What Does Dominion Lose When Customers Leave?

With a competitive service provider, you pay it and not the utility for generation, transmission and fuel – the elements of electricity supply service.

When you use a competitive service provider (CSP) instead of the monopoly electricity company, what does the monopoly provider stop collecting?  Just what part of the electric bill are big customers such as Costco and Kroger and Walmart seeking to avoid by leaving Dominion Energy Virginia?

The answer is most of it, everything covered under the bill heading “Electricity Supply Service” on the sample bill illustrated above.  With a CSP, customers would stop paying Dominion for generation, transmission and fuel.  If future legislation makes retail choice the rule in Virginia, customers could leave the utility and pay a CSP for their energy and the cost to make or buy it and get it to Virginia’s local grid. 

The State Corporation Commission is still considering the most recent dispute on this front.  It heard oral arguments August 6 from Calpine Energy Solutions LLC and Direct Energy Business LLC on their motion to force Dominion to transfer customers who have signed up for their 100 percent renewable power, customers Dominion has retained. The SCC has not acted on those motions.  It will hold a hearing August 20 on Dominion’s motion seeking a declaratory judgement that neither company is really offering 100 percent renewable power.  Watch this space for developments there.

In the meantime, what is the fight really about?  Money is one of the issues, of course.  Defenders of the monopoly, and Dominion is gearing up for a major fight to defend it, argue that massive departures from the monopoly leave those customers who remain with higher costs under that electricity supply service heading.  That argument has worked at the SCC in several cases so far.

As you can see, generation is the big cost avoided on the bill.  That’s your share of the capital, debt and equity costs of Dominion’s fleet of power plants, as approved by the SCC.  Traditionally that has been covered in the base rates, but since 2007 most new projects have created new rate adjustment clauses (RACs or “riders”) which are collected separately.

Within generation: Rider S is the Virginia City Hybrid Energy Center, Rider R is the Bear Garden Generating Station, Rider B pays for various biomass conversions, Rider W is the Warren County Power Station, Rider BW is Brunswick County Power Station and Rider GV is Greensville County Power Station.  Some of the new solar plant capital costs are recovered with Rider US-2 and another one, US-3, is coming.

Take service from a CSP and pay none of that, although what you do pay certainly may still be substantial (and some power could come from those plants after all, through the regional transmission organization PJM Interconnect LLC.)

The transmission charges you begin to avoid involve the lines connecting that flock of power plants to the grid, all those larger power lines zig zagging the countryside, including the Rider T1 that has been the subject of some controversial cases reported here on Bacon’s Rebellion.  Again, with a CSP another set of similar costs is baked into your bill, but you stop paying Dominion for that.

The final big category under electricity supply service is the fuel charge, also known as Rider A.  That rider predates the 2007 legislation that created all the other riders and is a simple pass through charge for all the coal, natural gas, enriched uranium and other annual fuel costs plus the cost of any power purchased through PJM or from an independent generator.

There is no profit for the utility in the fuel Rider A, but both generation and transmission projects use shareholder equity as financing and thus are allowed a profit or return on that equity (ROE.) A CSP makes a profit, too, but Dominion stops profiting off those customers.

The main things left are taxes (good luck avoiding those) and distribution, the system of substations, transformers and smaller wires that link to all the home and business connections.  The CSP does not (could not) seek to duplicate that, and its customers continue to pay Dominion for that service.  Some consider that the only natural monopoly.

So because CSP customers continue to pay their distribution costs to Dominion, they pay some of the other riders which have generated controversy and Bacon’s Rebellion reports:  Rider U, which covers the strategic underground project for smaller tap lines and Riders C1A, C2A and C3A, which cover various demand management and energy efficiency programs. (Some large industrial customers served directly by transmission voltage may avoid all that, too.)

If you are counting, 14 individual rate adjustment clause riders have been listed, ten of which can be avoided with a CSP.  For the full list and how they are categorized, open this. Rider E for the coal ash costs will be number 15.

To figure out what each of them is costing you, look here and open up each one, and Schedule 1 is the residential price.  For example, Rider S, the Virginia City coal plant, is adding about $4.05 cents on a 1,000-kilowatt hour monthly bill and the Greensville natural gas plant $2.29.

Would those individual costs go up to remaining customers if tens of thousands of Dominion customers suddenly went elsewhere?  That’s a fair question, and a crucial one as the pressure to end the monopoly continues to grow.  Any transition to a pure retail choice approach is going to be tricky, with only fools rushing in.

Money isn’t the only issue, but many of the large business customers seeking to leave are indeed looking for (and finding) CSPs that offer a lower cost.  The other goal customers are seeking, 100 percent renewable energy, is not always substantially cheaper but it can be.  That bears further examination in another post.