Dominion Virginia Power is under more scrutiny than it has been in some time. Richmond’s politically muscular electric utility has been under assault from grass-roots movements for proposed natural gas pipelines and not pushing renewable energy such as wind and solar fast enough.
Now, new issues have come forward on how it sets its rates.
Utility rate-setting isn’t exactly like the sausage-making to which drafting laws are often compared. It’s far more complicated and confusing. It is all the more so in Virginia, famed for its laissez-faire attitude about business regulation.
Two rate-related issues have been in the news.
First came an Associated Press story that reported that Dominion has billed ratepayers tens of thousands of dollars for “charitable donations” the utility made to institutions sometimes favored by politicians who have received Dominion money and vote on issues of importance to the utility.
One example is the $4,000 paid by ratepayers as part of a $10,000 donation to the Appalachian College of Pharmacy in 2012.
The school is not in Dominion’s service area but happens to have as one of its chief fund-raisers Del. Terry Kilgore, who is head of the House Commerce and Labor Committee. He is a major Dominion donation benefactor and has a lot of power when it comes to passing laws favorable to Dominion.
Dominion says it is changing its approach but would never give donations for political gain. Atty. Gen. Mark Herring has said that expert witnesses for him have said that Dominion overcharges ratepayers by $630,000 a day while a staff member at the State Corporation Commission (SCC), a regulator, says the overcharges are $860,000 a day. Dominion says not so.
One more rate situation involves how Dominion and the SCC set different types of rates, how they can change and what rates of return they can bring.
Rates are placed in three categories. One is the base rate that is the general cost of providing electricity. Another is the fuel charge, which reflects market prices for power. The third is the so-called rider, which reflects future construction of future generating plants the utility plans on building. This last rate represents about 9 percent of Dominion ratepayer’s bill and can fluctuate, generally upward.
Here’s the confusing part. At its own behest, Dominion asked the General Assembly to deregulate it back in the early 2000s so that it could be in a better position to sell power back and forth between emerging regional power grids, which was all the rage at the time. The General Assembly, naturally, did what Dominion asked.
Things didn’t work out as expected with dereg, so Dominion asked the General Assembly to reregulate it in 2007, which the legislature, naturally, did.
Two years later, Dominion was allowed to add to its payment structure the so-called riders that guarantee a rate of return to the utility of 10 percent. Another part of the rate structure, the base rate, allows Dominion a rate of return of up to 10 percent.
One result is that the average consumer power bill for about 1,000 kilowatt hours has gone up 20 percent since 2009, mostly because of the rate riders. In a blog posting, Chet Wade, a Dominion public affairs executive, said that the rate increase is more like 6 percent and that rates were artificially low before the reregulation makeover.
Confused yet? Unfortunately, there’s more. This past legislative session, Dominion was in a tizzy about the U.S. Environmental Protection Agency’s Clean Power Plan designed to reduce carbon-dioxide emissions as a means to prevent or slow climate change.
Dominion was behind a large campaign that said the then-proposed EPA rules would cost rate payers up to $6 billion in extra charges as it would be forced to shutter coal-fired plants and so on. The noise was so loud that the General Assembly went along with legislation, authored by Dominion, that would freeze its base rate for five years while giving it a five-year holiday from SCC audits.
When the EPA finalized its carbon-reduction requirements this summer, there was a big surprise: Virginia wouldn’t have to do that much after all. Sounds great, but what about the law that now seems unnecessary?
And what about the rate riders? Dominion has several billion in upcoming projects involving natural gas and biomass. What doesn’t get much publicity is a third nuclear reactor at its North Anna plant about an hour and a half by car from Washington.
It will cost $19 billion, according to estimates given by Dominion to the SCC. How will the rate riders be used for paying it? Good question.
Peter Galuszka is a regular contributor to All Opinions Are Local.