SCC Again Denies Escape from Dominion Monopoly

SCC: We’re All In This Together

The State Corporation Commission has denied another request from a major Virginia retailer for permission to escape from Dominion Energy Virginia’s monopoly electricity service.   The score for such petitions is now one approval, two denials, and the message is clear to all the other petitioners:  Go fight it out at the General Assembly.

The petition denied today was from Costco, seeking to aggregate 27 of its stores into a single electricity account that met the 5-megawatt demand trigger which allows large customers to seek a competitive supplier.  The final order is here.

“… [G]iven the context of a decade of rising rates and the likelihood of even higher rates in the future, the Commission does not find it consistent with the public interest for … captive customers – predominantly residential and small business – to experience the cost-shifting identified herein by enabling a larger commercial customer to seek its power supply elsewhere through aggregation,” the SCC wrote, noting that new Commissioner Patricia West did not participate in this decision.

The SCC said that it “respects the economic and business goals reflected in Costco’s pleadings and testimony,” but that “if Costco believes that the current statutory structure for setting vertically-integrated electric utility rates results in unreasonable or unnecessarily high rates, its potential for recourse may be found through the legislative process.”

Those quotes were used in the SCC’s official news release, which also cited Costco’s stated reasons for wanting to flee Virginia’s largest electricity supplier:

Costco had argued that Dominion’s rate structure was unfair.  During the case, Costco stated that it sought to leave Dominion’s system, “… based on Dominion’s piling on of rate adjustment clauses [(‘RACs’)], and [their] significant impact ….”  Costco also said, “under the current statutory structure Dominion has been over-earning on its frozen base rates for a number of years,” and “it is enormously frustrating that an incumbent utility has an incentive to keep what [Costco views] as the customer’s money.”

Costco also stated that “Dominion’s piling on of excessive costs … was the motivation for the Costco Petition.”    Costco further stated that, “Costco is also seeking to avoid the anticipated future rate increases” from “the huge potential cost impact if Dominion elects to fully implement the Grid Transformation and Security Act [Senate Bill 966 from the 2018 General Assembly Session].”

That’s pretty much the entire news release.  To paraphrase: “Yes, we know Dominion’s rates are unjust, unjustified and going higher, but we cannot let you escape and possibly shift major costs to smaller customers.”  Whether or not such cost shifts will really happen or amount to much has been the focus of new petitions or appeals since a Walmart request was rejected earlier this year.  Bacon’s Rebellion just reported on one of those.

One of the arguments is that the departures won’t matter because Dominion’s load is growing.  The SCC rejected that in a footnote, saying reallocation of costs still occurs and not all fixed costs are diluted by load growth.  It also said it is irrelevant that customers seeking to buy 100 percent renewable power can depart and that could also shift costs to other customers.  That was a General Assembly mandate, and the utility could recapture those customers if it had its own 100 percent renewable tariff.

In less than two weeks Virginia voters will be participating in numerous primaries around the state, with legislative allies of the power company in both parties being challenged.  Will their many votes for the company stockholders over the customers matter in the outcomes?  Stand by, but do not hold your breath.

Absent strong signs of voter discontent in June and November, telling the retail community to take their complaints to the legislature is like telling them to go pound sand.

Costco had also tried to argue that the SCC didn’t have full discretion in this matter, but this is one part of the law where SCC independent decision power is preserved.  The Commission wrote:

As evidenced throughout Title 56 of the Code, the General Assembly knows how to limit the Commission’s discretion if it so chooses and … knows how to mandate retail choice if it so chooses.

In Code § 56-577(A)(3) the General Assembly determined that it is consistent with the public interest to permit retail choice for large customers with a demand exceeding five megawatts, and it did not delegate any authority to the Commission to find otherwise. In stark contrast, in Code § 56-577(A)(4) the General Assembly did not determine whether it is consistent with the public interest to permit aggregated retail choice but, rather, directed the Commission to make such determination.

To recap an earlier comment, the SCC’s analysis fits personal memory.  The opportunity for retail aggregation, with SCC approval, was included in the 2007 legislation with no real expectation it would lead to anything (and it did not for  ten years).  The opportunity for large users to depart, more firmly established in the new law, was also gutted by allowing the utility to demand a five-year notice before large-demand customers could return.  That has helped keep the large industrial users locked in with the monopoly.

Retail choice was abandoned because the utility also agreed to fully review and adjust its excessive rates in a 2009 proceeding, to be followed by bi-annual reviews and possible additional rate cuts or refunds.  The utility has since found ways to break those promises, time after time, with the General Assembly’s collusion.

The recently announced Virginia Energy Reform Coalition has an outline (not a bill) for a new effort at creating real retail choice in Virginia.  Will it now have some new members – Costco, Walmart, Kroger, Harris-Teeter, Sam’s Club?  Again, stand by, but don’t hold your breath.