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.