Senate subcommittee rejects energy competition proposals

By: - January 30, 2020 12:02 am

A sign outside of a Dominion Energy office building in downtown Richmond. (Ned Oliver/ Virginia Mercury)

A Senate subcommittee on Wednesday voted down proposals to expand retail competition in Virginia’s energy markets.

“We have traditionally avoided what I would call a partial deregulation,” said Sen. Tommy Norment, R-James City, one of the five senators on the newly formed energy subcommittee. “This is partial deregulation. … There is no way you will persuade me that there is not going to be a cost-shift on this.”

The measures, which were rolled into one bill championed by Democratic Sen. Jeremy McPike of Prince William, would allow energy customers more leeway to buy power from entities other than the reigning utility, particularly when it comes to renewable energy. 

They were strongly opposed by both of the state’s two major utilities, the powerful Dominion Energy and Appalachian Power Company, as well as Tony Clark of Loudoun, who formerly served on the Federal Energy Regulatory Commission.

Virginia has seen a growing appetite over the past year for greater retail choice when it comes to energy, but state laws and an unusually complicated regulatory system, coupled with short legislative sessions that give lawmakers little time to delve into the details, have ensured that the monopoly utilities have maintained their tight grip over the market.

The spike in interest has been reflected in a series of cases brought before the State Corporation Commission, which oversees Virginia utility regulation. Corporations like Walmart and Costco have pushed to be allowed to combine the energy loads of their different facilities to take advantage of a statutory carveout that lets large customers “shop” for their energy. Data centers and groups representing companies like Microsoft, Amazon and Google have urged the SCC to reject a proposal by Dominion to sell a renewable energy package that would shut other suppliers out of the market

But while renewable energy companies have won a few victories before the SCC, the commission has been clear that it sees its job only as applying law set by the General Assembly and not driving policy independently.

In one February decision striking down Walmart’s petition to aggregate its energy loads to take advantage of the shopping provision, the SCC offered a suggestion: “If Walmart believes that the current statutory structure for setting vertically-integrated electric utility rates results in unreasonable or unnecessarily high rates, or that the public policy of Virginia should be to institute retail choice on a far more extensive scale than required under current law, its potential for recourse may be found through the legislative process.”

That’s exactly what the companies did. But their reception from the Senate’s energy subcommittee Wednesday was frosty, indicating that although some Virginia lawmakers are eager to tout the state’s business-friendly reputation, that business friendliness only goes as far as the utility’s front door. 

Both Norment and Sen. Stephen Newman, R-Bedford, aired concerns about the effect increasing competition could have on captive ratepayers, who the utilities said would face higher costs if others exited the customer pool — a worry the SCC also expressed when it rejected Walmart’s appeal to shop for energy outside of the utilities.

“For every customer that is cherrypicked and leaves the regulated utility, the cost to serve customers is shifted to all the other customers,” said Appalachian Power Company external affairs manager Ron Jefferson. “That’s the way it’s designed.”

The stance was reiterated by John Watkins, a former Republican delegate and senator from Powhatan now working as a lobbyist for Dominion Energy: “The small guy winds up picking up most of the cost.”

After the vote to pass by the bill indefinitely, however, advocates contested that portrayal. 

Ron Cerniglia, director of corporate and regulatory affairs for Direct Energy, one of the third-party renewable energy suppliers cleared to operate in Virginia and a backer of legislation to open up the market, said the cost-shifting argument was “simply not true.” 

“If Dominion wants to raise rates on customers it will have to get approval from the SCC to do so,” he said. “After customers overpaid Dominion by $277 million in 2018 alone … we hope that the legislature and the SCC would take a closer look at any claims that Dominion will have to increase charges to customers.” 

Though the Senate rules say “subcommittees shall not take final votes and shall only make recommendations to the committee,” advocates of retail choice don’t expect the full Senate Commerce and Labor Committee to revive the bill.  Despite the blow dealt by the energy subcommittee, the proposals still remain alive in the House of Delegates, where they are being carried in companion bills.

Other legislation voted down by the subcommittee Wednesday included the Virginia Clean Economy Act, pushed by a coalition of environmental and business groups. While the body voted to recommend that the full Committee on Commerce and Labor not approve the bill on the grounds that key details have still not been resolved, advocates expect it will still be taken up by the committee Monday.

Sticking points in finalizing the legislation include what role biomass power generation should play and how a renewable portfolio standard should be structured, said Mike Town, executive director of the League of Conservation Voters.

Still, he said, the measure “is healthy and alive,” and “I think if we reach agreement by Friday that we may see a different outcome on Monday.”

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Sarah Vogelsong
Sarah Vogelsong

Sarah is Editor-in-Chief of the Mercury and previously its environment and energy reporter. She has worked for multiple Virginia and regional publications, including Chesapeake Bay Journal, The Progress-Index and The Caroline Progress. Her reporting has won awards from groups such as the Society of Environmental Journalists and Virginia Press Association, and she is an alumna of the Columbia Energy Journalism Initiative and Metcalf Institute Science Immersion Workshop for Journalists. She is a graduate of the College of William and Mary. Contact her at [email protected]