Senate Committee Spikes Bill to End Electric Freeze, Promises Comprehensive Reform

Sen. Chap Peterson. Photo credit: Associated Press

The Senate Commerce and Labor Committee today killed a bill championed by Sen. Chap Petersen, D-Fairfax, that would have ended the freeze on base electric rates, restored State Corporation Commission (SCC) control over rate setting, and enabled the refund of hundreds of millions of dollars in electric utility profits to rate payers.

Senate leaders said that they are working on legislation that will direct the long-term future of the electric utility industry, subsuming the regulatory topics that Peterson’s would address. “There will be a larger conversation that will take place in the next week,” said Senate Majority Leader Tommy Norment, R-Williamsburg.

Peterson has pushed for a return to the regulatory regime that existed before 2015 when the General Assembly, worried about the potential impact of the Obama administration’s Clean Power Plan, enacted a freeze on base rates and canceled biennial SCC reviews. Peterson contends that Dominion Energy Virginia has earned excess profits of more than $400 million. Moreover, the new federal tax law will reduce Dominion’s tax bill by $150 million a year. His bill will protect rate payers, he said. “This is not an environmental bill. It’s not a pro-business bill. It’s a pro-ratepayer bill.”

Sen. Frank Wagner. Photo credit: Helment2Helmet

However, Committee Chair Frank Wagner, R-Virginia Beach, said the legislature needs to consider rate regulation in the context of building an electric transmission/distribution system that can accommodate more solar power and keep the grid secure and resilient. Virginia needs to upgrade its grid, he said. “We’re not there — we’re not even close to where we need to be.”

About a dozen speakers mainly representing consumer, environmental and business-customer interests spoke in favor of Petersen’s bill.

In remarks typical of those who supported Petersen, Sam Towell, with the office of consumer council for the Attorney General’s office, argued that Virginia should return oversight of the electric power companies to SCC judges who have the staff and expertise to review complex regulatory issues. “If the rates are too high, as they currently are, the SCC should have the authority to lower them,” he said. “If utilities make prudent investments, they should have the opportunity to recover their investments with a fair rate of return.”

Another advantage of SCC oversight, said Louis Monacell, an attorney representing the Virginia Committee for Fair Utility Rates, is that the public hearings allow for the production of documents and questioning of experts. In contrast to Dominion with its army of lobbyists, who meet with legislators and aides in settings where people don’t have a chance to challenge their assertions, he said, “the SCC bases its decisions on an open record.”

Norment said he was “taken aback” at the insinuation that legislators aren’t getting all viewpoints. “How can you stand there and tell me that your voices are not being heard?”

Dominion has a far greater financial interest in the outcome of the legislative process and can afford to hire more lawyers, lobbyists and experts, responded Monacell.

“We think the consumers do have an articulate voice,” as evidenced by the number of speakers at the hearing, said Norment. “And now they have an Attorney General who is serving their interests more than ever before.”

As Virginians ponder how to restructure the electric utility industry, said Wagner, the General Assembly needs to transcend the “myopic,” two-year time horizon of the SCC and adopt a longer-term perspective.

“It’s very clear that the Clean Power Plan is not moving forward,” Wagner said. “We have a degree of certainty that we didn’t have three years ago. This is the time to go back to a re-regulated environment.” Still, the General Assembly sets the broad parameters for energy policy. Solar is competitive now with every other form of electricity. Decisions must be made how best to integrate it into the grid without throwing off frequency and voltage, while also protecting the grid against a range of threats from hurricanes to cyber-sabotage, he said.

“We have huge changes coming,” said Wagner, echoing many of the same points that Dominion executives raised last month when announcing their openness to end the rate freeze.  “More electric vehicles, more batteries, more storage, more generation at the [local] level. …. We need to look a decade down the road.”

Update: An earlier version of this post said that the Committee “tabled” Petersen’s bill. In fact, committee members voted to “pass by indefinitely,” which I am informed is legislative jargon for killing the bill. I have rewritten the article to correct the mistake.

