A Great First Inning: Reformers 6, Utilities 0

by Steve Haner

Six bills which reverse 15 years of Dominion Energy Virginia legislative dominance advanced out of a House of Delegates subcommittee today, setting up the strongest challenge to the utility’s profits and power in decades.

Most in one form or another restore authority to the State Corporation Commission to use its own discretion in reviewing the company’s earnings, profits, and accounting decisions in a rate case due to begin in April. It will be the first such review since 2015 and will cover four years of company operations, 2017 through 2020. 

Preliminary data from the SCC has estimated the utility earned hundreds of millions of dollars in excess profits over those four years. Some or all of that might be returned in the form of customer refunds, but the more important risk to the company is that its base rates could be reduced. That could be the big win for consumers in future years.

As someone who has followed these issues since 2006 and written about them on Bacon’s Rebellion since 2018, five of the bills receive my endorsement (for what that is worth.) The sixth is one I would like to agree with, but I cannot deem it a clear win for Dominion’s customers.

Most of the bills were endorsed with 6-4 votes and now will be heard by the full Labor and Commerce Committee. The subcommittee split largely followed the pattern seen in donations from Dominion or from Clean Virginia, as reported previously. But two legislators who had received Dominion campaign support in 2020 voted for these proposals, Del. Lamont Bagby, D-Henrico, and Del. Lee Ware, R-Powhatan.

The bills were supported by a coalition of environmental groups, the Virginia Poverty Law Center, and the Office of the Attorney General (with one exception.) Dominion was joined in opposition by the other major utility, Appalachian Power Company. No representative of any major business group or industrial consumer spoke up either way.

Three lawyers who really understand the issues did most of the talking and probably the drafting: Meade Browder from the Office of the Attorney General, former assistant attorney general and now private practitioner William Reisinger, and William Cleveland of the Southern Environmental Law Center.  A University of Richmond professor, Joel Eisen, joined in.

Here are the bills moving on to the full committee:

House Bill 2020, Del. Jerrauld “Jay” Jones, D-Norfolk. This is the most extensive of the proposals, removing several roadblocks to SCC authority by changing the word “shall” to “may” in numerous places. A similar bill sponsored by Ware was incorporated into this. Both Ware and Jones had similar efforts last year.

House Bill 1914, Del. Dan Helmer, D-Fairfax. This reverses the most obnoxious element of a 2013 Dominion bill, which gave the utility total control over how to time the payment of certain one-time costs, such as closing a power plant. The 2013 bill was passed just before the 2013 rate case, and the utility piled up those charges on one year of its books, allowing it to argue it had not made excess profits. The SCC had to agree, preventing refunds.

The utilities’ control over this accounting gimmick was extended in the 2018 Grid Transformation and Security Act (known here on Bacon’s Rebellion as the Ratepayer Bill Transformation Act.)

House Bill 2049, Del. Jeffrey Bourne, D-Richmond. This deals with another aspect of the 2018 Ratepayer Bill Transformation Act, the Customer Credit Reinvestment Offset (CCRO). That creative accounting allowed the utility to spend excess profits on various capital projects, at its own discretion, once again wiping excess profits off of its books in the rate case. Why? Again, to prevent customer refunds or a cut in its rates.

Richmond law professor Eisen pointed out no other utility has been allowed to do this. This bill, should it pass, really blows a hole in the utility’s accounting strategy going into the 2021 rate case.

House Bill 2160, Del. Kathy Tran, D-Fairfax. This bill reverses a provision in the 2007 legislation that ended Virginia’s move toward deregulation and competition. Since then, the law has allowed utilities to keep a portion of their excess profits, lowering the funds available for refunds (or for CCRO’s, for that matter.) In the 2009, 2011, 2013 and 2015 rate cases the so called “return on equity collar” worked in the utility’s favor and will again in 2021 if not repealed.

On behalf of the utility, former legislator and now lobbyist John Rust claimed the point of the collar was to avoid worrying about the utility earning “a dollar too much or a dollar too little.” Tran told the subcommittee that in fact hundreds of millions of dollars were involved. A similar bill has already been defeated in a Senate subcommittee, however.

House Bill 1984, Del. Sally Hudson, D-Charlottesville. This is just a policy declaration, expressing the General Assembly’s desire for the SCC to function in a manner consistent with traditional balanced regulatory process. This has not been the case in Virginia in a long, long time.

The other bill, with more complicated implications, is House Bill 2048, also from Richmond’s Delegate Bourne. It was noteworthy that Browder of the Office of Attorney General spoke up to take no position on this, having endorsed the others. This bill reverses another 2007 provision that protects the utilities from competition. If they offer what they consider a 100% renewable energy option, approved by the SCC, other providers are locked out under current law.

The problem here is both Dominion and APCo are far down this road, with approved renewable tariffs now, questionable as they are. Opening the gates to allow major electricity users to flee to other providers likely will impose additional costs of those who cannot or choose not to depart. This has been another frequent topic on Bacon’s Rebellion.  Unwinding the current situation without significant cost shifting will not be easy.

Even more cost shifting will result from another provision of Bourne’s bill, which requires Dominion and APCo to develop a special discounted rate for 100% renewable power for low-income customers, at least 10 percent below any rate offered to other residential users.

The one subcommittee Democrat who had been consistently voting against reform, Del. Steve Heretick, D-Portsmouth, joined in the 7-3 endorsement of this bill.

The best argument mounted against all these bills is that their interaction is probably not well understood, and if the General Assembly is going to do this more work on integrating them may be required. But it was a meeting that showed the utility could be put on the run, at least for a morning.