GA Bills You For Industrial Electricity Discount

The people who make the real decisions about what we pay for electricity in Virginia, which would be the members of the General Assembly, have just cut electricity costs for large Dominion Energy Virginia customers by up to $10 million and shifted those costs over to other customer classes, including residential.

This is yet another small but significant gift to you from the 2018 Ratepayer Bill Transformation Act, which really had little to do with transforming Virginia’s electricity distribution grid.  Dominion’s plans for the grid remain stalled, but this little add-on provision from the same legislation just got approved by the State Corporation Commission on February 8.  

Cost allocation and rate design are major points of contention at the Commission sometimes, involving economists, accountants and reams of data.  Now you can just slip a paragraph into complicated bill and bypass all that.

This was ordered by an enactment clause (number 11 of 24) at the tail end of last year’s bill and may be the first example of the General Assembly dictating the fine points of cost allocation among rate categories.   The Assembly is deciding what plants to build, which transmission lines should be buried and when federal environmental regulations are inadequate.  Why not move into rate design?

Beginning in a few months, if a large commercial or industrial user is willing to sign a three-year pledge to stay with Dominion and to ignore the siren call of a competitive supplier, that user will get a 2 percent reduction in the generation portion of their electric bill.   Just which legislator’s vote or which association’s endorsement was procured in exchange for that unprecedented provision remains unknown.

Not all the almost 2,500 potential beneficiaries of this will take the deal.  Full subscription is “a highly unlikely scenario,” wrote Dominion attorney Lauren Wood in filed arguments at the SCC.  “In reality the Company believes that many customers will be unwilling to give up the flexibility to use alternative suppliers.”

That is probably right, and passage of this industrial discount did not stop large users from petitioning the SCC during 2018 for permission to aggregate their load and leave for another supplier.  Whether the annual discount turns out to be the full $10 million or just $2 million, those dollars to operate the company’s generation fleet will have to come from other customers, including the non-participating large customers.

Consider the precedent set.  If the General Assembly can shift costs between customer classes with a two percent discount this time, next time it will be a ten percent discount or twenty.  The industrial customers happy to take advantage of this will wake up when homeowners besiege legislators with petitions to turn the tables and impose more of the cost burden on business customers.  As prices rise due to all the other provisions in the 2018 bill, plus coal ash, plus the Regional Greenhouse Gas Initiative, pressure will rise.

Dominion filed its petition  in August seeking this special rate deal for customers willing to pledge their devotion.  This is called Rider CRC, for Commercial Retention Competitiveness.  A few more years and the rider names and acronyms on utility bills will require several pages to list and decode.

It was challenged by Direct Energy Services, Calpine Energy Solutions and MP Energy 2 NE, third-party suppliers.  The attorney for MP Energy, William T. Reisinger, pointed to existing statutes requiring the SCC to review voluntary rates for their fairness to other customers.  He asked the Commission to use those standard on this, noting that the bill language didn’t override them.   The SCC demurred.

“In the instant proceeding, the Commission has no discretion to reject a rate that conforms with Enactment Clause 11 as not in the “public interest” under the requirements of Code §§ 56-234 B or 56-235.2. That is, the Commission has the discretion to approve reasonable terms and conditions to implement the unambiguous plain language of Enactment Clause 11, but we do not have the authority to reject the provisions of Rider CRC that comply with that legislative directive.”

The SCC staff took no position on the case but did underline in its comments that the money not paid by the large customers will be paid by somebody else, and it won’t be the Dominion marketing budget.  Should all the costs be shifted to residential customers, it would add about $3 a year to their bills, the staff estimated for illustration.  Dominion countered that all customers, not just residential, would absorb it (correct) and that’s when it admitted many big industrial users will likely say no thanks.

As with so many other provisions of the Ratepayer Bill Transformation Act, this will all be sorted out at the next rate review set for 2021, should that happen at all. That’s when the discount will either reduce a potential customer rebate or reduce the amount applied to those new customer credit reinvestment offsets or whatever they call that new shell game where our money becomes their investment capital.

Just what gems are buried deep in energy bills still working their way through the 2019 General Assembly, we’ll just have to wait and see.

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8 responses to “GA Bills You For Industrial Electricity Discount

  1. You know when the issue was increased taxes as a result of the conformity issue – GOP “taxpayer heroes” popped up all over the place promising to protect taxpayers and “give it back”.

    But when it comes to Dominion – clearly – it’s a different game. Not only on this but the excess profits from the rate freeze and the tax refund that Dominion got from the TCJA.

    If the GA can slip “little” phrases into laws to grant something like this and take it out of the hands of the SCC process.. why not these other things?

    Here lately – we’ve been smacking gums here about that nefarious thing called “virtue signaling”.. which is far as I can tell is the Dem version of the GOPs “dog whistling” but in this case aren’t some of the same folks who stand up and claim to defend taxpayers … running away from them when it comes to Dominion…. that would be… oh… hypocrisy? tsk tsk

    😉

  2. More great reporting, Steve. Virginia is sliding down a very slippery slope. Now that the General Assembly is micro-legislating energy policy, there is no point at which it is logical to say, this is as far as we can go, therefore we have to stop. To the contrary, as every energy- and environmental-related group comes to realize that the G.A. can be log-rolled, more and more special interests will seek to bypass the SCC by cutting special deals in the legislature. The end result will be a fractured and incoherent energy/environmental policy that pleases no one.

    I hope you continue to highlight examples of this worrisome trend.

  3. re: ” To the contrary, as every energy- and environmental-related group comes to realize that the G.A. can be log-rolled,”

    well… not exactly… it appears that money has to flow … and if Dominion is going to play that game and the enviro’s realize that’s more effective than mere “lobbying”…. Que Sera, Sera

    so only now do we really get concerned about this “trend” that started quite some time ago…

    I guess a cynical critic might say that this is one way to stop “harmful regulation”, eh?

    Is there a devils advocate argument somewhere in this that Dominion was PROMISED a monopoly and they’re only really defending it in any way they can – that they should not have to compete in the first place?

    And perhaps on the other side – that the time has come to re-examine the appropriateness of Dominion’s monopoly in the 21st century?

    Now THAT … DOES sound like an issue to address at the GA level!

  4. What we all thought in the beginning was that Dominion’s predecessor, VEPCO or whatever came before, was openly promised a REGULATED monopoly. What sub-rosa promises may have been made in more recent years, we can only guess from events like these. It looks and smells bad. How can we clean it up?

  5. It is bad. In fact, it stinks. What’s really going on, IMO, is that Dominion’s rate-based generation construction program is driving up retail rates overall, to the point where Virginia’s reputation as a low-cost electricity State is in jeapordy. So, how to keep an attractive industrial rate along with the rate-based construction? Why, have your cake and eat it too — and with a compliant/ignoraant GA that’s easy: force the SCC to allow Dominion to subsidize industrial rates through residential rates. The SCC, the regulator, knows better and is only doing this because the GA legislated and the Gov. signed an explicit legislative command overruling the SCC’s own ability to decide what is in the “public interest.” This is in fact a gun to the SCC’s head. Yes, it is bad.

    • Excellent comment. This is when the whole system as a highly coherent and functional system begins to fall apart. And we may well be pulled in this direction by a confluence of forces that quite literally are working together to pull the system apart.

      I worry greatly about the entire electrical generation, transmission, and distribution system in this nation. We are racing toward ever growing threats of dysfunction and chaos, I fear, as the system becomes ever more opaque, political, and capitalistic, without transparency, and effective regulation. The misinformation going on now about the challenges we face boggles the mind.

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