Virginia Supremes Uphold SCC, Rule Against Wal-Mart

by L. Steve Emmert

Yesterday the Supreme Court of Virginia issued a ruling in Wal-Mart Stores East, LP v. SCC. The question here is whether Wal-Mart can shed the shackles of buying electricity from the dominant utility, a regulated monopoly that you know as VEPCO or APCO, depending on where in Virginia you are.

Some time ago, the 140 Troublemakers created a framework for some semblance of competition in electric utilities. Nonresidential customers whose demand exceeds five megawatts have the right to buy electricity from a competitor to VEPCO and APCO. Any customer, including a plain-old homeowner, has the same right if they want 100% renewable energy and their “host” utility doesn’t offer a choice.

There’s a third category for nonresidential customers. If separately they demand less than five MW but can aggregate different locations to exceed that threshold, they may ask the State Corporation Commission to permit them to bolt and get their electricity elsewhere. The commission has the discretion to approve the request if there are no adverse effects to other customers and the request is consistent with the public interest.

Wal-Mart, as you know well, operates a lot of stores in Virginia. The individual locations don’t use five MW, but when you add up all of them, they greatly exceed that figure. Wal-Mart accordingly filed an application seeking to enter the wholesale energy market, to save a few dollars.

An SCC hearing examiner convened a hearing to consider the matter. That hearing established that the electric companies would sustain losses if all the Wal-Marts across our fair land left the grid, and those costs would be passed along to “captive” consumers, those unable to leave the monopoly, in the form of higher rates. “Yes, but,” Wal-Mart replied, “the average customer’s bill would go up only fractionally, not enough to harm anyone.” The evidence showed a monthly increase of 13 cents for VEPCO customers using 1,000 KW, and five cents for those in APCO’s territory. A footnote in today’s opinion recites Wal-Mart’s contention that such a customer could offset that tiny increase by replacing a single incandescent lightbulb with an LED. (As evidence of my environmental bona fides, I hereby certify that all of my old lightbulbs are long gone, replaced by LEDs some time ago.)

I’ll reframe this setup slightly, in a way that will telegraph the outcome of today’s decision: Would you be willing to pay a few extra cents each month so one of the world’s largest retailers can save a lot, maybe millions, on its electric bills? The SCC looked at that proposed transfer of wealth, a few pennies at a time, and balked. It found that other customers would indeed be affected, and that the retailer’s request was thus contrary to the public interest.

Wal-Mart then moved for reconsideration, asking the SCC to allow it a more limited extent of relief – not all its stores, but something less than that, in a manner that would make it palatable. The commission denied that motion and Wal-Mart headed to the courthouse.

In this case, that means the Supreme Court itself. Under Virginia law, the SCC is a tribunal of equal dignity with circuit courts, and proceedings there offer the priceless opportunity for a by-right appeal. No petition stage; you just go straight to the merits.

Today a unanimous Supreme Court affirms the SCC’s decision. It affords the commission substantial deference where, as here, the statutory framework provides that the commission “may” grant requested relief. Despite the de minimis nature of the individual effects on each residential customer, the overall effect is to transfer millions of dollars from individual customers to a corporate giant without those customers’ consent. The SCC thus had the discretion to rule as it did.

The court also affirms the denial of Wal-Mart’s reconsideration motion. The justices agree with the SCC that this wasn’t a request to reconsider anything; it was a request to grant relief other than what the application sought. That would require amending the pleading, something that Wal-Mart never sought. Instead, the initial “request” was a passing reference during testimony by a Wal-Mart representative.

This column was published originally at Virginia Appellate News & Analysis.

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37 responses to “Virginia Supremes Uphold SCC, Rule Against Wal-Mart

  1. Something tells me that this is not the end of it for Walmart, this is a mere speed bump!

    I was under the impression that there are already preferential rates for some kinds of industries or users – that pay less than residential rates.

    no? How is that justified if true?

    • Larry, This case came because some other businesses got to do this, but only a limited total KWH was allowed and the cap was reached before Walmart requested to join the program. This was one of the ways people tried to get more renewables into our system. The program has a tight limit so Dominion and AEP don’t lose their biggest customers. It is all part of the protection provided to monopoly providers.

