Another Day, Another Load Aggregation Petition

Efforts by large electricity customers to aggregate their locations into one account eligible to seek a competitive supplier suffered a setback in Monday’s ruling against one such petition.  But another set of petitioners was in a State Corporation Commission hearing room Wednesday taking another crack at it.

The petition rejected Monday was from Wal-Mart and Sam’s Stores.  The hearing yesterday involved 128 locations of grocery chains Kroger and Harris-Teeter, seeking to consolidate into one account in Dominion Energy Virginia territory with a peak demand of 45 megawatts.  The case record had been built and was ripe for a hearing, so on it went in front of a hearing examiner. 

The law has offered a limited opportunity to aggregate and leave since 2007, but it was a recent decision by the SCC to let Reynolds Metals do that with about ten megawatts of load which opened the door to these petitions.  Wal-Mart, Sam’s Club, Kroger, Harris-Teeter, Costco, Target and New Albertson’s (Safeway) fired up their legal teams and rushed the goal line.

The micro argument is they represent such a small part of a giant utility, it will have no noticeable impact if they leave. The macro argument is if enough customers leave, Dominion won’t need to build the entire 3,600 megawatts of new generation contemplated in its last integrated resource plan, thus saving all customers some money.

When the SCC is sorting out rates and cost allocations in the next rate review in 2021, as planned, “the loss of the load we are here to discuss will be one minor factor,” said Kroger attorney Kurt Boehm Wednesday.  The applicants told the Commission they would waive any claim they might have on a share of rate credits for utility excess profits that the SCC might dole out at the end of the case.

In its testimony Dominion estimated that the loss of this revenue would increase costs on that imaginary 1000 kWh per month residential customer by 8 cents, a nickel on base rates and 3 cents on the various rate adjustment clauses.  But the base rate impact couldn’t be set until 2021, and might not happen at all.  There’s plenty of slack in those base rates.

Will Reisinger, attorney for competitive supplier Calpine Energy Solutions, pointed to the 2018 and 2019 General Assembly sessions and noted with all the other things done in this area, no changes were made to the provisions governing the opportunity to aggregate demand and leave.  In fact, a 2019 bill on that point was amended to ensure Dominion’s customers didn’t lose that.  He read that as legislative intent in favor of at least limited customer choice.

A witness for Dominion, in his written testimony, also focused on legislative intent.  Senate Bill 966 in 2018 showed the General Assembly’s “determination that utilities should significantly expand their portfolio of utility-owned and -operated resources to serve customers’ needs.” Gregory Morgan, Dominion’s Director of Rates, said legislators wouldn’t add those generating assets if its real goal was competitive choice.

Reisinger challenged whether a Dominion executive could be expounding on legislative intent, but I’ve got to stand with Morgan on that.   The utility writes the bills, writes the substitutes, writes the talking point, writes the committee Q&A, writes the floor speeches, drafts answers for legislators to constituent questions, and I’m sure offers helpful notes on what the Governor might say when he signs the bill.  Dominion’s wishes and legislative intent are the same thing.

Reisinger made a better point when he noted the SCC should focus on who is not participating in the case, and that would be those other customers.  The Attorney General’s consumer staff did not intervene, and the SCC staff took no position on whether the petition was in the public interest.  Other large customers stayed out, but then they got a little sweetener recently with a generation rate cut of their own.  Residential customers?  If the AG is missing and the SCC staff silent, they are not represented.

The SCC could approve one or more additional aggregation petitions, since the state law allows it to go up to one percent of Dominion’s load and Dominion has pointed to 140 megawatts as a possible cap.  Exactly how much money the companies might save is usually not revealed in the record, and of course is hard to predict over time.  Dominion’s rates are bound to rise with all the mandates.

Giving a few more customers that option and tracking the results would provide a useful illustration of what Virginia might look like if the generation portion of the utility monopoly disappeared, which didn’t happen 20 years ago but might work better now in this very different environment.

But nothing I saw in the record or heard during the portions of the hearing I monitored drew much of a contrast with the earlier Wal-Mart and Sam’s Club situation, where the Commission wrote:

In conclusion, given the context of a decade of rising rates and the likelihood of even higher rates in the future, we do not find it consistent with the public interest for captive customers who do not have the legal ability to obtain lower rates – predominantly residential and small business – to suffer from the cost-shifting identified herein by enabling a large-demand customer to seek its power supply elsewhere through aggregation.

