Virginia Senate Passed The Utility Rate Freeze Bill, Here’s What’s In It

The 60-page Virginia utility regulation bill passed the Virginia Senate Friday and will now go to the House for review.

Introduced Sen. Frank Wagner, R-Virginia Beach with the help of Sen. Richard Saslaw, D-Alexandria, Senate Bill 966 is a direct response to the rate freeze that was created in 2015 to help utility providers deal with the costly Clean Power Plan, a federal policy to reduce carbon emissions. Base rates were frozen until 2020, which cover the cost of operating its plants and distributing electricity while allowing for a profit.

Under the rate freeze, Dominion Energy and Appalachian Power were free of a biennial review of its earnings that ensured the utility companies were getting what regulators say is a fair profit and customers were unable to receive refunds on overpayments.

Prior to the rate freeze, rate reviews were deemed necessary to regulate energy monopolies, like Dominion, and avoid corruption.

The Richmond Times-Dispatch reported last year that Dominion Energy would have to return as much as $133 million to customers if it wasn’t for the rate freeze law.

But since Trump administration is now rolling back on the Clean Power Act, the proposed legislation attempts to replace the 2015 rate freeze.  

After much debate on the floor of the Senate the bill passed, 26-13.

Some Virginia conversation and clean energy groups praise the bills efforts to expand renewable energy. Sen. Saslaw called the bill the “future of Virginia,” and said the investment of renewable energy would, over time, drastically lower electric rates.

A representative from Dominion said the bill is a “transformation bill” because much of the focus is on modernizing the power grid. It will help energy utility companies work on energy efficiency, renewable energy and putting power lines underground.

The proposed legislation would set a new renewable energy goal ten times the amount of the current goal. The legislation’s target of 5,000 megawatts, of both solar and wind energy, will be enough to power over a million homes.

Gov. Ralph Northam has worked on this legislation with utility providers, conservation advocates and consumer advocates. He believes the bill is the best compromise to fixing the 2015 rate freeze.

“The goal of that legislation should be simple,” said Northam in a press release. “Give Virginians as much of their money back as possible, restore oversight to ensure that utility companies do not overcharge ratepayers for power, and make Virginia a leader in clean energy and electrical grid modernization.”

But while many approve of the renewable energy efforts of this legislation, critics of the bill believe it is undermining the opportunity to allow utility companies to dodge regulation and increases rates for consumers.

The bill would reinstate State Corporation Commission (SCC) reviews for every three years, instead of every two years as it was before the rate freeze. The new bill will also give Dominion and Appalachian Power customers a combined refund of roughly $200 million over the next year.

However, it does not restore the SCC full regulatory oversight of electric utilities. A review of the bill by the SCC found that the legislation deems certain projects as “in the public interest” impacting the SCC’s authority to evaluate whether the projects are cost-effective or whether there are alternatives available at lower costs to customers. The analysis said this provision could result in billions of dollars of additional fees that could be charged to customers.

Sen. David Suetterlein, R-Roanoke, opposed the bill and expressed his concern that the bill would take away necessary authority from the SCC to protect Virginia citizens.

“(The SCC) also made it very clear that no longer would the utilities have to demonstrate that the projects were in the public interest, so we’re taking that completely out of there,” said Suetterlein. “We’re incentivizing the utilities to spend up on each of those projects, so they do not have to put a refund back in the pocket of the ratepayer.”

The proposed legislation will also allow utility companies to keep future customer overpayments and, rather than return them to customers, use them for projects “in the public interest,” but the companies would also be able to charge customers for the same projects in their base rates.

Many believe this will allow utilities like Dominion to “double dip” into their customer’s pockets.

“We see both the fact that there may be for (utilities) to both take the over earnings but also add it to the base rate,” said Dana Wiggins from the Southern Poverty Law Center. “That’s a double charge.”

For example, if the SCC determines after a review that customers are owed a refund of $100 million, and the electric utility spends $100 million on distribution grid transformation investments, this would result in customer refunds being offset by the spending and customers will not receive any refunds. However, customers will also pay for the project, in addition to interest and profit margin, through base rates.

Therefore, customers pay more than $200 million – $100 million in lost refunds in addition to $100 million paid through base rates – for a grid transformation that costs $100 million.

Attorney General Mark Herring also opposes the bill stating that his office appreciates the conservation efforts put forward but from the perspective of Virginians as ratepayers, his office believes that portions of the bill are harmful to Virginians.   

Dominion Energy backs this legislation. The utility company has been Saslaw’s biggest donor. The utility company gave him $30,000 just this year and over $328,000 over the past 22 years, according to Virginia Public Access Project. Wagner has received similar treatment, receiving $17,500 from Dominion in the past year and $104,485 in total.