RICHMOND – Dominion Virginia Power, the state's largest electricity provider and the heaviest of hitters on Capitol Square, would skip routine state regulatory reviews in coming years and potentially freeze a portion of its rates under newly proposed legislation.
Senate Bill 1349 is very much a work in progress, sponsoring state Sen. Frank Wagner said Wednesday. The initial version would forbid the State Corporation Commission to conduct biennial reviews of Dominion's "rates, terms and conditions for any service" until 2020.
Those reviews are done every two years and are used to help set rates and profit margins for the regulated utility. The SCC would still analyze the utility's return on equity starting in 2017, though, and Dominion would still have to file long-term plans with the commission.
This bill is one of several Wagner has in mind to push back against the U.S. Environmental Protection Agency's coming carbon rules, or to prepare for their implementation. These Clean Power Plan rules are being finalized now, and there is wide disagreement over how they will affect rates.
Dominion and SCC staffers who analyzed the law predicted a major upswing. Environmental groups predicted potential savings, and took issue with the SCC's methodology.
Wagner, R-Virginia Beach, said a final bill probably won't include the review exemption into 2020. He said he wants a four-year rate freeze included as well, and that he wants to forbid the closure of four coal-burning plants that Dominion expects to take off line to comply with EPA rules.
Wagner said parts of Hampton Roads' electricity infrastructure get "maxed out" during cold snaps, and he doesn't want to lose any capacity.
A rate freeze wouldn't necessarily mean that bills wouldn't go up. A number of charges get added to the company's base rate, including a dollar-for-dollar tack-on to cover fuel costs, which vary over time.
Dominion officials said the company wrote a portion of Wagner's bill at his request. Wagner said Dominion and a number of large electricity users, including the shipyard, are negotiating on the bill's language now.
Dan Weekley, Dominion's vice president of corporate affairs, described it as "a timeout" bill. He said it would attempt "to hold harmless Virginia ratepayers" and shift to shareholders losses that the company would see if EPA regulations forced it to close coal plants.
Other energy industry experts said the rate review exemption was key. Left in place, those reviews could lead to lower rates. Weekley said that's unlikely, an argument the company also made last year as it pushed separate legislation through the legislature.
"The only risk to ratepayers … is if you believe that you're going to get a rate decrease," Weekley said.
Angela Navarro, an attorney for the Southern Environmental Law Center and head of the center's energy efficiency program, said the bill looks like a way for Dominion to protect profits.
"It allows Dominion to continue to preserve their revenues and they're using the Clean Power Plan as a way to justify that," she said.
Francis Hodsoll, president of the Virginia Advanced Energy Industries Coalition, questioned the wisdom of pulling state reviews.
"It's bad policy to not allow for flexibility," he said. "I think we need to think hard about what restraints we put on our ability to manage toward an uncertain future."
The argument is similar to the one critics made last year, as Dominion won bipartisan General Assembly support for an accounting write-off connected to a planned nuclear expansion in Louisa County. Critics said the move deflated the company's bottom line in an effort to avoid a potential rate cut.
The SCC's 2013 review had predicted a potential over-earning of about $280 million a year. If a 2015 review backs that up, Dominion could have to return money to customers.
But the company said then, and again Wednesday, the prediction was an unrealistic hypothetical. Wagner's bill is about keeping rates predictable and shielding ratepayers from liability if EPA rules force Dominion to close coal-burning plants long before their useful lives are done, Weekley said.
"We're going to fight like crazy to keep those plants alive," Weekley said. "But if we fail, the ratepayers aren't on the hook for one penny through this period."
Dominion is among the biggest donors to state political campaigns every year. Last year, in addition to its accounting bill, the company won widespread legislative support for a rate adjustment meant to recover the costs of burying power lines.
In November, the Associated Press revealed that the company got $30 million in grants from the state's tobacco commission for a pipeline project – millions more than commission staff calculated was necessary.
Fain can be reached by phone at 757-525-1759.