      • I don’t pretend to understand all the nooks and crannies of this… but I do suspect that a lot of money is involved if Walmart is burning legal resources! 😉

        Is Walmart able to install it’s own solar without paying any additional to Dom for grid power when they need it?

        Where I live – just a few miles, SPOWER was approved to put up more than 3000 acres of solar, 620 mw – and they have sold every single kilowatt of it – before it’s up and running! Microsoft bought half of it.

        • No. They will at minimum have to pay what would be required if their equipment broke and they had to depend upon Dominion again. This isn’t an argument used just by Dominion but by all the monopoly providers. If they have to be able to provide electricity to someone, even if that entity doesn’t currently need that electricity, they need to charge enough to cover the cost of having the system – grid and generation and running it – capacity to serve them. This is part of the guarantee we make to monopoly providers. If they’ll serve everyone, we’ll be sure they are paid for their expenses and a fair rate of return.

  2. Don’t we all pay Walmart’s electricity bill anyway? At least those of us who shop there.

    • Uh yep, but those of us who don’t shouldn’t have to… why, that would be communist or something. From all according to THEIR (WalMart’s) needs….

  3. All that roof space with 100% sun exposure…

  4. and this:

    Walmart to host solar power on 130 more sites
    The world’s largest retailer has slipped in recent rankings, but is planning to pursue more solar, both at its facilities and through third-party purchases of power.

  5. I’d be curious what Walmart has to pay for its electricity – do they already get a discount over what we pay as regular people? I am starting to think too much of the utility burden is on individuals.

  6. A few years back in the Fredericksburg region – there were two Burger Kings – one in Dominion’s territory and the other in REC territory.

    The one in the REC territory was paying almost twice as much for electricity as I remember.

    We have Walmarts in the region also – some get electricity from Dominion and some from REC but have never heard anything about them.

    Not sure what was done about it – REC had/has a different rate structure than Dominion apparently.

    I’m sure what is driving Walmart is that they’re looking at how much they pay for electricity per store – across the country – and perhaps in Virginia it’s more and they’re trying to get it down to what they pay in other locations.

    This is another one of those things where virtually no ordinary citizens really have knowledge or understanding… it’s all in the bureaucratic bowels.

    • Larry this relates to what utilities’ service territory each is located within. Even Walmart is simply trying to get to combine its stores within Dominion’s system and within AEP’s system.

      Long ago, the rules allowed our investor owned utilities to select the territory they wanted to serve. The REC system was developed to serve the rest (minus a couple communities where we have public power but too few to worry about for this discussion). None of us change change our provider. Those pushing for renewable energy got permission to have an experimental rate for renewables and it is limited in size to not hurt the income of the investor owned utilities who lose the customer. Those limits are carefully monitored. Walmart got in after the limit was met but keeps pushing to get access.

      In Montgomery County, VA I live on the tail end of the Craig Botetourt Electric Cooperative. We have the highest rates in the state because we are the mountainous area neither Dominion nor AEP wanted to serve. Our system is comparatively expensive because of the terrain and there are fewer users to serve and thus spread fixed costs over. We are too small to own generation. We pay more per kwhr for wholesale from the IOU’s than they charge their customers retail. AEP lines run all over our property and AEP serves part of the original farm, but when the area was divided up for service area, AEP chose to not serve our 1797 house but to serve the unoccupied farmland next to it. No changes are allowed today because if we could switch utilities, we’d leave a Craig Botetourt utility with even fewer customers and more cost per customer.

      • My understanding is that most all if not all of the rural electric coops rates are higher than Dominion and AEP yet not heard a whole lot of complaining or demands that rates be reduced.

        I know there is some kind of relationship between the REC and Dominion/AEC and I know some RECs get power from one plant in Southern Virginia. Others, I believe actually buy their power from PJM.

        It’s hard to know – with so many different players in the grid in Virginia – how it works. I’d bet that Walmart has stores in most all the utilities, Dom, AEC and REC so I was not even clear what Walmart was pursuing – just Dom or all of them?

        • It IS confusing and the REC’s are not all alike at all. You are right that there are relationships with the REC’s and the IOU’s. At one point, REC’s had to sue IOU’s to get them to even sell to REC’s. Today, some own some generation jointly with Dominion.

