Update: Aggregation Petition Moves to Full SCC

If our electric bill rises a nickel, and our grocery bill drops a nickel, do we care?

The debate over retail aggregation and choice for electricity underway at the State Corporation Commission is moving to another decision point, with a hearing examiner’s ruling May 21 on one of the many petitions. 

Eventually the full SCC must decide.  There is no real indication of the ultimate outcome in this ruling, which reads more like a case summary (here).  Senior Examiner Michael D. Thomas spends most of the 37 pages describing earlier testimony and arguments.  The real hints may be in two confidential supplements he provided but which we cannot read.  They may answer one key question:  Just how much money can these companies save?

A bit of recap:  Virginia law creates an opportunity for large users to aggregate demand from multiple business locations to reach an electricity demand of greater than 5 megawatts.  With that they can petition the SCC for permission to leave the monopoly provider and buy their electrons elsewhere.  In these cases, it’s Dominion Energy Virginia potentially losing big customers and revenue.

Last year the SCC granted permission for one company to leave, but earlier this year then denied a petition from Walmart.  It expressed concerns the loss of the big customers would shift too many costs to all the other customers unable to leave Dominion, in base rates and rate adjustment clauses (RACs).  Since then the various petitioners have been trying to change that conclusion.  See my previous reports here and here.

Thomas does a good job of summarizing the arguments.  Here are some excerpts:

In their Post-Hearing Briefs, Petitioners distinguished the facts and arguments raised in the Walmart Case from the Kroger and Harris Teeter Petitions. Petitioners believe Dominion’s cost of service analysis is an impossible standard to apply in this case because it only quantifies the negative impacts of retail shopping and does not account for the long-term benefits of reducing or deferring the need for new incremental generation resources…..

Petitioners believe the Commission never intended to establish a standard for Section A 4 approval that is literally impossible to meet. Petitioners believe the Commission must examine both sides of the ledger, and their evidence shows non-shopping customers would likely benefit from the loss of the Kroger and Harris Teeter loads due to the avoidance of new generation costs, which offsets any harm identified by Dominion…

Petitioners explained in the real world of ratemaking, the near-term impact of their switch to retail access service would depend on the interplay between the level of Dominion’s overearnings and any customer refunds authorized in the Company’s 2021 triennial review case.

If no refunds are authorized, the near-term impact on base revenue recovery would be absorbed by Dominion, not other non-shopping customers. If refunds are authorized, Petitioners’ switch to retail access service might cause a small reduction in the total amount of the refund; however, the amount attributable to Petitioners would be absorbed by Petitioners themselves because they would not be entitled to a refund for any generation-related overearnings.

In no place do the petitioners promise to pass along the lower electricity costs to their customers, but being retailers in competitive markets they could, and regular Kroger or Harris-Teeter customers (that would be many of us) might see a benefit that way, as well.  Whatever the SCC does for one it will be hard not to do for them all.   Costco and Albertson’s are also petitioning the SCC at this point.

Retail choice for everybody is the idyllic vision offered by that Virginia Energy Reform Coalition idea now driving so much discussion.  Within the PJM Interconnect LLC region, several other states are structured that way.   If Virginia split Dominion into two companies, one owning the wires and the other doing independent generation, there would be few if any problems for the rest of us depending on what Kroger or Walmart or Costco did.

But the path from here to there is long, winding, and to quote the cultural touchstone of the times, “dark and full of terrors.”  It is the path to the goal that is the greatest concern to me, the transition process, not the final shining goal.  A key question for the SCC has to be, would allowing a number of these customers to aggregate and leave move us toward the goal or away from it?  Would what we learn be of value?

The petitioners are totally correct that in today’s Alice In Virginia Wonderland regulatory system, with all advantages it gives to the utility, much of the traditional analysis is useless.  Too much is secret.  There is never a true accounting.  So many essential questions will not be answered until the full financial review in 2021, and no doubt Dominion will channel Lucy Van Pelt and seek to jerk away the football again before that happens.

So, add this unofficial personal comment to the record:  SCC, please do this. Allow some more of Dominion’s customers to leave.  Monitor the impact on the rest of us and on the health of the company.  And open more of the financial analysis involved to public scrutiny (the secrecy damages everybody’s credibility).  If in a year of so Dominion is angling yet again to avoid a true reckoning on its profits, which many of us expect, there is no skin off my nose.

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12 responses to “Update: Aggregation Petition Moves to Full SCC”

  1. LarrytheG Avatar

    So I have a question (as usual).. what is the basis for any customer “aggregating”? What is the concept and theory?

    Is it, perhaps, based on the idea that they are a high(er) volume purchaser (if they can aggregate) and thus deserve a lower rate?

    Or is it something else?

    If you purchase MORE power – you are entitled to a lower rate?

    and what is that based on? Can a utility provide more power cheaper than if they provided less power?

    In terms of the SCC allowing SOME to leave – that sounds patently unfair and arbitrary… and I’m sure if I feel that way these companies will also feel that way.

    And I’m quite sure that John Q ratepayer won’t think much of the idea that the “rich” companies pay less for electricity that he for his humble abode.

  2. Steve Haner Avatar
    Steve Haner

    Sometime Larry I don’t think you read this stuff at all. This is about customers seeking to buy from another company, a third-party competitor to Dominion. Being large commercial users they already pay a commercial rate lower than residential, but there are long-standing accounting principles behind the rate allocation process. Industrial rates are usually the lowest of all. Those questions have nothing to do with these cases. But they are coming up in another area, as the SCC deals with complaints that the current allocations don’t fit well with intermittent renewable generation.