 It’s a court.   They’re all lawyers.  That reads like a precedent to me.

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23 responses to “Another Day, Another Load Aggregation Petition

  1. My translation …

    “Free enterprise bad, Dominion good. Now let’s all go to Bookbinder’s for dinner. On Dominion!”

    • djrippert, No, Dominion goes to Bookbinder’s on the earnings from us and we fix our own from what we have on hand because we can’t afford anything else.

  2. Your morning tomes are the perfect compliment to that first cup of coffee!

    Then you said this:

    ” Dominion’s wishes and legislative intent are the same thing.”

    Then you said this: “The Attorney General’s consumer staff did not intervene, and the SCC staff took no position on whether the petition was in the public interest. ”

    Good Googly Moogly!!!

    So the legislative “intent” of the people-elected GA is whatever Dominion’s needs and wants are and it’s the AG who is slacking off?

    I’m AGOG!

    but let me ask a really dumb question –

    what exactly are these companies that want to “aggregate” REALLY wanting to accomplish?

    and is this something they do all across the country in other states or just in Virginia where we are essentially owned, lock, stock and barrel by Dominion when it comes to electricity?

    serious question – why are these companies doing what they are trying to do?

    • Larry, We have a very small AG staff to work on all of these cases. The SCC has been urged by legislators to not take a stand for consumers. It’s very expensive to participate in cases because an attorney is required. Thus, we have no mechanism to ensure consumers are represented in each case.

      Since the 07 reregulation legislation, there have been continuous cases before the SCC and there’s no way for volunteers and working people to keep up with everything. All of this is by design, by Dominion’s design.

      These companies see the opportunity to buy electricity for less than it costs from Dominion. That’s what they want to achieve. They don’t want to continue investing in the whole Dominion system, but to only pay the amount necessary to get what they need and nothing more whether it be of benefit to Dominion or society.

  3. Deja Vu all over again from my New Jersey life.
    Many industrial facilities in NJ were building their own on-site natural gas power plants because NJ had very high (nuke-based) electric rates. The state and utilities hated that trend, and tried to make it difficult to permit the independent natural gas power plants and also they made a policy that all future NJ power plants would be coal-fired and built by by the utilities.

    In the new situation, traditional industry is long gone but we have more distributed companies like Walmart with many locations. Virginia’s elec rates are not excessive, but a whole lot more expensive than the couple cents a kWhr that natural gas actually costs, so there is driving force to escape Dominion’s profit margins.

    I wish our elected officials could concentrate on giving us low cost electricity which might actually make the state grow. But I do not expect that, nor do I expect growth, given the trajectory.

    I would ask what stores like Walmart can do themselves, like using natural gas vs. elec for heat/AC, some roof solar etc. Windmill in some cases.

    • At the risk of becoming a Crazy Bernie or Fauxchohontas supporter …

      If electrical generation is in the public interest why doesn’t the state provide the electricity rather than a corporate monopoly?

      Alternately, if Dominion is inefficient why not return to some form of de-regulation / competition with regard to electrical generation and distribution?

      It seems like we have the worst of both worlds right now.

  4. We do, Don. The situation now is just horrible. A total monopoly providing a vital service that has largely broken free of the regulatory compact by corrupting a legislature. It is that simple. John D. Rockefeller and J.P. Morgan would recognize the landscape in a New York minute.

    • Well this did not just happen all of a sudden in 2019!

      Surely all those years prior to this – those who watched and participated in the SCC arena knew this… and those dratted “greenies” kept pointing it out… but were dismissed as leftists and socialists …

      So where is that middle ground and why is it gone?

  5. Here’s the fundamental question: Should big corporations, which have the clout negotiate lower electricity rates with competing providers, be forced to subsidize residential and small business customers, who have no such negotiating leverage?

    Corporations have the economies of scale to hire the lawyers, consultants and other experts it takes to aggregate demand, identify competing suppliers, and negotiate lower rates. Households and small businesses don’t. In a free market for electric generation, big corporations would enjoy lower rates than they do now (even though industrial rates are already somewhat lower than residential rates). In a free market for electric generation, households would wind up paying higher rates.