          Walmart is simply trying to get the deal that only a very few folks got. The program was only available within Dominion’s territory and within AEP’s – not across both. RECs were not involved. I think the specific case that went to the Supreme Court just dealt with Dominion.

          The SCC has been clearly told over and over by elected officials that it must keep costs low for residential customers and the law allowing the renewable program put a strict limit on participation. If the SCC had ruled in favor of Walmart, you can be sure Dominion would have appealed to the Supreme Court. It wants to keep its customers and to make them buy electricity from Dominion only, as the rules have long allowed. Walmart wanted to save money and to get the deal but the limit had been met before Walmart applied. The SCC did what the law said. The Supreme Court verified that it did so.

          • and so Dominion saw this coming way, way before Walmart and proactively worked the system to have rules in place by the time Walmart showed up!

        • Yes. The rules were set when the legislation passed the General Assembly. Walmart was trying to push the envelope and make them expand.

  7. Wal-mart pays the same published rates as other large commercial operations. Yes, they are lower per kWh than residential rates, but that recognizes major economies of scale for big users, who often take the power into their own plants at full voltage. I doubt Wal-Mart does that, but the shipyard did.

    I didn’t follow the arguments in this case, and may go dig them out, but what was driving Wal-Mart at the SCC is its full recognition and understanding of the sh$tload of higher costs coming down the track at us like a freight train. It wanted out before the 2020 Clean Energy We Don’t Need Act, and I’m sure the pain will now be higher. They are right, we’re about to be creamed by cost increases. The third-party suppliers are free from all that political lard added to our bills by the General Assembly.

    “I am starting to think too much of the utility burden is on individuals.” No, TBill. I admit I was paid by the shipyard to defend the industrial rates, but the SCC is charged with determining and distributing those costs by customer class on a fair basis, and they do get tweaked from time to time. One needs to keep an eye on any special rates, off the tariff sheet, and they do turn up from time to time. But the tariff sheets should be fair.

    • “It wanted out before the 2020 Clean Energy We Don’t Need Act, and I’m sure the pain will now be higher.”

      Doesn’t the prospect of materially higher rates for businesses have a significant impact on being among the best states for business? It certainly has a major impact on where data centers are located.

      • To me Dems are mandating that businesses use renewables, and the public will pay for it, so the commercial rates will be reasonable. Also Dems want to pay lower income residents higher electric bills for them. We do not need to be business friendly as Tennessee won that title. We need to be a Democrat state with high taxes and high utility bills, and we will plan to create our own local economy by mega development of off shore wind and other electrification mandates. That works, right?

    • @Steve – I’m not understanding why you say that lower rates for industrial are justified… it sounds a little arbitrary to me… hand waving…

  8. Does anyone think the SCC has a choice in this? The law, as Dominion got it passed, created limit. These big businesses want to use more renewables. They’re investing in the renewable generation directly. They’re trying to get around limiting rules since renewables are not adequately available at fair rates. Virginia has long allowed big business to escape responsibility for helping pay for costs it doesn’t want by claiming it doesn’t benefit – only residential consumers do. But that’s not the issue here. This is about limiting those who can try different rates so the utilities control things as they prefer and avoid renewables.

    FERC may make it even harder for Virginia businesses and individual consumers to use net metering to help finance distributed renewable energy, which our utilities fought but would help system costs, reliability and more. It is scheduled to address the rules in its next meeting and may make it uneconomical for future use of net metering in PJM’s region.

    Bottom line, renewables still have a long uphill climb to fairly compete with fossil fuels. The rules still tilt toward fossil fuels and FERC appears poised to make it worse.

  9. There is something going on in Virginia though. Our commercial and industrial rates are the 5th or 6th lowest in the country, while our residential rates are 24th out of 51 (including DC.)

    As Steve says, there are economies related to serving larger facilities. The rates per kWh compared to residential rates reflect this. About one-half of a typical commercial bill includes a charge for maintaining grid and generation resources to meet the peak demand of the facilities. This is included in the development of residential rates and is not identified separately.

    However, lets say a state has the 25th lowest residential rates. Its commercial rates are lower, as they are in other states, but the relative ranking should still be somewhere in the 20th-30th range compared to other states. Why is Virginia one of the lowest rates of all for commercial and industrial customers, but in the middle of the pack for residential rates?

