State regulators want to make sure Virginia’s millions of utility ratepayers benefit from the corporate tax cut pushed through by congressional Republicans and signed into law last month by President Donald Trump.
The Virginia State Corporation Commission, which regulates utilities, issued an order Monday that requires electricity, gas and water utilities to account for the tax savings on their books.
“The tax savings will thus be quantified and available to be passed on to customers in subsequent rate proceedings,” the commission said in a news release.
Customers of Virginia’s two large electric utilities, however, will have to await action by the General Assembly to reap any benefit, a consequence of the controversial base-rate freeze for Dominion Energy Virginia and Appalachian Power that the legislature passed and Gov. Terry McAuliffe signed in 2015.
The law prevented the commission from ordering refunds to customers if it found the monopoly utilities’ profits exceeded authorized rates. The SCC has found that the law has allowed the utilities to keep millions they would have otherwise been forced to return.
Dominion has signaled that it’s time to “transition away” from the rate freeze, which has been criticized as a cash-grab for the politically potent energy company and has prompted calls to restore the commission’s traditional rate-setting powers.
What the company will put forward to replace the 2015 law, supposedly intended to guard customers against price shocks from carbon regulation, is expected to suck up a lot of the oxygen in the General Assembly session that starts Wednesday.
Sen. J. Chapman Petersen, D-Fairfax City, who unsuccessfully pushed legislation last year to resume rate review, has introduced a similar bill — this time with broader support, he says.
Meanwhile, Dominion has said it favors a “reinvestment model” that allows the utility to deduct money it spends on modernizing Virginia’s electrical grid and on renewable energy from its excess earnings for rate-setting purposes.
Last month, the SCC’s staff told lawmakers who serve on the General Assembly’s Commission on Electric Utility Regulation that cutting the federal corporate income tax rate to 20 percent would save Dominion Energy Virginia about $165 million a year and Appalachian Power, the state’s other large electric utility, about $80 million. Congress ultimately settled on a 21 percent corporate tax rate.
Federal taxes are included in the base rates utilities charge customers.
“We advised the commission on electric regulation at that December meeting that unless something changes to the current law with regard to Dominion and APCO, those savings are retained by the company,” said SCC spokesman Ken Schrad. “There’s no mechanism by which to return it to ratepayers.”
That projected tax windfall for the utilities, with no means at present to pass it back to ratepayers, could create additional impetus for lawmakers to come up with a new model for dealing with utility “overearnings.”
“We are analyzing the effects of the federal tax cut law just passed and agree any reduced tax expense should benefit our customers,” said Dominion spokesman David Botkins.
John Shepelwich, a spokesman for Appalachian Power, said the company would “certainly comply” with the order but had not yet seen it.
“We also do not know at this point what the amount will be nor the process,” he said.
The commission’s order also affects: Columbia Gas of Virginia, which provides gas service to much of Chesterfield County as well as many other areas of Central Virginia including Lynchburg and Fredericksburg; Virginia American Water Company which provides water service to the City of Hopewell and certain areas of the Northern Neck (Westmoreland and Northumberland Counties); Aqua Virginia Inc.; Washington Gas Light; Virginia Natural Gas; Roanoke Gas; Atmos Energy; Southwestern Virginia Gas; Appalachian Natural Gas Distribution and Kentucky Utilities.
“Columbia Gas will comply with the State Corporation Commission’s order and the impacts of the tax reform act are currently being evaluated,” spokeswoman Kristine M. Johnson said.