After intense Dominion lobbying, Senate panel kills bipartisan Fair Energy Bills Act

By: - March 2, 2020 10:09 pm
The State Corporation Commission

The State Corporation Commission regulates Virginia electric utilities. (Ned Oliver/ Virginia Mercury)

A Democrat-led Senate panel Monday night killed a bipartisan bill that aimed to restore a system of electric utility rate review that could have returned hundreds of millions in overearnings to customers of Dominion Energy, vividly illustrating the power that the state’s largest electric monopoly still wields in the Capitol.

The Fair Energy Bills Act, which was sponsored by Democratic Del. Jay Jones of Norfolk and Republican Del. Lee Ware of Powhatan, previously cleared the House on a 77-23 vote. The legislation faced stiff headwinds in the more utility-friendly Senate, however, where Majority Leader Dick Saslaw of Fairfax, who chairs the Senate Commerce and Labor Committee, failed to docket it last week, leading to concerns that it would die without a hearing.

An unusual episode earlier Monday also saw Norfolk mayor Kenny Alexander turn out at a Senate Democratic Caucus meeting to urge legislators to vote it down, causing Ware to describe the utility’s lobbying efforts against the bill as “astounding.”

Ultimately, however, the committee sided with Dominion. Like the House vote to pass the legislation, the Senate’s 8-7 split against it was bipartisan, with two Republicans and six Democrats moving to kill the measure.

The hotly debated FEBA would have directed the State Corporation Commission to adopt the standard of rate review used for most non-electric utilities in Virginia during the 2021 review of Dominion’s base rates.

Advocates have argued that such a review, known as a Chapter 10 review in reference to the portion of Title 56 of the state code that outlines it, is necessary to “reset” Dominion’s base rates after several decades of overearnings.

In a letter dated Jan. 27, SCC Director of Utility Accounting and Finance Kimberly Pate estimated that since 1994, Dominion has overearned approximately $3.4 billion, with about $1.3 billion of that returned to customers as refunds or rate credits. 

A Feb. 11 letter from Pate estimated that if the company’s most recent haul of overearnings, from 2018, was refunded, the average customer using 1,250 kilowatts per month would see a $7 reduction in their monthly bill.

“This is about protecting the consumer, protecting the ratepayer. … That money belongs in the pockets of the people of Virginia,” Jones told the Senate Commerce and Labor Committee. 

His co-patron, Ware, contended that, with the sweeping changes in energy being ushered in this session as the state moves toward greater reliance on renewables, “it’s important we have a baseline.”

But while a diverse coalition including the Office of the Attorney General, Gov. Ralph Northam’s administration, the Virginia Manufacturers Association, environmental groups and the Virginia Poverty Law Center argued in favor of the measure, Dominion’s arguments prevailed.

Representatives and lobbyists for the utility turned out to the hearing to argue that FEBA would undermine regulatory certainty while instituting what Dominion Senior Vice President of Corporate Affairs and Communications Bill Murray described as an “internally inconsistent” patchwork of regulatory regimes. 

“What this bill is trying to do is mix and match things people like about three different regulatory models,” Murray told the panel.

Utility lobbyist John Watkins, a former Virginia legislator, in his remarks implied that if the legislature were to allow a Chapter 10 review in 2021, it could lead to the same troubles facing California, where utility heavyweight Pacific Gas & Electric is facing bankruptcy. And Robert Hevert, a utility analyst who recently served as a witness for Dominion in its unsuccessful petition to the SCC to increase its return on equity for investors from 9.2 to 10.75 percent, warned that FEBA could have a “disruptive effect” on Dominion’s efforts to attract investment.

“Stability and predictability are essential to utility investors. They watch closely what’s going on in legislatures and utility commissions around the country,” said Hevert. “And if investors perceive a regulatory environment is eroding, that can inhibit a utility’s ability to access capital or likely increase the cost of that capital.”

Not all senators accepted that view. 

“If we want stability from a regulatory scheme, we come in here every couple of years since 1996 or so, and we change the scheme,” said Sen. Creigh Deeds, D-Bath.

The motion to kill the bill came from Sen. Tommy Norment, R-James City, who accused “environmental groups and lower-income groups” of having “done their absolute unequivocal best to bend Dominion over in every way imaginable.”

Speaking after the vote, Will Cleveland, an attorney for the Southern Environmental Law Center, called the bill “a good opportunity for the ratepayer” that the legislature chose to bypass, while energy lawyer Will Reisinger described Dominion’s arguments as having “absolutely no basis” in fact.

“The General Assembly is more than willing to change the regulatory structure when it would benefit Dominion’s financial position at that point in time,” said Reisinger. 

In a text message, Jones said he was “deeply disappointed that the committee chose a corporation, Dominion, over the ratepayer” but was “not surprised since Dominion was fully mobilized and peddling lies and misinformation.”

Dominion has said it has a policy of not speaking with the Virginia Mercury. 

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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.