The State Corporation Commission staff audit of Dominion Energy’s ongoing effort to place residential and small business electric service tap lines underground has turned up some expensive examples. A handful of lines will cost ratepayers hundreds of thousands of dollars over time to serve a single residence.
The average cost for the first 18,000 customers getting new lines is about $50,000 each based on my own calculation.
Those are the all-in costs for planning and constructing the lines, then adding the interest cost or profit margin depending on how the utility financed it. The projection uses the current 9.2 percent return on equity. The money is collected over the estimated useful life of the new lines, about 40 years. For phases one, two and three the total cost with financing is about $921 million, according to the SCC staff analysis.
The SCC staff compared the full capitalized cost of installing the highest-cost lines to home values. “This means it is possible in some instances that the company could have purchased the customer’s homes at a lower cost than undergrounding their tap lines,” testified David J. Dalton of the SCC staff.
This program to expand underground lines is something else paid for with a specific monthly charge on everyone’s bill, a rate adjustment clause known as Rider U. It is also something else that the General Assembly has deemed to be in the public interest and virtually off-limits to SCC challenge.
The annual review of the program to adjust the billing charge is underway now and was the subject of a hearing at the SCC Tuesday. With big questions settled by the legislature, the discussion is focused on minor issues such as accounting changes or how the costs are allocated between various classes of customer.
The largest industrial customers are exempt but everybody else under the SCC’s jurisdiction pays, including the 600,000 customers who already have underground service (and paid for it themselves) and the unknown number who will never get underground service. For that mythical average residential customer using 1,000 kwh per month, the current charge is 55 cents per month and Dominion is asking to raise it to $1.98 as of next February.
The legislature has authorized this to go until at least 2028, and Dominion expects to place 4,000 miles of lines underground in 12 phases at a direct cost of $2 billion and a fully-capitalized cost of almost $6 billion. At that point the residential charge will be more like $5 per month. The charge for commercial or small industrial customers was not reported.
Spending other people’s money is very popular. The record on this case includes favorable comments from Senator Glen Sturtevant (R-Richmond), Delegate Vivian Watts (D-Fairfax) and several local officials where the program is active. A spokesman for the American Red Cross attended Tuesday’s hearing in person to testify about that organization’s support, noting how wonderful it is not to have your power go out. At the end he said his own house has already been upgraded under the program.