A major change to the rules governing Virginia's biggest electric utilities passed the House of Delegates and was sent to Gov. Terry McAuliffe Thursday.

The bill passed 72 to 24, with two abstentions. Last week the state Senate approved the measure, Senate Bill 1349.

The bill would freeze base rates for Dominion and Appalachian Power Co. for years, preventing customers from obtaining refunds if the companies earn more than they are allowed to under state regulations. But it would also shield customers from possible cost increases as the companies comply with proposed environmental regulations.

Base rates make up about 60 percent of a customer’s total bill, with the rest coming from fuel charges and special charges that pay for new power plants or upgrades to the company’s transmission network. Those rates would not be frozen under the new law and could rise or fall.

Dominion said that if it closes any coal-fired power plants during the next five years, shareholders will absorb the costs. Under current state law, the company's 2.4 million customers are responsible for paying the costs of plant closures. Customers would have to pay for any plants that close in 2020 or later.

The company has said that proposed Environmental Protection Agency rules put coal-fired power plants worth $2.1 billion at risk of closure. The bill would require the State Corporation Commission to approve the closure of any power plants during the next five years.

Del. Terry G. Kilgore, R-Scott, said the bill would protect customers. He noted that Virginia has changed its utility rules several times in the past 20 years, and that each change has brought fears of sharply increasing costs.

"People said in 2007 when we did re-regulation that rates would skyrocket. It didn't happen," Kilgore said.

Kilgore also noted that Virginia is the only state to review utility company earnings every two years. Other states review them on an "as needed" basis, he said.

Del. R. Lee Ware Jr., R-Powhatan, said he would vote against the bill because the State Corporation Commission is better qualified to handle changes in the regulatory environment than state lawmakers.

"One colleague described this as a simple path forward," Ware said. "This isn't simple. That's why the SCC has the authority to handle the complex cases for what is a monopoly power company."

Though the transition period would end in 2020, the next rate review for Dominion would not be held until 2022. Edward Petrini, who represents large manufacturers through the Virginia Committee for Fair Utility Rates, said that effectively means Dominion is getting an eight-year rate freeze.

Appalachian Power's next rate review would be held in 2020. The company paid a small refund to its 500,000 Virginia customers -- about $6 per customer -- late last year. Appalachian Power President Charles Patton told West Virginia's energy regulators last month that the company believes it is likely to be refunding Virginia customers in 2016.

If a company over-earns in two consecutive reviews - meaning it had excess profits over four years - state regulators can reduce base rates. Rates can be increased if the company earns less than its allowed profit in a two-year period.

John Shepelwich, a spokesman for Appalachian Power, said the company believes any potential refunds in 2016 would be small. He said Patton's testimony in West Virginia also noted that the company is earning less than it should there.

Shepelwich also said that three rate adjustment charges for Appalachian Power customers will expire on Sunday, and that a customer using 1,000 kilowatt hours per month will see his bill fall to $114.92 per month from $118 per month.

As he did during a committee hearing about the bill, Del. Peter Farrell, R-Henrico, left the floor during Thursday's debate and did not vote on the measure. Farrell is the son of Dominion Resources CEO Thomas Farrell II.

Sign up to receive daily business news emails from The Times-Dispatch

* I understand and agree that registration on or use of this site constitutes agreement to its user agreement and privacy policy.


(804) 649-6874

Twitter: @TDbusinessdaily

Load comments

You must be a full digital subscriber to read this article You must be a digital subscriber to view this article.