The debate over retail aggregation and choice for electricity underway at the State Corporation Commission is moving to another decision point, with a hearing examiner’s ruling May 21 on one of the many petitions.
Eventually the full SCC must decide. There is no real indication of the ultimate outcome in this ruling, which reads more like a case summary (here). Senior Examiner Michael D. Thomas spends most of the 37 pages describing earlier testimony and arguments. The real hints may be in two confidential supplements he provided but which we cannot read. They may answer one key question: Just how much money can these companies save?
A bit of recap: Virginia law creates an opportunity for large users to aggregate demand from multiple business locations to reach an electricity demand of greater than 5 megawatts. With that they can petition the SCC for permission to leave the monopoly provider and buy their electrons elsewhere. In these cases, it’s Dominion Energy Virginia potentially losing big customers and revenue.
Last year the SCC granted permission for one company to leave, but earlier this year then denied a petition from Walmart. It expressed concerns the loss of the big customers would shift too many costs to all the other customers unable to leave Dominion, in base rates and rate adjustment clauses (RACs). Since then the various petitioners have been trying to change that conclusion. See my previous reports here and here.
Thomas does a good job of summarizing the arguments. Here are some excerpts:
In their Post-Hearing Briefs, Petitioners distinguished the facts and arguments raised in the Walmart Case from the Kroger and Harris Teeter Petitions. Petitioners believe Dominion’s cost of service analysis is an impossible standard to apply in this case because it only quantifies the negative impacts of retail shopping and does not account for the long-term benefits of reducing or deferring the need for new incremental generation resources…..
Petitioners believe the Commission never intended to establish a standard for Section A 4 approval that is literally impossible to meet. Petitioners believe the Commission must examine both sides of the ledger, and their evidence shows non-shopping customers would likely benefit from the loss of the Kroger and Harris Teeter loads due to the avoidance of new generation costs, which offsets any harm identified by Dominion…
Petitioners explained in the real world of ratemaking, the near-term impact of their switch to retail access service would depend on the interplay between the level of Dominion’s overearnings and any customer refunds authorized in the Company’s 2021 triennial review case.
If no refunds are authorized, the near-term impact on base revenue recovery would be absorbed by Dominion, not other non-shopping customers. If refunds are authorized, Petitioners’ switch to retail access service might cause a small reduction in the total amount of the refund; however, the amount attributable to Petitioners would be absorbed by Petitioners themselves because they would not be entitled to a refund for any generation-related overearnings.
In no place do the petitioners promise to pass along the lower electricity costs to their customers, but being retailers in competitive markets they could, and regular Kroger or Harris-Teeter customers (that would be many of us) might see a benefit that way, as well. Whatever the SCC does for one it will be hard not to do for them all. Costco and Albertson’s are also petitioning the SCC at this point.
Retail choice for everybody is the idyllic vision offered by that Virginia Energy Reform Coalition idea now driving so much discussion. Within the PJM Interconnect LLC region, several other states are structured that way. If Virginia split Dominion into two companies, one owning the wires and the other doing independent generation, there would be few if any problems for the rest of us depending on what Kroger or Walmart or Costco did.
But the path from here to there is long, winding, and to quote the cultural touchstone of the times, “dark and full of terrors.” It is the path to the goal that is the greatest concern to me, the transition process, not the final shining goal. A key question for the SCC has to be, would allowing a number of these customers to aggregate and leave move us toward the goal or away from it? Would what we learn be of value?
The petitioners are totally correct that in today’s Alice In Virginia Wonderland regulatory system, with all advantages it gives to the utility, much of the traditional analysis is useless. Too much is secret. There is never a true accounting. So many essential questions will not be answered until the full financial review in 2021, and no doubt Dominion will channel Lucy Van Pelt and seek to jerk away the football again before that happens.
So, add this unofficial personal comment to the record: SCC, please do this. Allow some more of Dominion’s customers to leave. Monitor the impact on the rest of us and on the health of the company. And open more of the financial analysis involved to public scrutiny (the secrecy damages everybody’s credibility). If in a year of so Dominion is angling yet again to avoid a true reckoning on its profits, which many of us expect, there is no skin off my nose.
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