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14 responses to “Senate Committee Spikes Bill to End Electric Freeze, Promises Comprehensive Reform”

  1. So the Republican position is, “The legislature needs to consider rate regulation in the context of building an electric transmission/distribution system that can accommodate more solar power and keep the grid secure and resilient. Virginia needs to upgrade its grid, [Sen. Wagner] said. ‘We’re not there — we’re not even close to where we need to be.’”

    What a bunch of BS! The entire point is, these are all the sorts of things that the SCC and its Staff ought to be looking into, with all deliberate speed, not the entire General Assembly in a two month session crammed with other emergencies.

    Admittedly the lions of the General Assembly won’t admit that anyone else has already expressed an opinion on these topics, or finds the grid to be something that’s relatively well-planned and under control. Dominion has already addressed these topics in its latest IRP, which the SCC shelved because the GA hadn’t given the go-ahead on the CPP or anything else basic to the electric grid of the future. The Federal Energy Regulatory Commission (FERC) has already addressed the impact of solar generation on grid reliability in numerous proceedings. The Mid-Atlantic regional grid operator, PJM, has already addressed the impact of solar generation on grid reliability and found it to be no immediate threat and responsive to market forces. The SCC, in its brief comments on the last few IRPs, has already noted the concerns about Dominion’s failure to evaluate grid purchases in lieu of more ratepayer-financed construction by Dominion itself — but expressed no concern about “building an electric transmission/distribution system that can accommodate more solar power and keep the grid secure and resilient.” Indeed, the SCC expressed no such concern because Virginia doesn’t even have jurisdiction over transmission (that’s exclusively federal, regulated by the FERC) or independent generation (that’s most of the solar generation being built today, although Dominion insists on building a lot of the solar in Virginia for its own account so it can add to its rate base). And distribution, while hugely important, is nothing more than the lower voltage “sub-grid” that connects the interstate transmission grid to retail customers.

    Why does Senator Wagner say, “More electric vehicles, more batteries, more storage, more generation at the [local] level. …. We need to look a decade down the road.” Why does the G.A. need to do this on its own, without any input from the SCC or the A.G.’s ratepayer advocate section? Why does the G.A. need delay to look into all this when most of what it’s talking about isn’t even under State jurisdiction? Of course it doesn’t.

    So Sen. Wagner is actually worried about something else. I can’t reasonably guess what that is. Maybe it’s sorting out the “who’s in charge” atmosphere of a new administration and a tumultuous election. Maybe it’s to give time to Mr. Monacell, who’s thoroughly familiar with the AG’s office, time to round up his big institutional clients along with the other players who want re-regulation to be effective and comprehensive, and get them all on board a package that Dominion also can support. That is not impossible. Dominion has chosen (when it didn’t have to) to go with a regulated rate base for a lot of its recent electric utility investment. Regulation has a downside (it’s regulated!) and a big upside (steady, near-guaranteed rates of return). Dominion has tried a G.A. mandated rate freeze and seen where it leads. It may be time to chuck all that chaos and return to traditional SCC regulation.

    But why then does Senator Wagner want more time for his party to do the SCC’s job for them? Why not just jump on board (or co-opt) the Peterson initiative?

  2. Steve Haner Avatar
    Steve Haner

    The bill was not tabled, but passed by indefinitely – killed. There is a difference. And I suspect with it died any chance of fair treatment for consumers. But we will push on….

    The key part of the meeting actually happened before Petersen’s bill was discussed. SCC member Judith Jadgmann came to the committee to seek endorsement for another term, which is often pro forma. She is up for re-election this year. Norment, Wagner and Senator Saslaw took the occasion to make sure Judge Jagdmann and her colleague Mark Christie, also in the room, understood who was boss and who they worked for. Whatever bill gets passed, whatever it does to consumers – she was told in no uncertain terms not to exercise any independent judgement when the cases come to the commission. The tone was chilling, and made it clear to me that bad things are coming.

