For more than a decade, much of my time at the General Assembly has been spent on electricity rate regulation. During the 2018 session I will be working to reverse what I consider the largest mistake the General Assembly has made in recent years — its 2015 decision to end State Corporation Commission (SCC) oversight of electric utility ratemaking until 2022 (if not forever).
I will be doing this on behalf of the Virginia Poverty Law Center, which is interested because low-income families spend a disproportionate share of their money on their power bills each month.
- One fair outcome would be to return the regulatory approach approved in 2007, which I helped negotiate and which has already returned $824 million to ratepayers. Simply reverse the 2015 legislation and:
- Restore full SCC authority to review the utility’s costs for reasonableness and prudence, and to set a profit (return on equity) based on market conditions.
- Allow the SCC to review Dominion’s earnings for previous years and distribute any excess profit, just as earlier profits were shared in 2009, 2011, and 2015. Having a case in 2018 is a year late, but better late than never.
- Require the SCC to review Dominion’s projected forward earnings and set the proper base rates. Those base rates are what this is really all about. That is where Dominion is overcharging us — in the base rates.
Three years ago, Dominion created an unjustified crisis atmosphere over pending environmental regulations to justify ending SCC authority. It claimed that would keep rates from going up. Everyone who understood the statute knew the opposite was true; rates could still go up and the real purpose of that bill was to keep rates from going down.
Now we know the cost of that bill. While it prevented the SCC from conducting the scheduled 2017 review of Dominion’s results, the SCC did look at Dominion’s books and report some conclusions.
First, had its authority not been suspended, customers might have received refunds of between $133 million and $175 million.
Second, and more important, the SCC projected that Dominion’s annual revenue going forward was excessive by hundreds of millions of dollars. It had reported the same thing in a similar analysis four years earlier. That finding in a real rate case could cause a base-rate reduction.
So absent the 2015 law, we would have received refunds and we might be paying lower base rates for 2018. Combined, that might have been $400-500 million in lower bills in one year. It would have been noticeable on every residential bill, and saved substantial sums for local and state government, schools and hospitals, small and large businesses.
Electricity costs, like taxes, snake all through the economy.
Dominion will fiercely dispute these projections of potential customer gains. Only a real SCC rate review can sort it out. You should call your legislator and demand it, now.
The 2015 legislation was actually the third bill in three years that all had the same purpose. All three prevented the SCC from exercising its authority to order customer refunds or to even reduce utility rates.
At Dominion’s request the Assembly handcuffed the SCC in 2013 and in 2014. The 2015 bill was just the latest and greatest in the series.
That is the theme I’ve seen running through all of these issues going back to 2007 — Dominion’s desire to preserve the base rates. Absent those three successive bills, all of the elements would have lined up for a rate reduction in 2013 and then again in 2017.
That risk to Dominion profits has now passed, so now it is willing to talk of “transition.”
Having abandoned the claim that environmental regulations would cause prices to skyrocket, Dominion is now offering other excuses to prevent the SCC from returning the money to customers or lowering rates. But the costs of modernizing the grid, of dealing with coal ash, of encouraging energy efficiency and meeting any new state air regulations are actually very strong reasons to return to the SCC-managed process.
Those are all future costs, irrelevant to whether Dominion earned excess profits in the past. The decisions over how to pay for those, over how many years, and with what profit margin for the company — all of those decisions can and should be made by the State Corporation Commission as well.
Only at the SCC are all the stakeholders on a level playing field.