“Putinomics” Comes to Virginia

Several weeks ago, I was shocked to read a story in the TD that Dominion, Virginia’s dominant electric monopoly, was suing several land owners as a result of their refusal to allow a survey team to access their land to measure for a potential pipeline that Dominion and several other firms want to build.  The land is privately held, i.e. not in the public domain, private property and privacy are essential elements of a democratic and capitalistic society.  I was later informed that 10 years ago, the Virginia legislature in effect granted the right of eminent domain to Dominion, a private corporation.  Conceptually, eminent domain is used by governments to obtain property for public use such as schools, highways, and hospitals.  This is a prime example of anti-capitalist behavior on the part of Dominion and all of those “capitalists” in the General Assembly.

Today,  the TD reports that the electricity monopoly is playing accounting games with the legislature in an attempt to pass on inflated costs to its customers as it closes older power plants. Companies depreciate capital investments over a number of years.  Dominion failed to mention the original costs of these plants and that the charges that they have taken to their profits as legitimate depreciation.  The present book value can not be the same as replacement costs.  These costs are amortized over many years.

Perhaps Dominion should take the approach utilized by Lloyd Blankfein of Goldman Sachs to justify taking part in the huge A.I.G. bailout.  Lloyd said: “We do God’s work.” Vladimir Putin could not have said it better.

— Les Schreiber

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20 responses to ““Putinomics” Comes to Virginia

  1. Les, I don’t understand what your problem is with eminent domain. Starting with canals and turnpikes, then railroads, gas, electric, telephone, pipeline and water companies, there’s a well-developed body of law going back to the 1820s that says, these private corporations (collectively “public service companies”) provide a public service and obtain certain rights and privileges that otherwise would only accrue to the government, including a service monopoly and the privilege of “eminent domain,” IN EXCHANGE FOR the burden of having their rates and services regulated by the public (by franchise or the State or local legislature or an agency created for the purpose, e.g. the VSCC).

    Now we can argue about how effective that rate regulation is in Virginia, or whether the process of property condemnation in Virginia is equitable, etc., but the basic terms of that bargain between private “public service companies” and the State are repeated in countless variations in the U.S., at both the State and federal level.

    The question whether there are accounting games being played here is precisely why it seems ridiculous to me to deny the VSCC, by statute, the right to investigate and change Dominion’s rates for any period of time, much less for 5-6 years as proposed. That said, the prescriptive, formulaic, rule-bound manner in which the VSCC now sets Dominion’s rates is itself a creation of the legislature; we are a long way from the old days when the statutory guidance for VSCC rate review was simply “shall fix rates from time to time that are just, reasonable and non-discriminatory” or words to that effect.

  2. The premise of eminent domain is that it’s to serve the public and the criteria is not to, for instance, allow WalMart to condemn land because they will “serve the public”.

    Ditto for a Doctor’s office or a WaWa or even a Propane company.

    so what is the distinction?

    How come Transurban can’t lay out a highway corridor – condemn the land and operate a toll road?

    I think when the answer is given for the above – we might also ask why not only Dominion but other competitors for the same pipeline can both go on other folks lands – and do it in a world of satellites and drones that can map property.

    public use – is not the same as “serving the public”.

  3. “How come Transurban can’t lay out a highway corridor – condemn the land and operate a toll road?”
    It could, of course. Think Dulles Greenway. But first, in Virginia and most places, it must be chartered as a public service company, agreeing to the rate-regulation bargain discussed above, and arranging the financing for a big project on that basis is no easy task.

    • could Transurban do that anywhere they pleased based on their own business interests and also determine who can use the road or not?

      what role does that state play in this -and why?

      Why can’t WalMart just condemn land where they want to build?

      • That’s a good question. Could Transurban do that anywhere? Yes, like the first railroads and turnpikes did, it could pick any location where it thought it could make money; but first, to get eminent domain rights, it would have to get that crucial endorsement from the legislature or its proxy as a chartered “public service company.” And you’re right, that’s a lot more than simply selling something to the public. It means agreeing to accept rates and services regulation.

        Why not WalMart? Well, obviously the Big Wal isn’t willing to seek or accept rate regulation like that, but in theory, and sometimes this has happened, it could go to the “State” (i.e., a local government) that has the authority under State law to condemn land and/or sell previously condemned land to a private non-“public service company” business simply because the State has determined that it’s in the public interest to promote local economic activity. The legality of THAT is what the Supreme Court was asked to address recently. But we’re wandering a long way from the example Les raised, of Dominion (clearly a “public service company”) possibly condemning a slice through a farm for its pipeline.

