SCC Decision Denying Aggregation Choice: Read It

 

Not at the table? Then you are on the menu.

Others will have this story and I like to post things on Bacon’s Rebellion which are unique.  But I do have something to add to today’s State Corporation Commission decision to deny Wal-Mart Stores permission to leave Virginia’s monopoly electric companies.  The short decision is worth reading.  

My extensive notes on the 2007 stakeholder negotiations on that year’s regulatory legislation stayed with the client.  My recollection is that during those discussions, and as the bill progressed through amendments, everybody realized it was not creating real consumer choice.  It was a full retreat from consumer choice.

Yes, large industrial customers with five megawatts of steady demand could leave, but under threat of being prevented from returning for up to five years if their new deal collapsed.  That’s real risk, and industrial users are highly risk averse.   The industrials agreed to the restriction, in exchange for certain other good and valuable considerations…..which quickly evaporated.

Likewise, we all fully understood that the kind of account aggregation Wal-Mart and other customers were seeking to make a third-party provider contract attractive would likely be denied by the SCC.  It was in the bill largely for show.  I think, but I’m not sure, that 100 percent renewable choice came later in the process and was not discussed at the negotiating table.  That has been a true window for choice for a while.

The reality, Virginia, is we’re stuck with what we have until we make it something better.  No escape.  One of my goals in writing for Bacon’s Rebellion, and I must decide whether to continue this unpaid quest, is to highlight the very deep problems with the situation we are in.

I remain discouraged, because the members of the General Assembly do not understand what they do not understand, and do not care unless the voters start screaming.  The voters are not screaming because they don’t really feel the price increases that have hit them, at least not Dominion Energy Virginia customers, and the big price increases to come will trail the next couple of elections.  I don’t call the 2018 legislation the Ratepayer Bill Transformation Act in jest.

Those who claim to be fighting this battle on the same side as consumers, groups like Clean Virginia, will pulls their punches on Democrats because they are…also Democrats.  The environmental activists are more likely to shoot at both sides, but low rates is not their top priority.  The large customers who could afford to join in this battle are off with their own rent-seeking missions at the General Assembly.

Perhaps this SCC decision will wake up some of those companies?  That could be its significance, if it does.  But it likely will not help Mr. Average Ratepayer. Not many of us out there are thinking about you, not many at all.  You are not at this table.  And if you are not at the table, you remain on the menu.

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14 responses to “SCC Decision Denying Aggregation Choice: Read It

  1. It’s an interesting tome… but I do hope you’ll continue as you have provided a LOT of insight and I think you’ve just started.

    But I am a little quizzical because we already know that the deck is stacked against consumers here and apparently our representatives at the GA could give a rats behind about it and you sort of seem a little disappointed but as a former lobbyist … I guess I’m just confused…. but hopeful you will continue…..

  2. I second the comment about your added insight and would add that I think you have helped Jim take this BLOG to a new level. and hope that you will continue your contributions. My further hope is that you will find ways to increase your scope and monetize the contribution you are making as one of the few voices in Virginia where you can read an article which hasn’t been scrubbed of anything offensive to the SJW twitter warriors.

    Regarding getting a seat at the table, since you have swum in the pond and could probably provide some good answers, how does this unrepresented mass get a seat at the table? The lack of voice as they watch politicians and legislators celebrate laws a very large swath of the population abhor while trampling on rights they thought were immutable is an ever-growing issue across the country. To top it all off, the politicians very publicly rig their districts so that many will not ever have a seat at the table and they are coupling that with ever-more sophisticated fraudulent voting gambits of which one party is using everything at its disposal to prevent detection and exposure.

    Tell us, Steve, how do the disenfranchised take an honorable and dare I say American path to a seat at the table?

    • Somehow we’ve got to get enough citizens to care and let their elected officials know that they care. Many times people have thanked me for speaking up for consumers but when I try to get them to help, they don’t have time or don’t think they know enough to do it, or….

      You can help!

  3. As I explained to some folks earlier today, if all of the petitions that are now out there for companies to aggregate their electric load in Virginia and leave their monopoly provider were approved, the rest of each utility’s customers would be left holding the bag. These might not seem like big increases, but when they are all added together, they are significant. As you say Steve, more are coming. A lot more.

    When the electric system in Virginia went back under the monopoly provider regulated system in 2007, choice went away. The limited options have been further limited by the utilities and last year’s legislation gave utilities some of the things we got held off in 2007. I predict that Virginia will yet regret the changes made to electric law in 2018.

    Virginia is all for being business friendly, but the line had to be drawn on letting big users leave the system and avoid helping pay for the costs that are spread across all users. We’ve given businesses many advantages but cannot afford this. Most companies waited until the first case was approved and then a flood of these petitions landed at the SCC.

