Virginia is once again faced with a demand from its largest energy monopoly to increase the amount of our power bills. Dominion Energy is asking the State Corporation Commission (SCC) for an increase in its authorized rate of return on equity (or allowed profit level), which would, in turn, increase your electric bill. Dominion’s latest push for more profits is not justified and would result in real harm to its Virginia consumers. Before the SCC hears this case on Sept. 10, our state regulators and elected officials should tell Dominion Energy, “No. Enough is enough.”
By law, Dominion is allowed to recover a rate of return on the money it invests to provide electric service. This return is set by the SCC and is charged to the company’s customers in their monthly electric bills.
The company is now asking regulators for a 17% increase in this profit margin, a jump in its rate from 9.2% to 10.75%. This would make Dominion one of the most profitable electric utilities in the country — at the expense of Virginia citizens.
Dominion’s rate of return on equity directly affects the rates consumers pay each month. The SCC staff estimated that if Dominion gets the higher rate it’s requesting, Dominion’s annual revenue requirement — the total amount of money the company is authorized to charge customers — would go up by almost $150 million.
Additionally, the higher the rate of return on equity, the less likely it is that Virginia customers will ever be refunded for Dominion’s past overcharges.
To be clear, there is no issue with the company making a profit for the services it provides or being reimbursed when capital expenditures (aka investments) are necessary to provide service to their customers.
But you don’t have to look hard to find examples of the company using profit-driven behavior to make more than their fair share off of customers. In past years, the company’s efforts to control and manipulate the rate setting process have led to businesses and residents paying hundreds of millions above what the SCC has set as a fair profit for the company. Every year, the SCC sends a report to the governor and the General Assembly describing the extent of Dominion’s overearning.
And in this year’s newly released report, the SCC told legislators that, in 2018 alone, Dominion’s rates produced excess profits of as much as $277.7 million. In 2017, they overearned $356 million.
While the company has conducted zero analysis of how this cash grab will affect the Virginia economy and individual consumers, it’s safe to say it would mean more profits for Dominion Energy shareholders and less money in the pockets of Virginia ratepayers. This is on top of the SCC estimate that nearly $30 extra will be added to customer bills every month starting next year to pay for the implementation of the Grid Transformation and Security Act. These are rate increases that many customers, including businesses and residential customers alike, simply cannot afford.
Dominion claims it needs the increased rate of return on equity to attract investors to buy its stock but has presented no evidence that investors are finding Dominion Energy’s reliable profits anything less than attractive. The company’s parallel claim that federal officials will raise interest rates for banks (and thus create competition for financing big projects) also is unsupported by evidence. In fact, the Federal Reserve just cut the prime rate.
As part of an unlikely coalition that includes consumer advocates, agencies including the Department of the Navy and the Virginia Attorney General’s Office and big businesses like Walmart, we see Dominion Energy’s latest money grab for pure excess profit for what it is, and we don’t like it.
The Virginia Poverty Law Center is urging state regulators and legislators to reject Dominion Energy’s effort to fatten its profits at ratepayer’s expense. Dominion doesn’t need more profits, and consumers don’t need any more rate increases. The higher rate of return on equity Dominion is asking for is unsupported by any credible analysis, will further encourage unnecessary spending and burden Virginia consumers with unnecessarily high electric bills.