IRP Rejection Part of a Pattern of Trouble

The State Corporation Commission’s decision Friday to reject the Dominion Energy Virginia integrated resource plan is just the latest sign the energy package sold by the utility to a compliant General Assembly in early 2018 still has an uncertain future.

Two headline elements of the legislation – the promised massive renewable projects and a rebuild of the grid — are in limbo as the 2019 General Assembly looms.  Another headline element, the ability of the utility to use excess profits it is holding to pay for both and thus eliminate risk of rate cuts or refunds, won’t even be tested in front of the SCC until at the earliest 2021, when the utility might (might) undergo its next rate review.

The more aggressive stance taken by the SCC started more than year ago, with a September 2017 report on the massive excess profits being enjoyed by the utility after the General Assembly ended rate regulation in 2015.   The response of the utility was to rebate a small portion of those dollars, but otherwise double down on removing SCC oversight, disguising its assault on consumers behind promises of renewable generation and a shiny-new high-tech grid. 

During that legislative debate last year, the SCC continued its more assertive posture with an unprecedented series of letters to legislators dissecting Senate Bill 966 and warning of its effects. Only one of those warnings was taken seriously, dealing with the provision termed the “double-dip” because is allowed double recovery on investments.  

The rest of the complicated bill passed largely as the utility wrote it.   Determining where it all stands requires a check on the status of several SCC cases, some highlighted in Bacon’s Rebellion reports over the past six months. Only those elements in Senate Bill 966 where the General Assembly took discretion away from the regulatory body, and ordered certain outcomes, have seen resolution.  Where its discretion remains, SCC skepticism of the utility is on display, often citing the same problems it identified in those letters to the General Assembly.

The key promise made to the environmental groups who endorsed the bill involved thousands of megawatt hours in new renewable generation, and some small solar projects are being added.  But the challenge to the integrated resource plan focuses on whether Dominion needs any new generation at all, let alone the thousands of green megawatts which were allowed (but never mandated) in the bill. 

To make room for more renewables the rejected plan called for early retirement of viable fossil fuel plants, with the ratepayers on the hook for that cost and the utility stockholders protected.  The IRP application has been sent back to the utility for revision, with a demand that the full costs be estimated and compared to the lowest-cost alternative. 

Those added details may not make it easier to justify the promised expansion of renewables.

The key promise made to customers was a high-tech,responsive and flexible distribution grid.  That is also stalled, with Dominion’s grid modification plan – a separate case from the IRP – also being aggressively challenged as designed to enrich the utility but do too little good for the customer.  Opponents have complained the utility provided too little detail on plans and costs, perhaps giving the Commission a good reason to copy the IRP outcome and send that back to the utility as incomplete. 

The bill was also sold by various provisions (a cynic might see vote trading) for various smaller interest groups, and in those cases the SCC has more often complied.  The one getting the most attention is the off-shore wind demonstration project, which the legislation effectively ordered the SCC to approve with no consideration of cost, need or prudence.  It is too expensive, totally unnecessary and imprudent.

The legislation also ordered and the SCC has approved a major underground transmission project along Interstate 66, serving a proposed Amazon facility and perhaps demonstrating to Amazon how willing our political leaders were to put their interests above the rest of us.  A second “demonstration” project was also authorized in the legislation, but to date remains unidentified. 

The General Assembly was equally compliant to the utility in making it harder for the SCC to reject its on-going strategic undergrounding plan for residential tap lines, charging all ratepayers through a rate rider for benefits in a few legislative districts.  That Rider U case remains unresolved, however, with the company’s most recent filing an objection to several elements of a November 8 decision by a hearing examiner, mainly about cost allocation. 

There were two provisions in the legislation popular with large industrial customers, and the Virginia Manufacturing Association joined the parade in support of the bill.  One part of the bill made it easier for big customers to escape paying any of the costs of various energy efficiency programs charged to smaller customers, by repealing various regulations, and the SCC did that September 21.  