    Today we found out where the SCC drew the line. It was a good move and fair. If more of these were approved, we’d have to stop somewhere and the more that were approved, the worse it was going to get. This decision is also most fair to all businesses, even though those affected are unhappy right now.

  4. I haven’t had a chance to read the decision yet, but it is another salvo in the early stages of a breakdown in Virginia’s energy system that I have been speaking about for several years.

    I have been very frustrated about not being able to get business and labor leaders, chambers of commerce, consumer advocates, utility executives, etc. to understand the perilous situation that our current energy policies are leading to.

    At least since 2007, Virginia has embarked on a huge wealth transfer from ratepayers to investor owned utilities. Ratepayers suffer immediately, but I fear that the utilities will also suffer eventually, and the economy and business climate in Virginia will pay a long-term price.

    Our elected officials, who are supposed to represent the interests of both the citizens and the businesses of the state, are ignorant about what is happening, willfully or otherwise. They have also hamstrung the SCC whose job it is to achieve a balance between the ratepayers and the shareholders.

    We can bemoan our lack of campaign finance legislation, or the stranglehold a few powerful companies have on the legislative process. But until We the People reclaim our collective and individual responsibility we will continue the status quo.

    The basic business model for our utilities is eroding but we have not altered the way they are regulated and paid. So the utilities use their political might to extract billions in extra profits from ratepayers while providing little benefit in return. Utilities cannot continue to pit the interests of their shareholders against the interests of their customers. There will come a day of reckoning. Customers have choices.

    There is an orderly, effective way to transition to a modern energy system in Virginia. Other states are doing it. But we are not on that path.

    The natural monopoly exists only for the wires. Many new energy services and facilities can be provided more effectively and less expensively by nimble new organizations. But we need financially healthy utilities that earn a profit by serving their customers well, just as unregulated businesses do.They must adjust their business to the needs of the times. This is difficult for organizations accustomed to doing things the same way for decades.

    The message needs to be heard loud and clear by our paid political representatives that they are not helping our utilities thrive in the long run by enabling them to stay addicted to obsolete habits.

    We will prosper through collaboration. We need not assess blame to move forward but seek out shared goals and combine our efforts to achieve them. There is an amazing future possible in Virginia, but clinging to outmoded behaviors will not make it manifest.

  5. This is a depressing but necessary post. For those of us who have more or less retired from the fray but still understand how the game is played, we can make a difference, I do believe, by our frank reaction and honest interpretation and translation of the political shroud surrounding so many of these complex agency actions, to other readers here. Perhaps that leads to a better educated response by those other readers, paarticularly in their interactions with the GA; perhaps that only leads to the self-reinforcing frustration of a few isolated cynical old farts. I don’t know which, but venting here with others who care is the only way I know to help Mr. Average Ratepayer. There are people who care who ARE at the table — the SCC staff and AG’s consumer advocate, for example. That’s assuming what we discuss here even occasionally trickles down to them, and assuming the SCC finds the fortitude once in a while to stand up to the GA on Mr. Average Ratepayer’s behalf. If these assumptions don’t hold, we still have the luxury of saying with curmudgeonly charm to family and friends as we read the latest news, ‘we knew better, we even said so — but of course it’s not our problem any longer, and nobody listens to us retired folks any more any way.’ SH, please continue this unpaid quest with JB and the rest of us.

  6. The SCC staff and the AG’s staff are focused on consumers, but limited in their ability to advocate. It has been a long time since I’ve seen the AG himself do a damn thing in this arena. He takes the blood money, too. I continue to wonder if that function should be moved out of that office.

    The SCC members show up and they get abused by some of the senior legislators. The show that some of them put on 14 months ago when Jagdmann came for her re-appointment was nothing short of sickening. Sickening. I helped elect some of those people and they shamed me.

  7. Now that I’ve read it: Here is the pivotal paragraph of the SCC’s order:

    “Staff testified how the loss of Walmart’s load would, for remaining customers, cause a net increase in rate adjustment clause (“RAC”) rates and cause base rates to be higher than otherwise necessary. Staff also explained how the loss of Walmart’s load could result in lower earned returns for the utility, which would also be detrimental to non-shopping customers by decreasing the funds available for customer refunds or credits. We also find that the potential for load growth does not alter our public interest determinations herein; the reallocation of costs among remaining customers occurs independent of whether load growth exists. Moreover, as testified to herein, “[e]nvironmental compliance costs arising on pre-existing power plants, the possibility of plant write-downs, or write-offs due to changing regulations, legislative mandates for renewable development and continuing regulation of carbon at the federal and state level, among other items, have [the] ability to drive the need for cost recovery without regard to whether or not load growth exists.”

