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Va. lawmakers reach tentative deal to tighten reins on Dominion Energy

Dominion Energy, Virginia's largest public utility, has struggled this year to get favorable legislation from the General Assembly. (Steve Helber/AP)
8 min

RICHMOND — Virginia lawmakers have reached a tentative bipartisan agreement to bring the state’s biggest utility, Dominion Energy, under tighter regulatory oversight — reversing years of actions that loosened the reins over the powerful company.

The complex legislation, which took until the waning hours of the General Assembly session to hammer out, would restore broader authority to the State Corporation Commission to set electricity rates for consumers. Gov. Glenn Youngkin (R) took a direct hand in helping to reach the deal.

It could stand as one of the signature achievements of a session — scheduled to wrap up Saturday — that otherwise saw lawmakers shy away from acting on tough issues. With Republicans controlling the House of Delegates and Democrats controlling the Senate, partisan efforts to restrict access to abortion on the one hand and tighten gun control laws on the other failed to advance.

Even a deal on the state budget remains elusive; lawmakers said Friday that a $1 billion gap between House tax cuts and Senate spending will prevent the General Assembly from completing its work Saturday. Budget negotiators said they were close to a compromise, raising the possibility that the session could reconvene in about a week to finish approving the spending plan.

Those stalemates made it all the more remarkable that lawmakers came together to act on Dominion. A growing number of Democrats and a handful of Republicans have agitated for years to take a stronger hand with the utility, which is one of the most generous contributors to politicians on both sides of the aisle and had long negotiated laws seen as favorable to its interests.

This year several large corporations lent support to efforts to place tighter controls on the rates Dominion charges for electricity, including Wegmans, Costco and AWS, the web services arm of Amazon. (Amazon founder Jeff Bezos owns The Washington Post). Many stakeholders credited Youngkin with playing a key role in the effort to rewrite the laws.

“It’s a sea change,” said Brennan Gilmore of the nonprofit Clean Virginia, which has given millions of dollars to candidates — mostly Democrats — who would work against Dominion’s influence. “Governor Youngkin’s leadership during this session was essential to ensuring that Virginians are at long last protected from predatory profit-seeking by utilities.”

Officials from Dominion and from Youngkin’s office declined to comment on the matter Friday evening, citing the unfinished nature of the deal. The legislation itself was still being drafted and was expected to be in lawmakers’ hands Saturday morning.

The proposal would subject Dominion to rate reviews by the SCC every two years instead of the current three; set a target for return on equity, or profit margin, of 9.7 percent, less than the 10.5 percent the company was said to have sought; and establish that 85 percent of over-earnings should be refunded to customers, among many other provisions.

The deal must be approved by both chambers of the General Assembly, but support seemed broad in both the House and Senate. The underlying bills — House Bill 1770 sponsored by House Majority Leader Del. Terry Kilgore (R-Scott) and Senate Bill 1265 sponsored by Senate Majority Leader Sen. Richard L. Saslaw (D-Fairfax) — had already passed each chamber and were being modified in a conference committee.

Asked late Friday if the deal looked solid, Kilgore said: “We think so, yes … All in all I think it’s going to be good for consumers but … we want to make sure that our utilities are healthy and they can build generation capacity.”

When negotiations had stalled earlier in the week, Youngkin summoned Dominion executives to a meeting on Wednesday evening and presented a final proposal, according to several people familiar with the process and confirmed by Kilgore.

“The governor’s office played a vital, if not the vital role in pushing the parties toward an agreement,” said Kilgore, who was at the Wednesday meeting.

Advocates said the changes could lead to reductions in electricity bills for consumers and give the state regulator more power to steer the company through its transition to renewable energy sources.

Even without a deal on those two omnibus bills, both chambers already passed a pair of bills that simply give the SCC “unfettered” power to review the utility’s profits and set consumer rates, in the words of one bill sponsor.

Del. Lee Ware (R-Powhatan), who has submitted similar measures for several years in a row only to see them fail, said several things changed this year. “One is we do have the support of the administration,” he said. “And I’d have to be candid and say there are a number of legislators who have become increasingly apprehensive about simply approving a series of bills authored by the supposedly regulated utility.”

