Regulators get more power to adjust electric rates, set performance standards
The measure will also increase Dominion Energy's guaranteed profit.
The Virginia General Assembly approved a much-debated electric utility regulation bill Saturday.
The final version of the bill directs the State Corporation Commission to increase Dominion Energy Virginia’s profit margin this summer, but it will leave future decisions on that front to regulators at the SCC.
That was touted as a milestone by ratepayer advocates and legislators who have long sought to challenge Dominion's legislative force.
“This bill is full of good ideas that some members of this body have been championing for years,” said Del. Sally Hudson (D–Charlottesville) on the House floor Saturday.
Hudson highlighted language that requires regulators to set performance standards for Dominion and Appalachian Power Company, which could be used in the future to adjust their regulator-approved profit margins. Hudson said that will help ensure electric reliability for Virginians.
“Our power isn’t quite as stable as it should be here in Virginia,” Hudson said.
She pointed to a report from the Citizens Utility Board — an Illinois nonprofit — that compiled 2020 and 2021 data on reliability, energy efficiency, and cost of service from federal sources. The report placed Virginia 34th out of the 50 U.S. states for reliability.
While the data shows Virginia utilities restore power more quickly than the national average on days when widespread outages occur, the state lags in getting power back on for more granular outages. The report also shows that Virginians experience power outages more frequently than Americans on the whole.
State law previously gave the State Corporation Commission some power to adjust Dominion or Appalachian Power’s rate of return based on utility performance, but it didn’t specify how regulators would evaluate that performance. Executive director Brennan Gilmore of Clean Virginia, the lobbying group dedicated to battling Dominion’s influence in state politics, said the measure went unused.
“The key difference in this case is that it sets up a process to determine what will constitute proper evidence and standards for performance-based returns,” Gilmore said.
The new law is also broad, directing the SCC to determine metrics and standards that “may include” reliability, generating plant performance, customer service, operating efficiency of a utility, and load forecasting. It requires the commission to start that work this year with the goal of implementing standards by 2025, or 2027 at the latest.
Once standards are implemented, the bill limits the extent to which the ROE can be adjusted based on performance to half a percentage point.
Hudson said it’s less of a plan, and more the start of a conversation — but it’s one she’s glad to be having.
“There’s a lot that we need to be doing with our utilities to improve monitoring and accountability,” Hudson said.
The Virginia Electric Utility Regulation Act
Senate Majority Leader Dick Saslaw (D–Alexandria) and House Majority Leader Terry Kilgore (R–Scott) saw their very different versions of the bill come into alignment Saturday afternoon.
The bill does a lot:
- Shifts SCC-conducted rate reviews from every three years to every two — setting Dominion up for a rate review this summer.
- Directs state regulators to set Dominion’s rate of return on equity — the company’s approved profit margin — at 9.7% during the 2023 rate review. That’s an increase from the current ROE of 9.35%. Earlier versions of the bill would have set the ROE at 10.07%. 9.7% is the simple average of ROEs for regional utilities similar to Dominion – which the company sees as competitors for investment. The company’s stock has fallen $32 since May 2022.
- Following this summer’s review, grants the SCC authority to set a “fair rate of return” in future rate reviews, rather than designating it through legislation or tying the state to ROEs for other regional utilities. It’s up to the SCC to decide how to determine that rate.
- Rolls $350 million of additional charges for consumers — called riders — into base rates. The SCC told lawmakers the measure will lower a baseline 1kwh per month residential electric bill by $6 to $7.
- Sets up securitization of unpaid fuel costs. Due to inflation and the war in Ukraine, Dominion spent more than expected on generation fuel by about $1.6 billion — costs which ratepayers are on the hook for. The bill requires the SCC to consider a request from Dominion to issue bonds covering the cost, which would be repaid by consumers over about 10 years, rather than in the short term. Dominion has said monthly bills would increase about $17 for a residential customer without this provision, compared to about $2.50 with it.
- Directs the SCC to provide a yearly report to the Commission on Electric Utility Regulation on the reliability impacts of plant retirements — rather than requiring a separate report on each retirement.
Gilmore said the final text of the bill was worked on by ratepayer advocates big and small. Google and Amazon, some of Dominion’s biggest customers, were at the table alongside the Southern Poverty Law Center and Sierra Club. And he said the coalition got a “huge boost” from Gov. Glenn Youngkin’s office.
“We saw at the at the very last day of session a final text which had been vetted by the governor's office, working with their Office of Consumer Protection and the attorney general's office,” Gilmore said. “This bill, we thought, is frankly a sea change in the approach of regulating our utilities."
In a statement, Youngkin said the measure “will save customers money on their monthly bills, restore the independent oversight of the State Corporation Commission, and support the long-term stability of Virginia's largest electric utility.”
Youngkin has the option of either approving the measure as is, vetoing it or amending it and sending it back to lawmakers.
Sen. Chap Petersen (D–Fairfax) expressed a similar sentiment on Saturday.
“There was an imbalance of power in the conversation, and that’s changing. And today we’re gonna vote on a bill that was not dictated to us by Dominion Power, but rather it was people working together from different viewpoints,” Petersen said.
Dominion spokesperson Aaron Ruby was also positive about the final text in a statement: “This legislation is a win for consumers and regulatory oversight. It will lower electricity bills for our customers, reduce the impact of rising fuel costs and strengthen SCC oversight. We appreciate the leadership of the patrons, Governor Youngkin, Attorney General Miyares and lawmakers from both parties in getting this bipartisan legislation across the finish line.”
The legislation passed unanimously in the Senate, and only Del. Dave LaRock (R–Clarke) voted against the final measure in the House.
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