The General Assembly is set for a fight over utility regulation as two competing bills — each with some bipartisan support — have been proposed to adjust how regulators set rates for the state’s largest electric companies.
One bipartisan group of lawmakers is proposing a bill that would give state regulators some leeway to set lower electrical rates, which they said could result in lower electric bills.
The text of the Affordable Energy Act consists of one very long sentence. It says if the State Corporation Commission determines that existing base rates — which make up about half of a Dominion customer’s electric bill — are higher than needed to cover a major utility’s profit margin, the commission can lower those rates.
“The only way to protect the consumer is to ensure the monopoly is regulated,” Sen. Creigh Deeds (D-Bath County) said during a Tuesday press conference at the state capitol.
The bill’s patrons said they’re responding to Dominion customers being overcharged in recent years. Under state law, Dominion and Appalachian Power Company are guaranteed to earn a certain profit set by regulators. In 2022, the SCC guaranteed a profit of 9.35% for Dominion’s expenditures.
If they end up earning less than that set margin, ratepayers must cover the difference. But if the utilities make more, they’re only responsible for returning 70% of those overearnings. Regulators say Dominion has overearned to the tune of hundreds of millions of dollars in recent years.
This measure, the patrons said, would preempt that by allowing regulators to lower base rates, and therefore monthly bills, ahead of time.
Will Cleveland, an attorney for the Southern Environmental Law Center, supports the proposal. Although legislators said the bill would guarantee savings for Virginians, he doesn’t think it’s that straightforward.
“We won’t know until we actually get to the rate case,” Cleveland said. “That’s sort of the point of this bill is that it doesn’t mandate a specific outcome; it mandates a fair process.”
Cleveland said it would let regulators do their job.
“Ratemaking is a very complicated, intense process that requires expert analysis,” Cleveland said. “The State Corporation Commission and its staff and the parties that participate in those cases are the best people, and that’s the best forum to litigate those issues.”
The measure is one of many put forward in recent years designed to restore the commission’s power and limit Dominion’s power in the legislature — though previous measures haven't been approved by the Democratic-controlled Senate. One 2020 measure supported by Del. Lee Ware (R-Powhatan) received 77 votes in the then Democratically-controlled House before being killed by a Senate committee.
Ware is also backing the Affordable Energy act and said the bill would offer “linguistic and moral clarity,” in favor of the deeply complex legislation that is the norm for utility regulation in Virginia.
That’s where Del. Terry Kilgore (R-Lee County) and Sen. Dick Saslaw’s (D-Alexandria) 24-page Virginia Electric Utility Regulation Act comes in. The Dominion-supported bill would also restore some power to regulators to lower base rates.
And the bill would change the frequency of rate reviews. Currently, they occur every three years — the next one is slated for 2024 — but the VEURA would move them to a biennial schedule, with the first scheduled for this summer.
Dominion spokesperson Aaron Ruby said in an email to VPM News that shift would result in more immediate savings for its customers than the Affordable Energy Act.
“Dominion Energy supports immediate rate relief for our customers and comprehensive legislation that strengthens SCC oversight and simplifies Virginia's regulatory model,” Ruby said.
The utility estimates the proposal would provide $300 million in “immediate and ongoing” electric bill savings for Virginians, but the actual amount in savings would largely depend on regulators’ actions.
That measure would also change how regulators set Dominion’s rate of return on equity — that guaranteed profit.
Currently, the SCC assesses the profits of a “peer group” of Southeast U.S utilities when determining Dominion’s ROE. However, regulators remove the two highest and lowest-earning utilities, and only chooses a subset of the rest to make their determination. Dominion argues that its most recent review utilized averages from smaller utilities, resulting in a too-low profit margin.
Kilgore’s measure would require regulators to assess the full peer-group and exclude any utility serving less than 200,000 customers from consideration.
Cleveland said the measure would “almost certainly” result in a higher ROE for Dominion.
The measure would also allow regulators to merge some rate adjustment clauses into the base rate, which they’d be getting more power to regulate.
RACs, or riders, are charges that appear on monthly electrical bills on top of base rates. These can be adjusted more frequently than base rates, ostensibly resulting in consumers paying more accurate bills.
They’ve also been the subject of intense criticism by a range of Virginia politicians and advocates, including Gov. Glenn Youngkin, as they’ve gradually made up larger percentages of Dominion customers’ bills.
The General Assembly convened Wednesday for its legislative session. Lawmakers will have 45 days to decide if they want to change utility regulations and much more.
VPM News wants to hear your responses to one question: What do you want to learn about the most during the 2023 General Assembly session?