        • Acbar – this is glacial.. !!!!

          what gives any business the right to take land from other private owners of land?

          can any business condemn land to serve their business needs?

          If Transurban could do that – they could build a second highway corridor from Richmond to NoVa.

          why can’t they do that?

  4. They COULD join a private/public/partnership and build a new I-95 corridor right through Spotsylvania County! And they could condemn land to do it. PROVIDED the partnership (or, theoretically, Transurban itself) was chartered as a “public service company” or otherwise acquired the same rights as a p.s.co. by special legislation – which wouldn’t be easy or practical for a bunch of reasons, but the biggest one of which is raising the money for project financing while simultaneously being under rate regulation by the State.

    A much easier way for Transurban to get the same rights to build AND the land and the money to build with is to have the State (i.e., DOT for the State) decide to build the road and condemn the land, all of which the government can undoubtedly do, but then go into partnership with Transurban to do the road-building in exchange for future revenue, e.g. toll, rights. If the State provides the land for a pre-approved project, there’s no need for the partnership or Transurban to be a public service company, it can simply be a private for-profit builder. That’t the P3 model currently in use in Virginia.

    This is glacial? No, it’s hot stuff — according to the Republican way of thinking about how to leverage the small amount of tax revenue that’s been available for road construction.

    • well. it’s not about money – that just diverts the core issue which is what gives any company or individual the right to condemn and take land that belongs to others?

      not even VDOT can condemn land without a legal purpose.

      Dominion cannot even build a new powerline without permission -why?

      what’s the legal issue?

  5. my understanding –

    public use and “common carrier” means that the pipeline use is available to anyone who needs to transport product – as opposed to a pipeline that is reserved only for the private use of the owner, i.e. others cannot use the pipeline to transport their product.

    The former is a benefit to the public because it provides an opportunity for the competitive marketplace to serve the public – as opposed to a private monopoly that primarily serves the owners and investors of a single company.

    A private company is free to build it’s own pipeline for it’s own use – but since it does not provide the public with a competitive market – it is not entitled to the power of taking land from others for it’s own economic interests.

    that power is reserved for – markets – – that serve the public with products and services – beyond just those offered by one company unless that company is a regulated monopoly.

    So if Dominion is going to sell pipeline capacity to other companies – a “market”, then it would be a public purpose. If Dominion is planning to restrict service to only it’s own company – then it’s for a private purpose – not a public purpose and is not entitled to use eminent domain – unless the State and Feds see it as justified as part of their regulated monopoly.

    There are competitors to the Dominion pipeline – other companies that are vying to build along the same route.

    One of the differences is that the other companies are pipeline companies – companies that build pipelines than sell capacity to any/all who want it.

    What is Dominion’s proposal? Are they proposing a pipeline to transport for anyone who needs transport or are they building something that is primarily to serve their own business needs?

    here’s some more in detail about the issue:

    THE “PUBLIC USE” REQUIREMENT IN EMINENT DOMAIN LAW:
    A RATIONALE BASED ON SECRET PURCHASES AND PRIVATE INFLUENCE

    http://www.law.harvard.edu/programs/olin_center/fellows_papers/pdf/Kelly_5.pdf

    • LarryG, you’ve got the basics right, “public use and ‘common carrier’ means that the pipeline use is available to anyone who needs to transport product.” My understanding is that part of the justification for this proposed pipeline is to transport fracked gas to Dominion’s own plant, but also to any other businesses now or in the future located along the pipeline, and also to a terminal in Hampton Roads, and also to another pipeline in NC. That means the pipeline would be serving the public, hence, regulated as a common carrier. And as a regulated interstate gas pipeline Dominion would have to charge itself the same rate for delivering gas to its plant that it charges other users for comparable service (i.e., non-discriminatory).

      It is possible, of course, that Dominion could build a smaller pipeline solely to serve its own power plant, refusing to allow anyone else to use the pipeline. In that case they might still claim that, as an electric utility and a public service company, they are entitled to condemn property to build the pipeline as a ‘part of’ their power power plant’s fuel supply facilities. I expect the VSCC would look dimly on any application to spend that much on a delivery facility dedicated exclusively to one customer when it could easily be opened to the public and benefit many Virginia businesses. But anyway that’s not what’s contemplated here, as far as I know.

