Home Dominion Power There Are So Many Reasons The Dominion “Rate Freeze” Bill Sucks; Here’s...

There Are So Many Reasons The Dominion “Rate Freeze” Bill Sucks; Here’s One of Them

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There are so many reasons why HB1558, Dominion Energy’s latest effort to write its own electric utility regulations and have its bought-and-paid-for legislature go along, sucks/should be defeated (if not vastly improved), it’s hard to know where to start. As Dan Casey writes this morning in the Roanoke Times, “If the General Assembly approves a new regulatory scheme promoted by power companies and their legislative lackeys, it’ll be the fourth time in 11 years ratepayers have been screwed. Why are voters putting up with it?” I also would love to know why any Democrat has their name on this monstrosity as a co-patron. Yeah, I’m looking at you, Delegates Ken Plum and Lamont Bagby.

Let’s start with one reason why this bill does, indeed, suck: the fact that it refunds only a very small percentage of Dominion’s (and Appalachian Power’s) over-earnings during the “rate freeze” period. See below for an analysis of Dominion’s and Appalachian’s overearnings — as high as $705 million for Dominion, as high as $99 million for Appalachian Power. So how much is being refunded under this Dominion-written bill? According to the bill, try “a one-time bill credit of $133 million.” Last I checked, $133 million is less – a LOT less – than $705 million; in fact, it’s only about 19% of the over-earnings. Shweeeeet! If you’re Dominion Energy, that is. To quote Dan Casey again:

“Virginia electric customers are about to get royally screwed for at least the fourth time in 11 years…It’s being orchestrated to benefit Dominion Energy and (to a lesser extent) Appalachian Power, the commonwealth’s dominant electric-power monopolies. The former gets special consideration in Richmond because Dominion (by far) is the top corporate donor to political campaigns. That raises blunt questions. Why do voters put up with this? Why haven’t they revolted? Don’t they care that their elected representatives repeatedly have cheated them?”

Any answers? Again, why is any Democrat supporting – let alone copatroning – this crap?

  • Will_Driscoll

    Thanks for highlighting Dan Casey’s excellent analysis.

    I hear there’s a simple “rebate” bill; anyone know the bill number, or better yet, have a link?

  • RobertColgan

    An analogy…….
    An elderly friend signed online for 2 “free” samples of beauty creams which required submission of a credit card for the S/H charge of $4.95/ each sample.
    The fine print, which she didn’t see, said that if she didn’t cancel the ongoing order within 7 days, the company had the right to charge her credit card for a monthly fee.

    One week later she discovered that 2 payments of $119.95 each had been extracted from her bank account.
    This scam has been active in the US for quite a while now I learned….and AGs in different States have tried to contest it, but the operation often has nothing more than a PO Box which suddenly disappears.

    After some serious sleuthing I was able to actually contact the business, in CA, and demand they refund her money. She hadn’t even rec’d the “free” samples to try.
    (Since she had “given permission” for them to withdraw from her credit card, her bank said they could do nothing to demand such a refund, but she could cancel her credit card. ..which involves a lot when other monthly bills are paid through it.)

    The company balked at this….finally told me they could refund 30% “in order to maintain good customer relations”…….I got a higher up supervisor who told me she could offer only another 10% (40%) refund, and that is as much as they could do.
    After talking with her for some time, she finally offered a 60% refund…….since I had virtually no leg to stand on——- a flimflam operation that couldn’t be traced——-I agreed to the offer even though as I pointed out “You have done nothing to pocket $240 from an unsuspecting elderly woman and in your infinite charity you are offering to give back a portion of the loot as if you are doing her a favor. You stole $100 from that woman.”

    I doubted that the 60% would be returned to her account.
    But it was.
    And they kept the 40% as if it was perfectly within their right to do so.

    I think the analogy applicable here.