    I’m not arguing for or against free markets here (although as a matter of abstract principle, I am inclined to support them). My point is to make explicit the trade-offs involved in these corporate bids that Steve has been writing about.

  6. Well.. the conventional wisdom is that the govt is the worst possible choice to run “anything” and I’m quite sure “real” Conservatives would have uber attacks of gas and other digestive malfunctions at the mere thought of it!!

    However, supposed Conservatives apparently have big problems in Virginia – supporting – true “pro business” policies for ALL private-sector companies …

    They have explicitly chosen Dominion over the others… some wags would say they’ve been properly bought and paid for so what’s the complaint?

    They have explicitly chosen a government-sanctioned monopoly over private sector competition.

    VERY …. UN-conservative.

    DJ said : Fauxchohontas … fair point but FAUX-pro-business is actually much worse… just ask those other corporations whose butts
    are getting kicked by Dominion while all those FAUX-conservatives in the GA just smile…

  7. re: “free markets” and Corporations who have “leverage”.

    In the natural free-market scheme of things – WalMart uses it’s leverage to force companies to sell them their product for less than they do to other companies. Some companies won’t do it but others do and the result is more profit for Walmart AND lower prices for consumers who otherwise would be paying far more at Mom & Pop stores.

    Is the way that WalMart “works” something other than “free market”?

    Is Virginia and Dominion – that relationship and Dominion’s position – different than other states?

    I think most big Corporate users of electricity – in most states – typically get reduced rates… the same that Walmart gets if it buys 10 times as many widgets from a supplier that Mom & Pop would.

    This is a fundamental test of those Conservatives in Virginia who say they support “free markets” and a “pro-business” policy.

  8. Jim, for 12 years I was active with the large industrial coalitions and the history of their formation is interesting. They came into existence decades ago because a push was on to make them pay more in response to complaints their rates were lower. There are legitimate reasons for the various cost of service rate classes, economies of scale, etc., but a political case can be made to redistribute the cost to “help” residential users. The (we) big boys defended their interests at the SCC through that effort.

    The free choice would be generation, not distribution and transmission. One company would still own the wires. I honestly don’t know if the gap between classes in generation charges would grow or shrink but I suspect they would stay fairly close to where they are now, if the allocations so far have been done well.

    • so here’s a question – is the “Virginia Way” when it comes to Dominion and electricity – pretty much the same in other states or do we have a significantly different model?

      • Our legislation is one of a kind. Designed and run by Dominion for Dominion. Other states have more of the independent regulator serving as the balance on the industry in the place of competitive shopping. No state has copied our legislation.

  9. PS- The only reason I might die happier is because at least the coal-fired option is less favored, which I never thought I’d see that day

  10. Under most scenarios – we’d characterize the situation with Dominion as Crony Capitalism / Rent seeking…

    we’ve used that pejorative with other companies including Amazon seeking incentives to locate here

    but with Dominion, it’s standard operating procedure –

    and this is not something “new” – it’s been this way for a while.

    too many have defended it by saying that we have some of the lowest electricity rates in the country so it can’t be all bad…. etc…etc…

    but the reality is – and we’re seeing it now – this “arrangement” is starting to “wear” when it comes to other businesses.

    I give Dominon their due – they are a top notch corporation who maintains a highly reliable grid for Virginia and keeps electricity prices low and we could do far worse !!!

    but we are giving up a lot of opportunity in both business and electric power technology by letting Dominion occupy the position they have right now – and ultimately it is to both of us harm.

    They’ve got something and they’re not going to give it up… no matter what … and we’re all the worse for it….

  11. Commercial and industrial customers have received lower rates since the early 1900s when Samuel Insull created the model for utility monopolies. These classes of customers were given preferential rates because they allowed generating plants to run all day instead of just at night when residential customers used electricity only for lighting.

    In the early days, the natural monopoly was only for the wires. Insull’s companies bought energy generated by streetcar companies, even large residential generators (the mansions had their own coal-fired generators).

    The same sort of system would work today. Each customer would pay for the cost of their connection to the grid and the wire charges for the amount of electricity that flowed to them. Existing systems would be paid what was originally awarded as a return when the facility was built. New generation would not be in the rate base , but built by any developer (including a utility) who would be exposed to market forces in order to repay their investment. This would stop the nonsense about building projects that have no value to customers but great value to shareholders.

