Dominion Takes $206M From You Off the Top

by Steve Haner

As of late 2020, Dominion Energy Virginia had forgiven $206 million in unpaid electric bills for customers financially stressed by last year’s COVID-19 pandemic and recession. Those unpaid bills are not being covered by any of the billions in federal COVID emergency funding, nor are stockholders eating a loss.

We, the other Dominion customers, will pay them. As reported last year, this was decided by the Virginia General Assembly. How it happens is about to unfold.

The $206 million figure is prominently featured in Dominion’s initial filing in its pending triennial financial review by the State Corporation Commission, which actually covers a four-year period ending with 2020. The amount of bill relief is directly deducted from any calculation of excess profits, dollars which otherwise might justify rebates or even a rate cut.

This will be the first official review of the company’s cost of service and earnings since 2015, the hiatus being another little gift to the Dominion stockholders from legislators. It is a long and sordid tale how we got here, too often told. Thanks to a bipartisan fondness among legislators for accounting rules that favor Dominion, there may no way the SCC can order the company to pay rebates to us or cut our rates, excess profits notwithstanding.

The company filed the 44-part, hundreds-of-pages-long SCC report on its operations in March, but then came back in May with a major “oops” and requested permission to change several key numbers. With that permission granted, the entire schedule shifted to the right by a month, so, here are the key case dates as they stand now:

  • By September 3, all of the various interested parties who have signed up to be respondents (here is the list) must file any expert testimony they wish to offer. Included are Kroger, Costco, Walmart, Microsoft, Virginia’s big industrial users, and the U.S. Navy. Big payday for consulting economists.
  • On September 17, also the day voting for a new Governor and House starts in Virginia, the SCC staff will weigh in with its own analysis and recommendations. The staff accounting is a crucial step, as it may strongly disagree with the company and have its own estimate on the amount of any excess profits over the four-year period.
  • On October 22 a public hearing will be held for general public witnesses and then on October 25 a full hearing should convene. At this point it is not scheduled as in person but still virtual. This would be better in the courtroom; this circus deserves a real big top.

Find the 44-part Dominion file and track the full case record here. It will be massive soon, perhaps the largest the SCC has ever seen.

Any final case decision from the SCC is now pushed off until well after the election. Frankly, Dominion had sought an even longer delay when it filed it amended forms. This schedule means the voters may at least have some idea what is going on, what this will cost them, before casting a ballot.

What are the issues? Dominion’s own summary of the case was published in newspapers, but you can also read it at the end of this SCC order setting the case schedule.

The financial issues are the central issue. Were all the expenses claimed as needed for the services legitimate or should some of them been company costs, not customer money? Were some expenses excessive? Was there a proper balance between equity and debt or too much equity  The final figure for profit within the allowed rate of return, and possible excess profits beyond that limit, will be hotly contested.

Whatever that number turns out to be, it will be reduced by (1) the $206 million used to forgive all those unpaid bills (full profit included, of course), then (2) the cost of building the two-turbine offshore wind “demonstration” project. Oh, you didn’t actually believe company claims that customers wouldn’t pay for that, did you?

Finally, if that doesn’t get the excess profit amount totally wiped out, there are still all those “customer credit reinvestment offsets” that 2018 legislation authorized. Dominion will wipe those pesky excess profits off its books by charging them to advanced metering and customer information technology it has installed. The law gives it wide discretion (license even) to decide for itself how to time expenses on its books.

Why it is so crucial that the utility avoid any finding that it earned excess profits in this review? Because such a finding is the only way under the law the SCC could order a reduction in the utility’s base rates. Excess profits were found in 2015, and rebates made. If this becomes the second such case in a row, it triggers a possible base rate cut.

To make it harder to earn excess profit going forward, Dominion is also seeking to increase its authorized profit margin, which was 9.2% return on equity for that period. It has asked that be increased almost a fifth for 2021 and beyond to 10.8% ROE. Again, blame the General Assembly, which passed the 2020 Virginia Clean Economy Act, requiring so many trips to Wall Street for cash.

The Company asserts that it forecasts capital investment exceeding $28 billion over the next five years, $23 billion of which will be used to support investment such as customer growth, solar build out, storage deployment, nuclear subsequent license renewal, and the first utility scale off-shore wind project built in federal waters. … Longer term, the Company states it anticipates investments related to compliance with the Virginia Clean Economy Act alone may approach $40 billion over the next 15 years.

The company also claims in its filing that its current rates will produce a deficit for 2022, with revenue a “modest” $121 million short of what is needed to cover its actual expenses. Again, expect the SCC staff and others to do the math and possibly disagree.

The 2015 legislation that elevated the interests of the company’s stockholders way over its customers, the so-called “rate freeze bill,” was signed by then Governor Terry McAuliffe.  That and the 2018 “grid transformation bill” legislation (signed by Governor Ralph Northam) had bi-partisan support, so, neither party would like to see those brought up by challengers in the House of Delegates elections. Perhaps some challengers will do so anyway.

The Virginia Clean Economy Act in 2020 was almost an entirely Democratic show and may become a campaign issue. That, however, is more about future costs and plays more heavily in the pending case dealing with the planned offshore wind project.