  • TOSCANO AND OTHERS REQUEST OVERCHARGE INFORMATION FROM SCC

    Del. Toscano among signers of letter seeking SCC analysis of “rate freeze repeal” bills filed in the House of Delegates

    RICHMOND, VA — House Democratic Leader David Toscano (57th District) and five of his colleagues – Delegates Steve Landes (R-25th), Jeion Ward (D-92nd), Lee Ware (R-65th), Mark Keam (D-35th), and Michael Webert (R-18th) – delivered a letter Tuesday to SCC Chairman Jagdmann requesting an agency review and report on several bills submitted to “undo the ‘rate freeze’ adopted by the legislature in 2015, and to substitute a new regimen for utility rate regulation” as soon as possible. The legislators specifically asked for information about how the various bills would provide for returning “overearnings” to ratepayers, as well as the implications that the bills would have on setting base rates and approving rate adjustments.

    “We need to ensure that the bills we pass provide for utilities’ overearnings during the rate freeze period to be returned to the ratepayers,” said Toscano. “That is why this bipartisan group has called on the experts at the State Corporation Commission to provide us with analyses of these bills and hold themselves ready to answer questions from the legislature.”

    The “rate freeze” was created in 2015, when the General Assembly passed a bill that froze utility rates and provided for significant investment in weatherization projects around the state. This was done to protect ratepayers against the potential impacts of the Clean Power Plan, which has since been killed by President Trump and congressional Republicans.

    “These proposals involve millions of dollars,” said Toscano, “as well as affecting how we will be encouraging development and use of renewable energy in the future. We will be pushing the utilities hard on these issues.”

    • Will_Driscoll

      3 Rs on that. Excellent.

      Let’s get the simple “rebate it all” bill out of committee and passed.

  • Also, check this out:

    HB 1558 (as proposed 1/19/2018)
    Initial Analysis of Major Revisions

    Changes to rate and earnings reviews:
    • Change from biennial to triennial earnings review periods.
    • APCo’s first triennial review will be held in 2020, reviewing earnings in calendar years 2018 and 2019 (lines 317-321)
    • Dominion’s first triennial review will be held in 2021, reviewing 2018, 2019, and 2020 (lines 326-331). Earnings from 2015, 2016, and 2017 would not be reviewed by the SCC.
    • The SCC would be required to use the “peer group” methodology for setting authorized rates of return for RACs as well as for base rates (line 338). This could potentially increase authorized returns on costs recovered through RACs.
    • Requires the SCC to consider investments made in solar/wind/Grid Transformation projects as expenses when calculating earnings for purposes of potential rate changes and refunds, as long as these investments are not being recovered through a RAC (lines 684-697; 855-861; 871-909). See discussion of “customer credit reinvestment offset” below.
    • Requires the SCC to find overearnings outside of a 70 basis points earnings band (and after considering offsets to earnings attributed to solar/wind/Grid Transformation investments) for two consecutive triennial review periods before rates can be reduced or refunds can be issued (lines 855-861; 871-909). See discussion of “customer credit reinvestment offset” below.
    • Several new categories of costs (including costs associated with fossil fuel plant closures; automated meter reading; environmental compliance and coal ash remediation costs; costs associated with severe weather events and natural disasters) shall be deemed to be recovered in the triennial review period under review (lines 786-792). The SCC does not have to approve these expenditures. This accounting treatment could reduce Dominion’s/APCo’s reported earnings in a triennial review.
    “Customer credit reinvestment offset” for purposes of calculating refunds:
    • The SCC must provide for a “customer reinvestment offset credit” for solar/wind/Grid Transformation investments not recovered through a RAC (“credit offset”).
    • The credit offset would be applied in the SCC’s calculation of customer credits (i.e., refunds) due under Va. Code 56-585.1 A 8 d.
    • Under existing law, if the utility earns more than 70 basis points above its authorized earnings band one time, 70% of the excess profits above this earnings band is refunded to customers. (e.g., if a utility’s authorized ROE is 10.0%, 70% of any earnings above 10.7% would be refunded to customers).
    • Under HB 1558, a utility would have to overearn above the 70 basis points earnings band for two consecutive biennial review periods AND the SCC would have to incorporate credit offset amounts.
    • In other words, if the utility overearns by more than 70 basis points for two consecutive triennial reviews, there will only be refunds if the total investment in solar/wind/Grid Transformation is less than 70% of the overearnings amount.
    New RAC for Grid Transformation:
    • Authorizes a new RAC for electric distribution grid transformation projects (“Grid Transformation”) (lines 530-531).
    • “Grid Transformation” is broadly defined.
    • Grid Transformation, whether recovered through a RAC or base rates, is “in the public interest” (line 693).
    Solar “public interest” declaration:
    • Provides that the construction or purchase of solar facilities up to 4,000 MW is “in the public interest” (lines 597-598).
    • Note that under existing law, solar and wind facilities 150 MW and smaller are deemed to be “in the public interest,” and in considering whether to approve construction of such projects, the SCC must “liberally construe” the provisions of Title 56. Va. Code § 56-580 D.
    Wind “public interest” declaration:
    • Construction/purchase/or leasing new onshore wind is “in the public interest.”
    • Construction/purchase/or leasing new offshore wind up to 16 MW is “in the public interest.”
    Distribution line undergrounding mandate:
    • All conversion of distribution lines after 9/1/2016 are deemed “reasonably and prudently incurred” and “shall be approved for recovery,” providing that the projects meet certain cost parameters (lines 610-619).
    • Under the existing law, utilities are permitted to seek RAC recovery for distribution undergrounding project costs up to an amount equal to 5% of the utility’s distribution rate base. For Dominion, that would mean about $180 million in investment in distribution undergrounding per year.

