing stock so we would lower the cost of occupancy year after year and save us all money by lowering the peak.

    Wiping out the double dip did not make this a good bill. We can do better for the utilities and Virginia.

    1. Rowinguy1 Avatar
      Rowinguy1

      Amen, brother!

  9. LarrytheG Avatar
    LarrytheG

    I got a bad feeling that most legislators are not cognizant of the issues raised in the comments here… it’s complicated and even Jim wonders why it needs to be so complex – even as he misses the advantages to Dominion – which is probably exactly as they intended in making the proposal so complex in the first place.

    This process does not engender trust in Dominion… it actually confirms the fears that people had… geeze…..

  10. Steve Haner Avatar
    Steve Haner

    Tom is correct, the bill is still a bonanza of profit for the utility and a disaster for consumers who have only the SCC to defend them. Legislators do not understand it and have been fed a steady diet of unfounded complaints that the “backwards” SCC would oppose investments in the grid – which of course have not even been discussed with anybody in more detail than a 60 second TV ad and certainly have not been presented as a formal proposal.

  11. LarrytheG Avatar
    LarrytheG

    Looks like Dominion does not want the SCC assessing improvements to the grid – both in terms of what kinds of improvements and the cost effectiveness/ROI … Dominion just wants to make whatever improvements they deem needed – and pass that cost on to ratepayers.

    you gotta admit -that’s an “elegant” approach!

    I’m nor immune to the idea that the SCC may not have the expertise to essentially “decide” what is “best” in terms of grid improvements. Anyone who works for the govt is not going to have the same perspective as someone who is being held accountable to investors. I do recall the SCC turning down some proposals from Dominion – that I thought made sense… and could not understand why the SCC nixed them.

    The question is – who should be looking over Dominion’s shoulder if not the SCC?

  12. TomH Avatar
    TomH

    An appropriate use of legislative authority would be to pass policy acts. For example, the GA could pass a bill that says modernizing the grid is an important activity for improving Virginia’s economic competitiveness, therefore we encourage the SCC to add more staff expertise in this area, or that the SCC should hire outside consultants to organize a symposium of energy experts, employees of utilities that are leaders in this area, and representatives of regulatory bodies that have developed successful schemes to promote grid improvements in cost-effective ways that also serve the customer.

    Dominion has a skilled grid modernization subsidiary. They should be part of a collaboration such as this. But they should not be the only voice or given free rein to do as they please.

  13. LarrytheG Avatar
    LarrytheG

    I can see some issues involving regulators who may lack sufficient knowledge about an evolving industry , knowledge that is internal to a given company strategic plan which may have elements which by themselves don’t have a short or good ROI but are imperatives for other initiatives to succeed. There may be differences of opinion inside of a utility like Dominion as to what things should be done – large or small and when…. and those things themselves might change as the industry and technology evolve.

    You’d almost have to have an SCC person on staff at Dominion for them to fully understand the direction and the need for various parts and pieces.

    Then you can see Dominion feeling not only hobbled but perhaps harmed by not being able to quickly move on changes.. they deem needed and soon… but under “review” and potentially turned down.

    From THAT perspective, one might well understand why Dominion appears to be so ruthless in their quest to shed the SCC.

    HOWEVER – and again – if that is the case – then they need to make that case Prima Facie – on the merits – rather than the current complex rigmarole that has to be dissected to really understand the ramifications – some of which could well be harmful to ratepayers interests… not all initiatives are successful .. some are risky and some can do the opposite of ROI… that’s the essential nature of a lot of businesses where risk doesn’t also result in reward … Even Dominion could have it’s own “dot-coms” and “new cokes”… so here’s the thing – is it the SCC’s job to not let Dominion engage in efforts that may ..or may not return an ROI? Is it the SCC role to prevent Dominion from engaging in potentially risky initiatives that may not provide a good ROI?

    There may well be a legitimate issue on that basis – that Prima Facie case but we’re not going to get there with Dominion writing legislation that is rube-Goldberg in design and ends up with the perception that they are “double-dipping” and then some. It’s just a wrong way to go.

    Questioning how the SCC should operate – in a fast changing utility industry environment – is a valid question though and there are a lot of other comparatives these days with regulators trying to cope with things like drones, gene slicing, DNA, autonomous vehicles that the industry itself is struggling to fully understand how their products will “fit” into the existing environments… legal, cultural, practical..etc..

    So I’m not convinced that re-instating the traditional SCC role is “right” either.

  14. LarrytheG Avatar
    LarrytheG

    I think I might have “muddled” a bit.

    The question: All companies engage in risk. There is no 100% definitive “truth” available prior to decisions.