The General Assembly also authorized Dominion to offer a rate discount to large industrial customers who promise not to seek a competitive supplier.  That case is still pending, having drawn opposition from those potential competitive suppliers.   The record contains an estimate that Dominion is willing to give away $10 million in discounts through Rider CRC to deter competition, with a potential 2,600 customers eligible. 

In a bad sign, the most recent document on that record is a hearing examiner decision allowing future information to be secret.  The key question in the case will be, if Dominion does grant two percent discounts to retain industrial customers, will the revenue lost come from its profits or operating expenses, from stockholders or ratepayers? 

Finally, after Congress dropped the corporate income tax rate from 35 to 21 percent, the General Assembly ordered the utility to pass those savings on to customers and in part that has been done. Accounting details remain in dispute in several on-going cases that will impact future rates or rebates.  When the SCC has ruled, it has sided with taxpayers, as in the dispute over the transmission costs in Rider T, but the utility continues to wrestle with the SCC over adjustments in several other elements of their business. 

Where the SCC has been allowed to perform its constitutional role, it is doing so.  Will the 2019 General Assembly lay off or interfere once more?

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5 responses to “IRP Rejection Part of a Pattern of Trouble

  1. One thing that is amazing to me is all those folks talking about medicaid, EITC, school tution , the cost of health care and tax and spending in general are pretty much mute about Dominion’s financial behaviors… egged on by many in the GOP in the GA.

    I strongly suspect that the SCC’s assertive posture these days is related to the change is political power in the General Assembly which tells us that when the GOP was in control – that Dominion pretty much ran amok and slap over the SCC and now things have changed… but again – those it’s amazing that those who portray themselves as defenders of the taxpayers don’t seem to have the same passion when it comes to electricity in Virginia.

    Only in Virginia are people being charged MORE for wind and solar which is said to have lifecycle Levelized costs and our Conservative friends in the GA are apparently at the root of it and Conservatives in general – would much rather talk about MedicAid than excess profits, tax rebates not returned and taking wind/solar away from 3rd party competition and sole-sourcing it to a monopoly that intends to charge a premium for it ….

    Where are Conservatives these days who whine incessantly about the costs of health care and college tuition when it comes to how taxpayers are being treated over electricity?

    ouch. ouch. ouch!!!

    • I suspect the main that so many people are silent is that Dominion isn’t raising base rates. If fuel prices go up and get passed on, and if Dominion passes on a lot of capital costs, and electric rates start increasing, I expect you’ll hear a lot more squawking.

  2. Larry, the two sitting commissioners are among the finest Virginia conservatives it has been my privilege to work with over the past decades. As judges now, they are out of politics, but I knew them well when….The General Assembly’s propensity to give the utility whatever it asks for is neither red nor blue, but a matter of green…..

    And Jim is right, so far the smart play for Dominion has been to freeze/maintain base rates at a time of rapidly declining operating costs, thus boosting its profit margin. The explosion of rate adjustment clauses on top of base rates has the same outcome, moving cost out of base rates and leaving fatter profits behind. The SCC process is supposed to be a surrogate for competition, which would naturally force down rates. But the General Assembly has short circuited all that.

  3. Agree with both Steve and Jim. Larry, I also think that energy regulation is something few people understand. In this day of an overload of information sources, “fake news” and decreasing ability of individuals to influence our own fates, fewer are even bothering to try. Those who speak up are labeled negatively and discredited in every way possible. A consumer could spend weeks figuring something out, only to realize that nothing can be done to protect yourself and that it’s easy to get yourself in trouble you weren’t expecting because you did try to protect yourself. It makes busy people who don’t want to be frustrated all the time simply not even attempt to figure things out or weigh in.

    I agree with Steve’s assessment of our SCC judges and am grateful that they are doing their job – what’s left of it. I’m hopeful to see the utility being less able to get its way in every corner.

    The SCC process is supposed to be a surrogate for competition, but Virginia regulated entities too often seem to want the benefits of both competition and regulation and the challenges of neither. Our electricity regulation has clearly been designed so no typical person can figure it out and it was created in an environment where whatever the company tells legislators is accepted without question.

    This has gone on for far too long. It’s time for some pushback and rebalancing of power.

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