    Transmission line undergrounding mandate:
    • Provides that part of a power line Dominion has proposed to serve an Amazon data center in Prince William County must be buried underground (lines 1121-1127). Dominion can recover costs through a new RAC.
    Solar CPCN approval timeline shortened:
    • The SCC must enter a final order on any solar CPCN within 6 months of filing (630-633). Currently, the SCC must enter a final order for generation facilities within 9 months.
    Offshore wind 16 MW demonstration project costs:
    • Provides that if Dominion gets a RAC for offshore wind demonstration project and does not begin construction of a “full-scale” project by 7/1/2023, then the SCC may direct that the new demonstration project may be recovered through base rates as opposed to a RAC. Recovery in this manner may reduce Dominion’s reported earnings in a 2024 triennial review (lines 732-743).
    • Note that this provision may provide an incentive for Dominion to delay construction of a full-scale offshore wind project until after its 2024 triennial review.
    Removes SCC discretion in several areas:
    • Note that Va. Code 56-585.1 D is modified in a way that may remove the SCC’s discretion in several areas (line 981).
    RIM test:
    • The SCC may still use the RIM test when evaluating the cost effectiveness of EE projects. However, the SCC is no longer required to consider all four tests (lines 208-209).
    Immediate $133 million rate credit to customers:
    • This refund amount appears to be tied to the SCC’s 9/1/17 Report on Dominion and APCo’s earnings during the rate freeze.
    • The SCC’s 9/1/2017 Report found that, had the SCC been permitted to order refunds for the 2015-2016 review period in accordance with the formula provided in Va. Code § 56-585.1, customers would have been refunded either $133 million (based on a 10.0% ROE) or $175.9 million (based on a 9.6% ROE).
    • The SCC’s Report did not provide an estimate of overearnings during 2017.
    Rate reductions associated with federal tax savings:
    • Provides for reductions to Dominion’s rates designed to equal $125 million reduction in annual revenues (line 1231).
    • Approximately $2.75 per month for a typical 1,000 kWh/month residential customers;
    Low-income energy assistance:
    • APCo and Dominion will continue energy assistance programs enacted under 2015 SB 1349 (line 1246).