    Dominion may make a decision based on the apparent promise of some technology – only to have that technology usurped a few years later by a better technology that make the prior one obsolete .. i.e. an “investment” that won’t return the expected ROI .. unless more money is spent in acquiring the newer technology that supplanted the old.

    You can see this quite easily in areas like storage … or other strategies for incorporating solar as well as what might be done at night when solar goes away.

    Going to the SCC for “approval” of something that is … inherently risky – given the upheaval ongoing… the SCC if operating in a traditional mode may deem such initiatives as “too risky” and no guarantee of ROI…

    in cases like that – what is the proper SCC role? I think you can see that their assessment of what is a reasonable risk may well differ substantially from Dominion’s view and that such regulation may actually be harmful – even to consumers – if Dominion can move when it needs to…. on a time-frame.. entirely foreign to how the SCC typically operates. If that might be the case.. then the SCC would actually NOT be operating in the best interests of the ratepayer…. nor investors…

    Risk is an inherent part of industry and technology… there are countless examples of companies that did not evolve fast enough and fell to more nimble competitors.. but that kind of harm can befall monopolies also as non-monopoly companies spring up when technology brings new opportunities – and the start-ups just go around the bigger regulated companies… perhaps like we see right now with 3rd party solar … Should Dominion, for instance, be able to market residential solar with custom-designed systems specifically configured to work best with Dominion’s infrastructure?

  15. TomH Avatar
    TomH

    The new rate bill sets shorter deadlines for SCC decisions on these issues.

    Most regulators give great latitude to utilities in making technology decisions. There has been a great deal of progress made in digital grid technologies and many new standards have been developed. I don’t think this will be a problem for the SCC. The big change might be the way the utility calculates ROI. The old electro-mechanical equipment that is being replaced has been in the grid for up to 50-60 years. I think a regulator today would have difficulty accepting a ROI calculation today that assumes a lifespan of current technologies that would be that long. New technologies are evolving too quickly.

    I think the SCC’s role would be more like comparing the cost of Dominion’s distribution undergrounding estimates and finding that in many cases they were up to six times higher than what other utilities were charging for similar work. Ratepayers should be glad that the SCC is doing that type of comparison.

    The same would apply to coal ash and nuclear cost recovery. The regulatory body should evaluate whether these were prudent expenses or if they could have been less had the company chosen a different course of action, or were they done in order to achieve higher revenues and higher rates of return?

    No custom-designed solar systems are required to work with Dominion’s infrastructure. Modern inverters used with current solar panels actually provide voltage and frequency regulation that assists the grid. The main modification required to more fully integrate solar is to allow for a two-way flow of energy and information. The old grid is designed for just a one-way flow. This is not only helpful for more solar development, but it also assists the utility in identifying downed power lines, local outages, expanding advanced metering infrastructure, etc. Solar is often blamed for requiring things that the utilities need to do anyway, but it helps them get paid more for it.

  16. LarrytheG Avatar
    LarrytheG

    I guess what I’m sorta saying is that not even Dominion knows for sure what they are going to do… ahead of time. They will make mid-course corrections according to their own experiences and changing technology and that seems ill-suited to have to go get permission from a regulator at every new turn…. different form the original submitted proposal.

    That’s the number one complaint of a lot of businesses, that regulators are themselves not keeping up with the fast changing business environments and they are using old rules that harm without really understanding that rote adherence to obsolete rules is the very antithesis of a nimble business model.

  17. TomH Avatar
    TomH

    I agree that the utilities should have some latitude in how they implement programs. I think a new regulatory scheme that resets the role of our utilities would provide that and include opportunities for performance-based rates would give more freedom to utilities as long as they adhered to certain principles.

    But in the three years that I have closely watched Dominion interact with the SCC, it seemed to me that the parent company was using every opportunity to create ways that the utility could extract extra money from the ratepayers.

    When a utility proposes a program for undergrounding distribution lines that costs more than $1 million per mile, you want the regulator to ask detailed questions.

    1. Rowinguy1 Avatar
      Rowinguy1

      “When a utility proposes a program for undergrounding distribution lines that costs more than $1 million per mile, you want the regulator to ask detailed questions.”

      Actually, Tom, it appears to me that Larry prefers that these decisions be made by citizen legislators, meeting for 30 to 45 days per year, and accepting money from Dominion all the while instead of having utility proposals reviewed in open court by a regulator that employs accountants, economists and engineers with decades of experience reviewing utility proposals and their books and that will receive sworn evidence from both the utility and anyone interested in its proposal, pro or con.

      1. Acbar Avatar
        Acbar

        Amen to that, brother.

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