      Anyway, sorry to drag this conversation out but I’m not as glued to the keyboard as you seem to be; get ’round tuit when i can.

      TMT’s citation is correct of course, and that provision in there that you focused on is indeed intended to cover the special case of one public service company wanting to condemn another’s land or facilities. Typically this would happen when a pipeline wants to cross a railroad or something like that; the law basically kicks it over to the VSCC to get the parties together and work it out through a kind of supervised arbitration.

      • re: ” Anyway, sorry to drag this conversation out but I’m not as glued to the keyboard as you seem to be; get ’round tuit when i can.”

        I think people forget what is the fundamental basis of Eminent Domain and especially so in a time when folks blather on about the role of govt and private property rights – and the Constitution and all that ROT!

        Is DOminion’s core business to build and provide common carrier pipelines?

        If more than Dominion are vying for a pipeline route from the frack fields to eastern Va – what companies out of those making proposals – are the ones that we can point to as legitimate existing common carrier businesses who will provide access to capacity to any/all takers and not reserve capacity for one business?

        here’s what a Public service company is:

        WIKI public service company

        and the there is this :

        VIRGINIA EMINENT DOMAIN:
        Frequently Asked Questions

        IS A TAKING FOR A PIPELINE A PUBLIC USE?

        Most takings for the construction and maintenance of a pipeline to provide authorized public utilities will qualify as a public use under Virginia law. Article I, § 11 of the Virginia Constitution states: “A public service company, public service corporation, or railroad exercises the power of eminent domain for public use when such exercise is for the authorized provision of utility, common carrier, or railroad services. In all other cases, a taking or damaging of private
        property is not for public use if the primary use is for private gain, private benefit, private enterprise, increasing jobs, increasing tax revenue, or economic development, except for the elimination of a public nuisance existing on the property.” Virginia Code § 1-219.1 defines public use as including takings where “the property is taken for the creation or functioning of any public service corporation, public service company, or railroad [or] the property is taken for the provision of any authorized utility service by a government utility corporation.”

        http://pstrust.org/wp-content/uploads/2013/04/Virginia-Summary-2014.pdf

      • well no, not dragging it out but pointing out that it’s not the free market doing this – it’s govt and it’s govt degrading and damaging individual property rights – but within specific limits as laid out by Constitution.

        NO company is entitled to take your land – for any reason – other than for a legitimate public use and even then it is a restricted power.

        we blather on in this blog about the evils and wrongs of govt.. it’s incompetence and evil intentions.. and that if the govt merely got out of the way and let the free market work without regulation – all would be better.

        Nothing could be further from the truth – when it comes to public purpose and eminent domain.

        the REAL free market would be an all willing-buyer/willing seller world.

  6. Here’s what the Code of Virginia says:

    § 25.1-102. Condemnation of property of corporations possessing power of eminent domain.

    A. Except as provided in §§ 15.2-1906 and 15.2-2146, no (i) corporation or (ii) electric authority created under the provisions of Chapter 54 (§ 15.2-5400 et seq.) of Title 15.2 shall file a petition to take by condemnation proceedings any property belonging to any other corporation possessing the power of eminent domain, unless, after notice to all parties in interest and an opportunity for a hearing, the State Corporation Commission shall certify that a public necessity or that an essential public convenience shall so require, and shall give its permission thereto; and in no event shall one corporation take by condemnation proceedings any property owned by and essential to the purposes of another corporation possessing the power of eminent domain. Notwithstanding anything herein to the contrary, a locality exercising the powers granted by § 15.2-2109 or § 15.2-2115 shall be subject to the provisions of this section to the same extent as are corporations, unless otherwise provided in § 15.2-1906 or § 15.2-2146.

    B. If the State Corporation Commission gives its permission to a condemnation, the Commission shall establish for use in any condemnation proceeding whether any payment for stranded investment is appropriate and, if so, the amount of such payment and any conditions thereof.

    C. Any condemnor that is authorized to use the procedure set out in Chapter 3 (§ 25.1-300 et seq.) of this title by a provision that incorporates such procedure by reference shall, in using such procedure, be subject to the provisions of this section to the same extent as are corporations, unless the provision specifically provides that this section shall not apply to such condemnor’s use of such procedure.

    Hardly an unlimited power. A form of this statute has been on the books since 1919.

