SCC Authority Over ACP Costs Reinforced In Bill

Sit down for this shocking news, but for the first time in recent memory a key energy subcommittee at the General Assembly has voted for the ratepayers, for the authority of the State Corporation Commission, and against protecting the stockholders of Dominion Energy Virginia.

The energy subcommittee of House Commerce and Labor Committee has approved a bill from Delegate Lee Ware (R-Powhatan) that reinforces the SCC’s authority to review the construction and operation costs for the Atlantic Coast Pipeline when Dominion starts using it.  If Dominion uses gas from the line in its power plants, as expected, ratepayers will be asked to pay both the commodity cost for the gas and a share of the transportation cost of using the new pipeline.

That transportation charge will be the customers covering their share of the construction cost, financing charges, and decades of profit margin and operation cost of the new pipeline.  It will be a much higher price than the charge for using one of the existing pipelines now serving Dominion’s stable load. (You can think of the pipeline as a toll road, with older competing toll roads to the same places.)

If that ACP project falters, Ware’s change in the statute remains a good additional protection for consumers going into the future.  House Bill 1718 does not stop the pipeline project.  It simply deals with how the company recovers its costs from the ratepayers in the decades ahead.

The vote was 8-2, with five Republicans joining  the three Democrats present to support Ware’s bill.  The no votes, however, were Commerce and Labor Chairman Terry Kilgore and another senior Republican, Tim Hugo.  The vote in the full committee Tuesday afternoon bears watching.

The SCC could still approve the exact amount of cost sought by the utility.  With these rules, however, ratepayers have a bit more assurance that will be a fair decision. These decisions properly lie at the SCC.   This has been my broken record message since Dominion set about successfully pushing bills to handcuff the SCC, year after year after year.  Even strong supporters of the pipeline should want this bill passed and signed.

Ware noted the unusual political alignment behind his bill, which received testimony in support Thursday from a deputy to Attorney General Mark Herring, and was praised in a recent on-line column by former Attorney General Ken Cuccinelli.

Cuccinelli wrote the bill will “protect captive electric utility ratepayers from having to pay for natural gas pipeline capacity contracts that are not necessary for those utilities to provide electricity in Virginia. Such contracts are the epitome of crony capitalism, transferring potentially billions of ratepayer dollars to utilities.

Other speakers in favor of the bill Thursday included a spokesman for the Tea Party and lawyer-lobbyist Will Cleveland of the Southern Environmental Law Center.  Equally important, while Dominion opposed the bill, for once it stood alone.

When killing bills in that subcommittee, and it killed a bunch of them that evening (another column on another day), the Dominion lobbyist usually stands with people from Appalachian Power Company, from the electric cooperatives, and usually from their loyal lapdogs from various business groups where Dominion pays huge dues.

Former Delegate Jack Rust stood alone, arguing that the SCC already has all the authority it needs to make a proper decision and apply a fair and just share of the pipeline cost to ratepayer.  In fact, when the Sierra Club petitioned the SCC to make some decisions now, the judges’ opinion stated it was too soon but when that decision comes, there will be a heavy burden of proof on the utility.

Rust then mischaracterized the bill, claiming it sought to force an early decision by the SCC, before the pipeline is built, before all the (major) cost overruns and delays are included in the final accounting.  The bill does not alter the SCC’s position that the time to make those decisions is once the fuel is flowing into Dominion power plants and Dominion seeks an increase in the fuel factor.

Here is the heart of the bill – typical dense language, but worth plowing through:

…the Commission shall require the utility to prove by a preponderance of the evidence that, at the time the utility executed the contract giving rise to the costs for which recovery is sought, the utility had (i) identified and determined the date and amount of new fueling resource it needed; (ii) objectively studied all available alternative fueling resource options, including options other than new capacity contract or contracts to meet the identified and determined need; and (iii) determined that the pipeline capacity contract or contracts were the lowest-cost available option, taking into consideration fixed and variable costs and a reasonable projection of utilization.

Those words add additional weight to the SCC’s quiet warning last year that for once, with this pipeline, built by another Dominion subsidiary only because Dominion Energy signed a contract for much of the gas, its stockholders have their own wallets on the line.  The SCC might say yes, but it might also say no, at least to any price that exceeds the cost of other choices.