Virginia electric utility regulation bill takes different form in House

A House version of a bill Dominion Energy is backing this General Assembly session made it out of committee Thursday without a controversial provision aimed at raising the company’s profit margin, but with a new section that critics say weakens the Virginia Clean Economy Act.

The House Commerce and Energy Committee voted Thursday along party lines to advance House Bill 1770, patroned by House Majority Leader Terry Kilgore. 

The current version of the bill strips out a provision opposed by environmental and ratepayer groups that would alter how regulators choose the utility’s peer group, a collection of other utilities used by the State Corporation Commission as comparisons when setting profit margins for Dominion Energy and Appalachian Power Company.

It also doesn’t include a proposal to roll into base rates $350 million in riders, or fees Dominion and Appalachian Power tack onto bills to recover costs for particular projects, or approval of Dominion’s issuance of $1.6 billion in bonds to immediately cover spiking fuel costs.

Despite negotiation impasse, Dominion rate reform bill advances to Senate

A Senate version of Kilgore’s bill, carried by Majority Leader Dick Saslaw, D-Fairfax, includes all those provisions and advanced to the Senate floor Monday, despite criticism that the increased profit margin will cause rates to go up. Dominion says Saslaw’s bill will reduce rates by about $6 to $7 a month, a view backed up by the State Corporation Commission in a Feb. 1 letter, and the increased profit margin is needed to attract more capital to operate.

Another key difference between the two bills is language in Kilgore’s that declares plants “shall not” be retired before a utility petitions the SCC for their closure and the SCC conducts a grid reliability analysis. The same provision was stripped from Saslaw’s version.

“When we go to turn the lights on, we want them to come on,” Kilgore said, citing concerns about blackouts and brownouts that other states have experienced.

Since the bill’s introduction, Dominion has said the retirement language is intended to restore authority to the SCC and reflects a request of stakeholders. In the fall, the SCC said in a report that current law limits regulators’ proactive ability to protect ratepayers from reliability concerns.

Under current law set by the Virginia Clean Economy Act, however, retirements of carbon-emitting plants are scheduled for certain dates, and reliability concerns are addressed when the utilities bring them to the SCC. 

Critics say the language in Kilgore’s bill that states a plant “shall not” be retired without a petition from the utility and a reliability analysis usurps that schedule, which is intended as one of several roadmaps toward decarbonization of the grid by 2050.

“We did carefully … when we created the Clean Economy Act, work out that schedule in cooperation with the utilities,” said Del. Rip Sullivan, D-Arlington, in committee, calling the grid reliability threat a scare tactic. 

Sullivan also pointed to language in the VCEA that states, “Nothing in this act shall require the utilities or the State Corporation Commission to take any action that, in the State Corporation Commission’s discretion and after consideration of all in-state and regional transmission entity resources, threatens the reliability or security of electric service to the utility’s customers.”

Environmental groups, including the Southern Environmental Law Center and Virginia chapter of the Sierra Club, sided with Sullivan.

“Our concern with this language is it sort of cuts out the ability to have a set retirement date for these facilities that would help grow the industry as it continues to move toward a clean energy future,” Connor Kish, legislative director for the Virginia Sierra Club, told the House panel Thursday.

But Kilgore’s bill won approval from Republican Gov. Glenn Youngkin’s administration, which testified on its behalf, as well as the Office of the Attorney General and Virginia Manufacturers Association.

Youngkin outlined his desire to “restore discretion to the SCC concerning power plant retirement timelines” and “require periodic reports to be produced to the Governor and General Assembly on the impact of potential retirements on reliability” in his four-year energy plan last year.

The passage of Kilgore’s bill by the House committee this week leaves two very different versions of the original legislation in play, indicating negotiations will continue. 

Sullivan said he would “not be at all surprised” if Kilgore’s bill looks different by the end of the session. 

The administration and attorney general’s office also supported proposals Thursday that would allow the State Corporation Commission the discretion to reduce electricity rates  and give the SCC the authority to move riders into base rates, another request from Youngkin in his plan. 

The electricity rate reduction bill, from Sullivan and Del. Lee Ware, R-Powhatan, seeks to more directly restore authority to the SCC by giving it the ability to reduce rates going forward if it finds a utility has overearned. Current law has given the utilities broad flexibility  in how they account for their earnings during rate reviews, which has prevented regulators from finding they have earned above their approved level. 

The proposal “presents straightforward, foundational and commonsense ways to move the conversation on energy forward and target processes to improve predictability, accountability and the restoration of the SCC’s independent authority,” said Acting Secretary of Natural and Historic Resources Travis Voyles.

The measure passed out of House committee unanimously Thursday. A companion bill from Sens. Jennifer McClellan, D-Richmond, and Creigh Deeds, D-Bath,  also cleared the Senate unanimously 40-0 on Thursday.