    • re: “… and in no event shall one corporation take by condemnation proceedings any property owned by and essential to the purposes of another corporation possessing the power of eminent domain.”

      this doesn’t sound like the provision of the law that applies to individual property owners.. it seems to be talking about two companies – each of them having the power of eminent domain – and prevents either of them from exercising it on each other…

      the part of the law I am talking about involves the ability of anyone including a business or company being able to take land from an individual property owner – ….

      and the law requires that there be a “public purpose” – beyond the idea that a private company doing business by selling products to the public. It has to serve the public interest – in other words – it cannot be something that makes a particular private company more competitive than it’s own competitors.

      In other words – if you have 2 or more companies seeking to build a pipeline – in order for eminent domain to be used – the use of the pipeline has to be for more than just the interests of the private company.

      pipeline companies – build pipelines to sell the transport service to any and all who want to transport …

      whereas some companies build pipelines for their own proprietary use – to give them an advantage over other competitors in the same market.

      the latter is not justification for eminent domain because it does not serve the public at large through a more competitive market – but rather it provides an almost monopolistic ability to one company.

  7. Here’s what the Code says about Public Service Companies in Title 56.

    § 56-49. Powers.

    In addition to the powers conferred by Title 13.1, each public service corporation of this Commonwealth organized to conduct a public service business other than a railroad shall have the power:
    * * *
    2. To acquire by the exercise of the right of eminent domain any lands or estates or interests therein, sand, earth, gravel, water or other material, structures, rights-of-way, easements or other interests in lands, including lands under water and riparian rights, of any person, which are deemed necessary for the purposes of construction, reconstruction, alteration, straightening, relocation, operation, maintenance, improvement or repair of its lines, facilities or works, and for all its necessary business purposes incidental thereto, for its use in serving the public either directly or indirectly through another public service corporation, including permanent, temporary, continuous, periodical or future use, whenever the corporation cannot agree on the terms of purchase or settlement with any such person because of the incapacity of such person or because of the inability to agree on the compensation to be paid or other terms of settlement or purchase, or because any such person cannot with reasonable diligence be found or is unknown, or is a nonresident of the Commonwealth, or is unable to convey valid title to such property. Such proceeding shall be conducted in the manner provided by Chapter 2 (§ 25.1-200 et seq.) of Title 25.1 and shall be subject to the provisions of § 25.1-102. However, the corporation shall not take by condemnation proceedings a strip of land for a right-of-way within 60 feet of the dwelling house of any person except (i) when the court having jurisdiction of the condemnation proceeding finds, after notice of motion to be granted authority to do so to the owner of such dwelling house, given in the manner provided in §§ 25.1-209, 25.1-210, and 25.1-212, and a hearing thereon, that it would otherwise be impractical, without unreasonable expense, to construct the proposed works of the corporation at another location; (ii) in case of occupancy of the streets or alleys, public or private, of any county, city or town, in pursuance of permission obtained from the board of supervisors of such county or the corporate authorities of such city or town; or (iii) in case of occupancy of the highways of this Commonwealth or of any county, in pursuance of permission from the authorities having jurisdiction over such highways. A public service corporation which has not been (i) allotted territory for public utility service by the State Corporation Commission or (ii) issued a certificate to provide public utility service shall acquire lands or interests therein by eminent domain as provided in this subdivision for lines, facilities, works or purposes only after it has obtained any certificate of public convenience and necessity required for such lines, facilities, works or purposes under Chapter 10.1 (§ 56-265.1 et seq.) of this title.

    And provided, further, that notwithstanding the foregoing nor any other provision of the law the right of eminent domain shall not be exercised for the purpose of acquiring any lands or estates or interests therein nor any other property for the construction, reconstruction, maintenance or operation of any pipeline for the transportation of coal.

    For the purposes of this section, the words “public service corporation” shall include any Virginia limited liability company as defined in § 56-1 that has been issued a certificate of public convenience and necessity authorizing it to furnish telecommunications services of a public utility set forth in subdivision (b) of § 56-265.1 and that seeks to construct or acquire facilities for use in providing the certificated telecommunications service.

    There appear to be more references to ED in Title 56.

    • is there a definition for “Public Service Company”?

      • The principal definitions are: va code 56-55, -265.1, -1, and -2. I have to warn you, these definitions are hard to follow precisely because there are lots of companies that do/do not want to be bound by the restrictions imposed on a p.s.c. in special circumstances and our legislature has built a swiss-cheese structure out of these laws. But the basic idea is, a p.s.corp. includes a p.s. company, which includes a public utility, and a public utility includes an electric company, gas company, etc. In addition there’s the complication that interstate gas pipelines are regulated under federal law, thus taking them out from under state law for some purposes regardless of what state law says, and the feds have their own approval/rate regulation/condemnation process. So can’t give you a simple “clean” answer, though there are answers.