    Yes, letting some leave and not others is not fair. But the law lets the SCC allow up to 1 percent of Dominion’ load to leave through aggregation, so more could. Other customers who have 5 MW load in a single account can already leave.

    1. TBill Avatar

      Do we care?
      That’s a hard question. We would like to encourage retention and attraction of businesses and empoyess to Virginia, which to me means we’d like to keep taxes and elec rates in the lower-than-our-competition category (competitive).

    2. LarrytheG Avatar

      Well I did get it balled up a bit… but then I wondered if a company can “aggregate” with a non Dominion provider – why not WITH Dominion?

      Another question – if a company buys from someone other than Dominion – who is responsible for making sure that enough power is available during periods of peak demand? Is that Dominion’s responsibility such
      that if the system demand goes up at peak demand – they have to bring another plant online or buy from PGM and that increased cost is spread out over only the Dominion customers and not companies who are buying 3rd party power?

      I’m all for breaking Dominion’s monopoly because I believe they are abusing it but I also think that companies that buy 3rd party power need to participate more power has to be brought online during peak demand periods – that DO get passed on to regular customers – it’s in their bill as a fuel adjustment factor, right?

      1. Rowinguy Avatar

        “Aggregation” means a single customer, say Kroger, with lots of stores spread out all over the service area of Dominion gets to combine the load of all those stores to reach the minimum size permitted by law to shop.

        Aggregation is not a bunch of different customers, like a subdivision, combining the loads of each house in the development, to size up enough to be eligible to shop.

        1. LarrytheG Avatar

          Thank you much!

        2. LarrytheG Avatar

          yes.. I get the concept of disparate sites but one company and that once some threshold is reached, they can “leave” but two things:

          1. – Can Dominion compete on the rate with prospective 3rd party suppliers?

          2. – what’s the fundamental basis for allowing 3rd party providers to serve “aggregation” – is that some sort of a carve-out “relief” from the monopoly? I assume that in a de-regulated model that many players could and do provide different terms of service.

          Perhaps some even offer time-of-day pricing – a lower base rate in exchange for higher rates at peak demand (that would encourage users to reduce consumption at peak demand to save money)?

          My provider Rappahannock Electric does a version of this, they will sell and install at a discount – water heaters and ecobee thermostats – in exchange for the ability to turn off the water heater and decrease the HVAC in peak demand events.

  3. It would be hard to keep aggregators from leaving since the law allows up to 1 percent of Dominion’s load to do so.

    It is hard to argue that others would be hurt by this. The aggregator’s businesses would still have to pay their fair share of the wires costs. Since they would not be using any energy supplied by Dominion they would not be obligated to pay for their portion of generation expenses. Some argue that this places a greater burden on those that remain.

    The aggregators respond that by losing their demand Dominion would postpone the need to build new generation. The aggregators argue, accurately, that by postponing the need for new generation built by Dominion they are saving the remaining customers money. The remaining customers also should be asking for energy provided by other suppliers, since having Dominion add new generation to the rate base will cost them more.

    Although somewhat arcane and obscure to most customers, this issue shines a bright light on the fact that customers exist to serve Dominion’s profit requirements rather than Dominion existing to serve the needs of the customers.

    Other states have made the switch to having the utilities manage the wires and retail sales for a fair return. The utilities in those states are still financially healthy, but are now disconnected from the need to keep building something new (needed or not) in order to prosper.

    The fallout from this minor issue might be the tipping point for beginning a serious reappraisal of the best way to manage our future energy system and re-examining the investor-owned utilities role in it.

    Currently, the utilities in Virginia see the energy system as theirs to determine and that customers should be required to do whatever is necessary to provide them an increasing stream of profits.

    That is an unhealthy situation for all concerned. An in-depth, deliberate process of evaluating the best ways to transition to a modern energy system should be undertaken, not a quick bill written by the utilities with little public participation and transparency.

    We can create an outcome that can be good for utilities too, but they must realize that they are companies that exist to serve the public. Customers deserve choices and reasonable prices. They do not exist solely to serve as the utility holding company’s piggy bank.

  4. Steve Haner Avatar
    Steve Haner

    “if a company buys from someone other than Dominion – who is responsible for making sure that enough power is available during periods of peak demand?” That would be the role of PJM Interconnect LLC, Larry, that regional marketplace. That is one of its main jobs, which it does with those capacity markets. It tells all the utilities in its zone what capacity they must have, and also tracks and markets power from non-utility generators.

    1. LarrytheG Avatar

      Well okay, but who has to pay for the power that is provided by PJM when peak demand occurs?

      I even hate to ask this question for fear that Acbar or Tom will tell it like it is!

      I know PJM calls the shots on system design/operation capacity but on a hourly basis – when peak demand occurs – who bears the responsibility for calling up/delivering more power and who pays for it?

      I don’t know the answer and maybe the question is irritating to some but I suspect others who read here also might also find that info informative.

      1. Rowinguy Avatar

        The Competitive Service Provider or “CSP” purchases the power from PJM and delivers it through the transmission grid and Dominion’s distribution grid to the customers that are aggregating their loads.

  5. […] petitions or appeals since a Walmart request was rejected earlier this year.  Bacon’s Rebellion just reported on one of […]

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