Regulators approve major electric rate increase for Old Dominion Power

By: - April 16, 2020 12:01 am
The State Corporation Commission

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

The State Corporation Commission has approved a rate increase for the roughly 30,000 Southwest Virginians who get their electricity from Old Dominion Power, with the bump set to go into effect May 1. 

In their April 6 order, regulators allowed the utility, which is the Virginia unit of Kentucky Utilities and the state’s smallest investor-owned utility, to increase its annual revenue by $9 million. The company has calculated that the average residential customer using about 1,250 kilowatts of power will see their monthly bill rise 15.4 percent, or $21.40. 

During hearings and in testimony, a number of citizens and local governments, including the Wise County Board of Supervisors, decried the rate hike as “one of the highest proposed by any investor-owned utility in the country in the past year, and the second-highest proposed increase for the average residential customer.”

At an October hearing in Norton, Big Stone Gap Mayor Gary Johnson spoke against the increase, saying, “We have gone through an economical development downhill fast here, and how in the world can I ask outside investors to come into my part and pay such an outrageous electrical bill that they’re going to be paying?”

Old Dominion, however, argued that the rate increase was necessary to “ensure safe and reliable energy service,” provide shareholders with a fair rate of return and offset the loss of nine municipal customers from the rate base. 

But as the coronavirus pandemic continues to halt normal activity and deepen an economic nosedive, the decision to increase rates raised some eyebrows.

Previously, Virginia regulators issued orders prohibiting utilities from disconnecting service to customers and requiring late payment fees to be waived for the duration of the coronavirus emergency.

“The timing of this increase could not be worse,” said Chelsea Barnes, a program manager with environmental and ratepayer advocacy group Appalachian Voices, which testified in the rate case, in a statement. “We encourage the commission and lawmakers to continue to seek ways to help Southwest Virginia communities lower their energy bills.”

In March, four state legislators — Republican Dels. Terry Kilgore of Scott and William Wampler of Abingdon and Sens. Ben Chafin of Russell and Todd Pillion of Abingdon — in a letter to the State Corporation Commission asked that regulators “seriously consider the adverse effects that this proposed increase will have on families, businesses and public/private institutions.”

COVID-19 has caused a record number of Virginians to file for unemployment,” the lawmakers wrote. “Additionally, government mandated closures have also contributed to the loss of revenue for numerous businesses in our area.”

SCC Division of Information Resources Director Ken Schrad said in an email that the decision was “a matter of timing.” When an investor-owned public electric utility applies for a rate increase, state code requires the commission to issue a final order no more than nine months after the application is made.

Old Dominion Power submitted its rate increase application July 12, which meant regulators had a deadline of April 12 for their decision.

“The company is, by law, entitled to a rate increase to cover its costs,” said Schrad, pointing out that the commission had found the higher rates to be “just and reasonable.” 

The $9 million revenue increase approved by the SCC last week is almost 30 percent lower than the utility’s initial ask of raising its revenues by $12.7 million.

“The longer a company goes without being able to recover its costs, it will only lead to higher future rate increase requests,” Schrad wrote. “Current law only permits a company one base rate increase in a 12-month period.”

All of Old Dominion Power’s 30,000 Virginia customers are located in the five coalfield counties of Dickenson, Lee, Russell, Scott and Wise, jurisdictions that routinely report high percentages of residents living in poverty.

Daniel Lowry, a spokesperson for the utility, said Old Dominion Power “understand(s) the difficulty that so many of our customers are going through during the COVID-19 pandemic and we don’t take lightly our responsibility that we have to our community and to our customers that rely on our electric service.”

Lowry said that because the SCC’s April 6 order also calls for Old Dominion to refund about $1 million to customers resulting from the federal Tax Cuts and Jobs Act, customers will not see the impact of the rate increase until June. 

The company has calculated that the average Virginia customer’s May electric bill will decline by about 20 percent, or $32, as a result of the refund.

“There is a little bit of a delay,” said Lowry.

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Sarah Vogelsong
Sarah Vogelsong

Sarah is the Mercury's environment and energy reporter, covering everything from utility regulation to sea level rise. Originally from McLean, she has spent over a decade in journalism and academic publishing and previously worked as a staff reporter for Chesapeake Bay Journal, the Progress-Index and the Caroline Progress. She is the recipient of a first place award for explanatory reporting from the Society of Environmental Journalists and has twice been honored by the Virginia Press Association as "Best in Show" for online writing. She was chosen for the 2020 cohort of the Columbia Energy Journalism Initiative and is a graduate of the College of William and Mary. Contact her at [email protected]