“Strong Words” In Bills Give SCC Power On Rates

From Energy Burden Coalition flyer mailed to legislators.

By Steve Haner

One sentence, if it is the right sentence, can upset the machinations of the powerful. Two bills pending in the 2023 Virginia General Assembly contain such a sentence, and it could upset the plans of Dominion Energy Virginia.

Here is the sentence at the heart of both bills:

…if the (State Corporation) Commission determines in its sole discretion that the utility’s existing base rates will, on a going-forward basis, produce unreasonable revenues in excess of the utility’s authorized rate of return, then, notwithstanding any provisions of subsection A 8 of § 56-585.1, the Commission may order any reductions to such base rates that it deems appropriate to ensure the resulting base rates (i) are just and reasonable and (ii) provide the utility an opportunity to recover its costs and earn a fair rate of return.

The House version of the bill, House Bill 1604, has bipartisan sponsorship. The Senate version, Senate Bill 1321 has three Democrats listed as sponsors. It is the Senate version which at least has been aired in an open Senate subcommittee meeting, and the leading Dominion lobbyist in the room was not coy about his concerns. So far, the House version slumbers and has not been heard.

During the Senate discussion, William Murray, the firm’s senior vice president for corporate affairs, noted the presence in the bill of “strong words,” which he said included “notwithstanding” and “any.” He warned the legislators in the meeting that “our concern would be if you just mooted everything you did in Senator Saslaw’s bill.” The Richard Saslaw-sponsored bill he referred to is Dominion’s main effort to recast its regulatory environment, which had just been discussed in the same meeting on January 18. It was first reported here.

Murray failed to mention the strongest words of all: “sole discretion.” But he is correct that the word “notwithstanding” tells a judge that this authority overpowers all the other places in the long regulatory statute where the legislature has dictated various policies to the SCC.

Preventing the SCC from having and exercising “sole discretion” over the company’s rates and profits has been the point of just about every legislative initiative the utility has undertaken in years, starting with its return to regulation in 2007 with a regulatory structure not seen in any other state.

In the pending Saslaw bill, and the companion House measure, the legislature is asked to interfere with the SCC’s discretion (again) on matters such as how to calculate the utility’s allowed return on equity, which peer utilities to compare it with, how to account for the ratio of debt to equity in its capital structure, and how to charge ratepayers for the rate adjustment clauses which are independent of its base rates.

In the meeting last week, Dominion’s Murray indicated a willingness to amend the language in Senate Bill 1321 to “reconcile” any dissonance between the two. No proposed changes to the language have surfaced, but the same Senate subcommittee meets again tomorrow. At least one senior Republican, Steve Newman (R-Forest), felt like approving SB 1321 along with the Saslaw bill meant the Senate would be “sending out two different policies.”

Well, it wouldn’t be the first time, but yes. As noted in the earlier article focused on the main Dominion bill, this language to give the SCC the final say and “sole discretion” is the exact opposite of what Dominion is trying to do.

A coalition of nine environmental and liberal activist groups, ranging from the unions to Clean Virginia and the Sierra Club, is spending significant resources to promote the two bills. The Energy Burden Coalition website has the full list of members. They have also paid for effective and attractive mailers into various legislator’s districts, and a digital advertising campaign is underway. Their ad popped up on a Republican news and commentary site, and it was not Bacon’s Rebellion.

On the other side of the political spectrum, Americans for Prosperity has also endorsed and is spending political capital on the two bills.

GOP legislators who look at the coalition list are likely to recoil, but they should ignore that reflex and support the bills. Woe be unto them if GOP votes kill either of these good bills.