One of the most debated and controversial bills of the legislative session, SB 966, passed the Senate on a 26 to-13 vote on Friday, Feb. 9. If the bill were signed into law, it would repeal an electricity “rate freeze” instituted in 2015 — ostensibly to shield ratepayers from potentially-escalating electricity costs associated with complying with the Obama Administration’s Clean Power Plan emission regulations. However, the bill would allow utility monopolies to profit doubly from investments without returning money to ratepayers, fail to resume essential regulatory oversight, and trade on support for investments in renewable energies that market forces are already bringing into play naturally.
Prior to 2015, the State Corporation Commission (SCC) conducted regular biennial reviews that served as crucial ratepayer safeguards, ensuring independent oversight of the electric utility monopolies Dominion Energy (Dominion) and Appalachian Power (APCO). The responsibility of the SCC is to determine whether base rates (the costs of building, closing, and maintaining power plants and the electrical grid) are adequate, or whether electric bills are too high and result in “over-earnings” (excessive profits) for utility monopolies, in which case the over-earnings would then be rebated to customers.
I voted and spoke out against the 2015 bill that stripped the SCC of the authority to conduct regular reviews of utility monopolies’ earnings, arguing that it was unnecessary to freeze rates (as the Clean Power Plan was likely to be challenged in court or not implemented for other reasons). This turned out to be the case and the SCC estimates that, had the rate freeze not been enacted, ratepayers would have been entitled to as much as $705.2 million in rebates for 2015 and 2016 alone. Additional over-earnings have yet to be calculated for 2017. One SCC commissioner estimates the total amount that would have been due to customers is as much as $1.1 billion.
The bill severely limits SCC authority by restricting the frequency of rate reviews from every two years to every three years. Since the SCC can only order base rate reductions after two consecutive reviews show the utility has been over-earning, the new law would lengthen the period of time before ratepayers receive a potential rebate from four years to six.
SB 966 would require Dominion to pass on just $200 million to ratepayers of the estimated more-than-$350 million that the company will receive as a result of the recent federal tax cut.
One positive aspect of the legislation is that the deployment of up to 5,000 MW (enough to power 1.2 million homes) of renewable energy would be declared to be “in the public interest.” However, with the costs of renewables becoming increasingly more competitive, market forces will result in additional renewables being deployed at a faster pace.
Sweeteners were added to the legislation to facilitate buy-in, including projects to underground transmission lines in Prince William County as well as residential communities in other regions with the most outages, and other incentives for rural areas.
Most importantly, while refunds were required to be returned to ratepayers prior to 2015, under SB 966, utility monopolies would be able to keep the over-earnings, as long as they were invested into grid modernization or renewables. Due to the way that the base rates are calculated, it would allow utilities to “double-dip,” or, make excess profit from capital projects.
Prior to 2015, Dominion was allowed to charge customers a 10 percent rate of return on its capital investments. These projects had to be approved by the SCC and any money earned in excess of recouping the cost of the investment plus 10 percent profit would be rebated back to consumers. Under SB 966, Dominion would still gain 10 cents on every dollar invested, but the company could count those over earnings against those same capital projects and keep the rebate, rather than returning over-earnings to ratepayers.
Because of this “double-dipping” provision, the Chesapeake Climate Action Network, the Sierra Club, the Virginia Poverty Law Center, and Attorney General Mark Herring opposed the legislation. Last week, I supported floor amendments offered by Sen. Chap Petersen (D-Fairfax City) that would have eliminated “double-dipping” and returned highly-technical independent oversight to the expert utility lawyers at the SCC, rather than having 140 citizen legislators try their hand at it. As electronic voting mechanisms malfunctioned on the Senate floor due to power fluctuations in Richmond, the amendments were ultimately defeated.
I have long maintained that Dominion, and Virginia as a whole, were far behind the curve in making adequate investments in solar and other renewable technologies. In the end, I opposed the bill. I could not justify asking Virginians to pay twice their fair share for utility investments.
An amendment from Delegate Toscano, (D-Charlottesville) to the House version of the bill removed the “double-dipping” provision. I hope the final bill that makes it to the Governor’s desk will reflect this.
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It is my continued honor to serve the people of the 30th District.