His House Bill 1604, co-sponsored with Del. Richard C. “Rip” Sullivan Jr. (D-Fairfax), and the Senate version sponsored by Sen. Jennifer McClellan (D-Richmond), upped the pressure to reach a deal on the more comprehensive legislation, which would place some guidelines on SCC oversight.

The giant company that could: How Dominion turned scorn into a big payday

Lawmakers had been weakening the SCC’s power over Dominion for years. In 2015, the General Assembly granted Dominion a rate freeze to protect it from mandates of the Obama administration’s Clean Power Plan that might have harmed its profit margins. When President Donald Trump killed the Clean Power Plan, the freeze remained, along with weakened SCC oversight.

With Virginia’s blue-wave elections in 2017 and 2019, a new generation of Democratic lawmakers came to Richmond vowing to take on Dominion’s influence, fueled by the millions donated by Charlottesville financier Michael Bills and his Clean Virginia group. A few consumer-minded Republicans, such as Ware, were allies.

Youngkin, a former private equity chief executive who was steeped in financial dealmaking, seemed to deliver a decisive push. Last year, Youngkin released an energy plan that called for lower consumer rates and stronger SCC oversight of utilities. It put Dominion on notice.

While Youngkin’s goal aligned with consumer and environmental advocates, some of his reasoning did not. Youngkin has said his primary concern is that policies enacted by Democrats in recent years are pushing Dominion to convert to renewable energy — such as wind and solar — on an aggressive timetable, driving up rates for customers.

But the strange bedfellows were happy to have the common ground.

“The governor has played a pivotal role,” said Albert Pollard, a former Democratic delegate who has lobbied for stronger regulation of Dominion on behalf of the Virginia Poverty Law Center. But Youngkin is not the only factor, he said, adding that “the legislature has evolved because of a lot of effort on behalf of a lot of folks.”

Around the halls of the Capitol, lobbyists and lawmakers also can’t help noting that Dominion and Youngkin got off to a bad start in 2021 when he was running for governor and it emerged that the utility had donated some $250,000 to a group running ads against him.

Dominion Energy asks for donations back from group targeting Youngkin

Dominion later said the donation was a mistake and asked for it back. The utility also donated $50,000 to Youngkin’s inauguration, according to the nonpartisan Virginia Public Access Project.

The utility approached this legislative session aware that the writing was on the wall for giving more power to the SCC. And change comes at a time of turmoil for a company that has been a Virginia mainstay for generations of employees and shareholders. Dominion’s longtime CEO Thomas Farrell II died in 2021, the day after stepping down from his post; energy markets are reeling from rising prices; and the industry faces the need to retool for renewables.

With an expensive offshore wind project in the works and fossil-fuel plants slated to close, and with its stock price weakening since the pandemic, Dominion officials have said that they, too, are looking for regulatory stability.

The company worked on the two omnibus bills, offering to return to greater oversight and reviews every two years. It also proposed rolling some surcharges back into its base rates and eating the difference, which the company says would save consumers $350 million a year or about $6 a month on the average electricity bill.

In addition, Dominion proposed changing the way it charges customers for fuel costs — spreading out big increases, such as those that have hit since Russia invaded Ukraine, over many years instead of paying them all at once. That would also lower monthly bills.

Those proposals remain in the deal that lawmakers should find on their desks Saturday morning, Kilgore said.

The hope is that the bill “provides stability and benefits the consumer,” said House Speaker Del. Todd Gilbert (R-Shenandoah). “Everybody would like to stop seeing an annual approach to energy regulation and have something with more long-term stability.”

Assuming no last-minute hitches, Sullivan — the Democrat who co-sponsored one Dominion-related bill — said the legislation “will be a success story of hard work, good negotiating and, in the end, bipartisanship … It will be a great boon for ratepayers in Virginia and restore to the SCC the power that it has to ensure that Virginians are paying fair prices for electricity.”