GENERAL ASSEMBLY 20150206

Senators John C. Watkins (R-Chesterfield) and Frank W. Wagner (R-Virginia Beach) confer during session in Richmond, Va. Friday, February 6, 2015.

The state Senate voted 32-6 Friday to approve a bill to change the way Dominion Virginia Power is regulated after a flurry of floor amendments and last-minute lobbying.

The bill had sailed through a Senate committee but was altered several times on the Senate floor to address concerns from Democrats, including Attorney General Mark R. Herring and Gov. Terry McAuliffe.

The bill would freeze base rates for Dominion until 2020. Base rates make up more than half 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.

Under the legislation, customers would be unlikely to see big price increases in the next five years. But customers wouldn’t get a refund if Dominion earns more than it is allowed under state regulations.

Senators who support Dominion’s push to change the regulatory rules introduced amendments designed to shore up support. Senior lawmakers from both parties were seen huddling outside the Senate chamber with Dominion executives midway through the daily session.

The company says it won’t earn more than it should. Environmentalists and consumer advocates point out that state regulators said last year that the company was on pace to earn well more than it should, and that in 2009 and 2011, state regulators authorized refunds for customers.

The changes are being driven by proposed regulations from the Environmental Protection Agency. The EPA wants Virginia’s power plants to cut carbon dioxide emissions by 38 percent in the next 15 years.

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Sen. Frank R. Wagner, R-Virginia Beach, the bill’s sponsor, introduced an amendment to require Dominion to install at least 500 megawatts of solar power by 2020. The company announced plans Thursday to build at least 400 megawatts of solar power around the state, and last month it said it plans to build a smaller facility in Northern Virginia.

Sen. A. Donald McEachin, D-Henrico, said the solar provisions were a key reason he was supporting the bill.

“On this floor today we have created the opportunity for more solar (energy) in Virginia than has ever been had before,” he said. “It’s progress. Not as far as some would like to go, but it is verifiable progress.”

Several groups that had been fighting the measure hailed the new language on solar power.

Cale Jaffe, director of the Virginia office of the Southern Environmental Law Center, said his group was pleased by the last-minute changes. He said the bill would now create job opportunities in solar energy and energy efficiency.

Glen Besa, head of the Sierra Club’s Virginia chapter, said the solar provisions were “hard-fought, modest gains.” Besa also thanked the six senators who opposed the measure, which he called a “bad, utility-sponsored bill.”

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Senate Minority Leader Richard L. Saslaw, D-Fairfax, introduced an amendment that would require Dominion and Appalachian Power to conduct a pilot program that would help poor, elderly and disabled individuals reduce energy bills through financial assistance or programs that would reduce the amount of air that leaks from their homes.

Wagner said the bill was amended over the past month in an effort to balance the concerns of Dominion, large industrial customers and consumer advocates. He said the measure will protect customers until the EPA issues its final rules on power plant pollution.

“We don’t know what the final regulations will look like and what the courts will rule,” Wagner said. “They may rule it is all a drill and the regulations don’t apply. Or they may rule Virginia must comply with the final regulations as they are written. We have an opportunity today to keep every existing plant open until we do know.”

Brian Coy, McAuliffe’s spokesman, said the governor met with Dominion’s leadership — including CEO Thomas F. Farrell II — this week to discuss the bill. Coy said McAuliffe would review the legislation when it reached his desk but was pleased with the floor amendments.

Coy said McAuliffe was very happy with Dominion’s announcement Thursday on solar power.

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Before senators considered the bill, letters in support of passage were circulated around the chamber. MeadWestvaco, Gerdau Long Steel in Dinwiddie County and Smithfield Foods Inc. all wrote in to say they supported the measure. Gerdau is the single largest user of Dominion electricity.

Sen. J. Chapman “Chap” Petersen, D-Fairfax City, said he voted against the bill because he didn’t think lawmakers were more qualified to set rules and regulations for Dominion than the State Corporation Commission.

Though Wagner’s original bill applied only to Dominion, it was later amended to freeze rates for Appalachian Power until the end of 2017.

Sen. Stephen D. Newman, R-Lynchburg, was the only Republican to vote against the bill. He had said during committee hearings that he did not think Appalachian Power should be included in the bill.

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John Shepelwich, a spokesman for Appalachian Power, said Dominion and Appalachian Power have very different operations but said his company supports the bill.

“We look at this as a good opportunity to protect customers,” Shepelwich said.

Shepelwich noted that Appalachian Power saw sharp rate increases in recent years when it exited the rate freeze that accompanied a return to regulated status. Customers were furious with the price increases. “We don’t want to see that again,” Shepelwich said. “In our 2014 filing we did not ask for a base rate increase.”

In November, the SCC ordered Appalachian to refund customers about $5.8 million. The SCC also cut the company’s allowed profit to 9.7 percent from 11.4 percent.

In testimony before West Virginia’s energy regulators, Appalachian Power President and Chief Operating Officer Charles Patton said the company was earning more than it should in Virginia and that further refunds could be necessary. “It’s also true that in Virginia that, quite candidly, that there were refunds ordered for this year, and quite honestly more than likely by the time we get to our next biannual (review), there’ll be a refund ordered for that time too,” he told West Virginia’s Public Service Commission on Jan. 20.

Patton also said that the average Appalachian Power customer in Virginia paid $118 per month, while a customer on the West Virginia side of the border paid $97 per month.

“Quite honestly, do I think that the $118 in Virginia is the right number? No, because what’s going to happen in Virginia going forward is what happened in the last rate case,” Patton said. “You’re going to have refunds and you’re going to see that rates begin to level out depending on what additional investment that we have.”

Those refunds would be delayed or canceled under Wagner’s bill. Appalachian Power’s next rate review would be in 2020, rather than in 2016.

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