    No forecast is certain; everything the Commission does is based on probabilities. The fact is, the uncertain potential for load growth is not enough for this Commission to stick its political neck out and say, “the ratepayer won’t be harmed here because there will be load growth.” Load growth used to be something a retail utility and its regulators took for granted; no longer, but in the near term Dominion’s load growth is likely, even near-certain, thanks to those data centers and the like. Indeed Dominion insists its load is going to grow faster than PJM and others predict in its latest IRP.

    Why does load growth matter? The rate base is the total utility investment reduced for depreciation. Build a new generating plant at today’s prices and adding that investment to the rate base can have a big impact on the total. Rates are set to provide a return on the rate base — so a 30% increase in the rate base dictates a 30% increase in rates. Therefore: load growth for a rate-basing utility costs it and its ratepayers money; losing a chunk of that growth SAVES it money because it doesn’t have to build new rate-based generation to serve the additional load. If Dominion’s load grows more than Walmart’s departing load in the same year, Walmart’s departure would LOWER generation costs for the other retail customers. And remember, Walmart will still pay all of Dominion’s wires charges regardless of who the supplier of the energy is; the only effect of retail choice here is on the “generation” charge.

    The Commission, however, insists “the reallocation of costs among remaining customers occurs independent of whether load growth exists.” That only makes sense if you look at Dominion’s retail rates with blinders on! The Commission’s calculation is, same rate base divided by smaller retail sales equals larger rate base per sale. But what about all the wholesale sales Dominion can now make with the generation left “excess” by departing retail load? What about all the dollars credited to retail rates through the net-interchange component of the retail fuel clause? The Commission seems to assume that a rate-based generator no longer needed to serve retail customers automatically becomes a “stranded cost.” Ridiculous! There is a vibrant wholesale market out there that includes every electric utility in the mid-Atlantic and beyond, from Cape Hatteras to Chicago. And Dominion’s sales into that market from rate-based generation are automatically credited to retail customers through the fuel adjustment clause, one of those “RACs.”

    So the rate base per retail sale goes up, but wholesale revenues should go up enough to make retail ratepayers whole. “Should”? Well, Dominion “should” be able to make a good profit on those wholesale sales. If that were not so, why did Dominion insist it was a good deal for ratepayers to build those new generators rather than purchase the marginal power it needed from the wholesale marketplace? Dominion persuaded the Commission these new generators were a better way to serve ratepayers than by buying from the wholesale market; OK, now prove it.

    I haven’t read the Staff testimony, but if the potential exists for wholesale sales (both energy and caapacity) from any excess generation in Dominion’s rate base left behind by Walmart’s departure, and if those wholesale sales are not profitable enough to equal the lost profit on sales to Walmart, then, wasn’t the Commission misled when it approved Dominion’s latest generating units for rate-basing? Perhaps that is the “oops” moment here!

    As has been said here before: The Commission long ago should have required Dominion to quit the rate-basing game; in that case, all those risks of future generation costs — future carbon emissions regulation, future environmental costs, etc. — listed by the Commission in its order are risks that would have been, as they should have been, shouldered by Dominion shareholders along with the upside potential of profitable sales in the competitive wholesale marketplace — assuming Dominion actually thought they would be profitable. In that event, Dominion also would have bought a substantial amount of power from the same wholesale marketplace to supply its retail customers, and it would have cost other ratepayers NOTHING EXTRA had Dominion’s retail customer load dropped and the amount of its wholesale market purchases dropped with it.

    Bottom line: the Commission is looking at Dominion generation and Dominion retail loads as though exclusively dependent upon each other. But that is an absurdly limited view. Plainly it has chosen to restrict its view. Today that dependence, that commitment, is a myth; it ignores the role of unregulated, competitive generation and the fact of regional economic dispatch by the ISO and the existence of the Mid-Atlantic’s thriving regional wholesale electricity markets for energy and capacity.

    • But, if RGGI do what I think it do, sales into PJM become problematic. It is a hard cap on generation, not simply on generation for Va consumption. Isnt that the point? If the plants keep running, why do it? The plants cannot keep running.

  8. I much appreciate the informative dialogue…

    and what I seem to get out of it is that the goal of both Dominion AND the SCC is to maintain Dominion’s monopoly – to maintain it’s VALUE and WORTH to Dominion and to not allow those subject to that monopoly options to benefit themselves that would diminish/undermine what was granted to Dominion.

    no?

    If true – I “get it”! I also see PJM as essentially a threat to Dominion’s Monopoly as well as bigger users of electricity being able to “buy” from PJM.

    How about it Tom? weigh in………

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