    The monopoly arrangement provides a fair return for the amount invested. There is nothing inherent in the concept that says the monopoly should be used to supply the company with the maximum amount of revenue- only a fair return for doing what serves its customers.

    Other states are focusing on utilities as managers of the distribution system. The utilities remain responsible for assuring adequate resources to assure reliability. This gets more complicated when they don’t own all of the generation, but many other states have shown that reliability is maintained when utilities and independent businesses own the generating resources and operate them as merchant generators.

    There are a variety of ways to do this. I’m sure we can find a method that suits Virginia. However, we must confront the basic issue of whether our state energy policy will be developed to suit a few large energy companies, or whether those energy companies will be granted a fair return for the portion of those activities that are related to the operation of a monopoly that serves its customers. Additional profits can be had by competing on an equal footing with other competitors without special advantages conferred by control over the legislative process.

    • What you are saying makes perfect sense – but up until now it has been characterized as “leftist” heresy by many who have supported Dominion – to the point where they would allow Dominion to keep excess profits, taxes rebated… and all this stuff about solar not being “dispatchable” and coal ash that can not or should not be cleaned up even when subject to flooding… etc…. etc…

      I don’t have a problem with Dominion having a limited monopoly – but the way it is now is way more than it ought to be.

      And it’s becoming clear that Dominion is not going to budge and their supporters in the GA are still supporting them.. and ironically now, the SCC itself is agreeing… apparently…

      This is not the way we should be doing electricity.

  12. I don’t much care for labels, and certainly don’t appreciate it when people apply them to me without knowledge.

    I am proposing such a scheme because I think it will benefit the utilities in the long-run and give them more freedom to earn a higher return when they earn it.

    If companies like Dominion keep favoring the interests of their owners over the interests of their customers, sooner or later a correction will occur and it could lead to a long-term setback for the company. Successful businesses align the interests of their owners with the interests of their customers.

    Why not reset along a new path when you are financially sound? If you believe that you are a master of the universe, why be afraid of proving it in the marketplace? Are their people not skilled enough to compete without the crutch that political contributions provide in Virginia? I don’t believe that.

    Why should I have more faith in Dominion’s abilities than Dominion does? They should concentrate on providing more value to their customers just as every other business does. Everyone wins when that happens.

    • Tom I agree that we need to be looking for the win/win. The challenge is changing the rules so that utilities are incentivized to care as much about the customer as the investor/ their own earnings. Things are so far out of balance now – and Dominion, in particular, is so pleased with what they get now – that they aren’t interested in changing. The stranglehold they have via our elected officials, the way FERC is set up, and everything else has to change. How do we create this change when so few people understand what is happening and when so many are so easily convinced to even seek that which is against their best interest? How do we get to win/win?

  13. re: labels and the rhetorical question about why Dominion just can’t do the right thing….

    I think because there is no uniform approach by folks who want Dominion to change – it comes across as a bunch of disparate “ideas” from various individuals – as opposed to some proposed model that many groups get behind and advocate for.

    Dominion and it’s surrogates then, through various strategies, get thse groups labeled as “kooks” and socialists, etc…

    and sadly, it does work.

    but like I said up thread – the lack of consensus among the groups advocating for changes – leaves them vulnerable to such tactics.

    We cannot just be “opposed” – we have to be “for” something and it has to be something that folks who do want that change can agree together to push for.

    • Dominion is also skilled in divide and conquer and in getting people to work against their own best interests to do Dominion’s bidding. The rules we live with do not require that Dominion treat folks fairly. With this pipeline, they can take our land, whatever part of our land they want, ignoring our current and long term use for our own land and our requests for consideration of our use, needs, plans, heritage, or concerns – even safety. I have learned the hard way that when push comes to shove, the landowner is powerless against them. They alone get to decide who among us wins and who loses everything. Our laws are set up to meet their goals and do not even recognize or allow us to stand up for our rights as landowners. Currently, no one has motivation to work for anything because a Dominion can come along and destroy it without even considering what it does to you. Unless we find a way to change this, our country is doomed.

  14. Pingback: Update: Aggregation Petition Moves to Full SCC - Bacon's Rebellion

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