    On Friday Commissioner Jadgmanm appeared before the House committee, and the message was sent: we shouldn’t and won’t ask you about how you might rule in a future case. The opposite message was sent from these Senators: we are here to tell you right now how you will rule in a future case. The contrast between Friday and today was stark. And it tells me that the bill that is coming – this Golden Age of Energy Wonder that Wagner described — will have nothing to do with an open judicial process where all the stakeholders are on a level playing field, and where the impact on ratepayers is paramount, and once again the General Assembly will make all the decisions – including whether you get any refunds of the money you’ve been overcharged, and if so how much.

    But we will push on….

    1. Steve Haner Avatar
      Steve Haner

      Start about 3 and a half minutes in for the comments Wagner, Saslaw and Norment made to Judge Jagdmann…..Wagner was fairly polite, Saslaw quite blunt, but the message was clear – the SCC only exercises discretion if we let it do so.

      These videos and the recorded votes in committee are going to change this process – and for that I say Bravo!

      1. Saslaw is simply the loudest and most boorish of an incredibly thin-skinned majority on that Committee. The arrogance that poured forth several in that hearing was truly over the top. I wonder how they will react to clips from these meetings being played on an endless loop during their next re-election campaigns.

  3. LarrytheG Avatar

    yep.. I get the definite impression that the SCC is done regulating Dominion…

    and yes , apparently some of the Yahoos in the GA think they have the expertise to do what the SCC does…

    I don’t know but it feel like both at the Federal and State level these days – the legislators no longer trust the regulators.. much these days – that regulators are regulating “too much” or the wrong way or just not good.

  4. TooManyTaxes Avatar

    How could anyone criticize Senator Saslaw? The great liberal guardian of justice – the Washington Post has endorsed him for decades? The best thing Jeff Bezos could do for America is shut down the Post — post haste!

  5. Politics is NOT pretty…ugh

    PS- Chap for Gov

  6. Steve Haner Avatar
    Steve Haner

    The other very telling moment in the meeting came when the staff expert for the SCC, who had worked on the recent report about the utility over earnings, went to the podium and said she was there to answer any technical questions the legislators had about Chap’s bill or the underlying issues. Crickets. Crickets. Not one question. The destruction of the legislature’s reliance on and confidence in the SCC has been a long standing strategy of the utilities and is really bearing fruit now.

  7. TooManyTaxes Avatar

    While I would certainly prefer the VSCC handle utility regulation, the regulation of utility and railroad rates is a legislative function, rather than a judicial one. In fact, the very, very old court cases dealt with legislative rate-setting. The most famous case being Munn v. Illinois, 94 U.S. 113 (1876).

    There, the Illinois legislature, responding to pressure from the Grange, passed a law regulating the maximum prices that could be charged for the transport and storage of grain. A Chicago firm was prosecuted for charging more than the statute permitted and challenged the constitutionality of the statute. The Supreme Court upheld the state’s authority to regulate a business whose property was devoted to public use. So are Wagner and Saslaw trying to go back to the future?

    1. djrippert Avatar

      Illinois limits corporate contributions to state political candidates to $11,100 per election cycle. My understanding is that the limit is per election cycle in aggregate not per candidate.

      I would have far less heartburn about the Thundering Herd of Corruption in Richmond regulating utilities if their pockets weren’t swollen from the political contributions from those utilities they purport to regulate.

      When I tell friends and acquaintances from other states how Virginia allows the monopoly utilities the legislature regulates to make unlimited contributions to the politicians who supposedly regulate them they are shocked. Slack jawed and glassy eyed.

      Our state government is an embarrassment.

      1. “Our state government is an embarrassment.

        And Illinois is an example you’d like to emulate?

        1. djrippert Avatar

          In regard to campaign contribution limits from corporations like Dominion – yes, I’d like to imitate Illinois or … for that matter … any of the 44 other states besides Illinois that limit campaign contributions in some way. When it comes to legalized corruption, anti-democratic behavior and pandering to special interests, Virginia stands alone.

  8. Steve Haner Avatar
    Steve Haner

    Yep, right past our 100-year experience with state public service commissions, which were created after several legislatures proved subject to corruption.

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