        • well I agree.. having done some reading on it in Va and other states ….when some of the laws were written before larger “multi” companies came to be.

          I still think a public service company does not build a pipeline to export product overseas.. nor do you want a company whose primary business is not pipelines to build a pipeline that will be proprietary – when you have other pipeline companies whose main business is pipelines – also in the competition.

          but more than all of the above –

          what exactly justifies ANY company NOT using entirely free-market principles in acquiring assets that it needs to compete?

          why is the government involved at all? we need roads and hospitals and schools – that’s a legitimate purpose of govt but why does the govt need to be involved in helping companies conduct their businesses?

          that’s the essence of my question.

  8. Without wading too deep into the thickets of political philosophy — I think we all are familiar with situations like those that created the earliest “condemnation” laws. To recap, the first turnpikes (including that early federal venture, the National Road) and canals were generally overwhelmingly supported by the people whose communities they would serve, BUT there were those who would hold out against these projects. They were motivated not only by sentiment or love of isolation perhaps, but often by the desire to cash in on being the last holdout — the same as a modern day homeowner in a block where all the other homeowners have sold their property to some institution or developer — demanding an exhorbitant price to sell, say, the key location for a bridge or a way up a hill. Legislatures wanted and supported those public improvements, bought bonds to finance them (they were generally built by private companies but with public backing), and weren’t about to put up with some darned farmer’s rip-off or ‘irrational’ refusal to participate, thwarting everyone else’s interest in going forward — so they came up with the idea of condemnation — which is, if you won’t sell to this public project at a reasonable price, a bunch of your fellow citizens will decide what is a “reasonable” price for you and make the deal in spite of you. It’s pretty easy to extend this logic to, e.g., railroads, and electric transmission lines, and pipelines. There was a big debate in this country over such things in the 1820s-50s (e.g. the fights in Congress over the National Bank and national public improvements under Andrew Jackson) but after the Civil War big government and the railroads had their way. This is not to pass judgment, it’s simply the factual history.

    So you ask, “we need roads and hospitals and schools – that’s a legitimate purpose of govt but why does the govt need to be involved in helping companies conduct their businesses?” Let’s not confuse ends with means, here. The ends are transportation or health care or education. the means are a private turnpike company or doctor-owned hospital or private college, versus their government-owned equivalents. All the “right of condemnation” does is allow the private versions of these to get the job done in effectively the same way as the public-owned versions. We have a long tradition of making it possible for private businesses to perform public tasks — and personally I’m all for that as a general principle (got some issues with particulars, like you I’m sure).

    • roads, hospitals and schools typically don’t make profits for investors unless the investors are the public.

      that’s a difference.

      canal and rail charters were generally done to allow any rail or boat company to use the facility – as a condition.

      in terms of holdouts – first you have secret purchasers – the same is done right now when developers try to assemble properties for a development.

      but again – why is a given property owned by one person any different than a company owned by many that another company wants and must come up with the required price – and makes a business decision based on the value of the transaction?

      I’m not arguing against eminent domain here – for legitimate public purposes.

      what I’m arguing is that we’re confusing what legitimate public purposes are – to start with – as a bogus justification for a private business want – vice a public need.

      It makes no sense what-so-ever to provide Dominion with the right of eminent domain to build a pipeline for it’s own purposes if there are other companies – that are primarily pipeline transport companies who also want to build the same path – for what appears to be a similar reason.

      what are you going to do – give them all the right of ED to build competing pipelines that at the end will become private ventures that primarily serve them and their investors vice the public?

      The rails west were not given eminent domain – the govt provided the land in return for putting in rail and the govt actually owned half of the parcels in alternating fashion.

      Would you allow that right now with the Dominion Pipeline?

      probably not. all hell would break loose. so why do we compare it in that way?

      ED is a govt process to provide citizens and the public with something they need – and it does come at the expense of other property owners.

      I-95 was built on the backs of thousands of individual landowners but not an inch of it belongs to a private company – not even the tolled sections.

      If Virginia needs a pipeline – why not Va condemn the land and lease it out on a bid basis to operate it but ensure that any all customers have equal access to it rather than providing one company with a competitive advantage over other companies for essentially non-public purpose?

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