    Something different is happening here compared to other locations. On the face of it, it appears that residential customers are paying more than their fair share in order to attract business to the state.

    If someone has a good explanation for this, I would like to hear it. I believe that the SCC is doing a fair job of distributing costs, but they might be constrained by legislation that favors business interests. Or perhaps more is included in the demand charge in Virginia, which makes the rates per kWh lower than other states.

  10. re: ”
    About one-half of a typical commercial bill includes a charge for maintaining grid and generation resources to meet the peak demand of the facilities. This is included in the development of residential rates and is not identified separately.”

    I’m showing what my REC bill looks like – it looks like they might separate. Dominion does not?

  11. here’s a Dominion bill (I think):

    /dominionenergysolutions%3Aextralarge

  12. Both of these residential bills are entirely usage based. The charges for transmission and distribution, fuel adjustments, etc. are all based on your total monthly energy usage, not on your peak usage.

    Businesses pay for usage too, but they also pay extra for the facilities required to be in place to meet their peak demand.

  13. Sorry, my old eyes could not see that the REC bill applied to a business member. They could have a variety of tariffs for different size businesses. This looks like it is being treated like a household.

    • I missed that also… just grabbed the image…

      I would think that many small businesses would be treated the same as residential but larger businesses different, perhaps.

  14. The Dominion bill is for their Ohio gas distribution company.

  15. yep, I also have “old” eyes… let me see if I can find a better one:

    can’t find one so far..

  16. If Amazon is demanding renewables, or progressives are mandating that Amazon and the cloud industry demand them, then that industry should pay billions for the offshore wind, and not get a 50% discount.

    If that were the case, maybe Amazon says we’d prefer to pay 5-times less for onshore wind, which would probably have to be sited in PA or Md or WV. Which is sensible comment. That’s what I believe Wash DC does.

  17. Amazon Web Services currently purchases renewable energy from Dominion using a recently developed solar tariff. This includes the cost of the renewable energy credits which allow them to say that the energy they use is “green.”

    I don’t know if a separate commercial tariff will be developed for the offshore wind – probably.

    The offshore wind project that Dominion will build is likely to be capable of producing electricity at 5-6 cents /kWh, similar to other offshore wind projects on the Atlantic Coast under development. This is similar to or cheaper than the cost of gas-fired generation (which will probably get more expensive).

    The extra cost comes in because this project will be subject to a Rate Adjustment Clause that will allow Dominion to recover the cost of the project, plus interest charges, plus about a 10% rate of return. The revenues needed to repay this RAC will be folded into the various rate categories as they are now. This added cost is courtesy of Dominion. It will not be charged for other offshore wind projects owned by independent developers.

    You might have an exaggerated sense of the price of offshore wind because of the $300 million Dominion spent on the 12 MW pilot project. But this project included the cost of the underwater transmission line that will serve the much larger wind project too. It is a transmission cost that is likely to be folded in with all of the other transmission expenses and added to the bills in that category, not as a generation expense. Other R&D expenses to develop the offshore infrastructure were probably included in the $300 million too.

    So in general, offshore wind is likely to be very affordable. Our choice to let a utility build the project, makes it more expensive for Virginia customers.

    I don’t think Amazon will get any special discount other than what is normally available to commercial customers.

  18. My bet is that if Amazon and Microsoft and Facebook and others could band together to create their own renewable energy company, they would.

    But companies like Dominion, with the help of the GA have essentially maintained their monopoly such that these companies have to find some other ways to do it which is to locate in other utility service areas.

    One thing to be aware of is that while Dominion serves the more dense areas of Virginia, the rural electrics actually serve a larger geography and solar farms like SPOWER’s 3000 acre, 620 mw project locate in service areas that are not Dominion, pump their power into PJM where it gets sold to Amazon and Facebook, Microsoft, etc. (I think, Tom might correct).

    Dominion has sway over their service area – but much of the other geography belongs to the rural electric cooperatives.

  19. I think Dominion serves about half of the data centers in Virginia. The remainder are co-op customers.

  20. My house is now used for Zoom meetings.
    Do I qualify for reduced electric rates due to being a business?
    How big do you have to be to qualify for Walmart-style business discount on elec rates?

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