Legislation to restore regulators’ authority to set electric rates headed to Youngkin

Following weeks of debate on electric utility regulation this legislative session, a bill that will explicitly give state regulators discretion to set future electric rates as they see fit is on its way to Gov. Glenn Youngkin’s desk.

The legislation, carried by Sens. Jennifer McClellan, D-Richmond, and Creigh Deeds, D-Bath, as well as Dels. Lee Ware, R-Powhatan, and Rip Sullivan, D-Arlington, passed out of both chambers unanimously on Tuesday.

“This is quite a swan song,” said McClellan in a press conference on the bill Tuesday. A chief patron of the Virginia Clean Economy Act, the landmark 2020 law that sketches out a path for the state’s electric grid to decarbonize by midcentury, McClellan is expected to win a special election Tuesday to fill the congressional seat left vacant by the death of former U.S. Rep. Don. McEachin, D-Richmond.

Currently, the State Corporation Commission, which regulates electric utilities, determines a range within which Dominion Energy and Appalachian Power Company are allowed to make a profit. Every three years, the SCC reviews the utilities’ earnings and determines if the companies’ profits fell within that range.

If profits are within the range, rates stay the same. If profits are below the range, the SCC can raise rates for the next three years. If profits are above the range, then 70% of the excess earnings must be refunded to ratepayers.

While the SCC currently has the power to reduce rates if a utility overearns, legislative changes in past years have given the utilities great flexibility to recalculate their earnings and thereby prevent rate reductions. 

The legislation that passed Tuesday overrides those recalculation measures by adding new language that states the SCC “shall order any reduction or increases” to rates “that it deems appropriate” to  ensure rates are just and reasonable, and the utility can still recover its costs and earn a fair profit. 

The new authority would be effective during rate reviews for Appalachian Power this year and for Dominion in 2024.

“The momentum in the legislature is very clearly towards protecting ratepayers by restoring the SCC’s oversight,” said Ware.

Youngkin’s administration declined to comment Tuesday but previously voiced support for the bill during committee discussion, with Acting Secretary of Natural and Historic Resources Travis Voyles saying it “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.”

Environmental and ratepayer advocacy groups, including the Southern Environmental Law Center, Clean Virginia and the Virginia Poverty Law Center, touted the passage of the bill.

“In a time of inflation and skyrocketing fossil fuel costs, this is a major victory for Virginians,” said Will Cleveland, senior attorney for the Southern Environmental Law Center. “For the first time in a generation, the Commission will have the power to make sure customers pay a fair price for electricity, which is essential as we continue Virginia’s clean energy transition.”

Other bills on utility regulation are still making their way through each respective chamber, including legislation introduced by Senate Majority Leader Dick Saslaw, D-Fairfax, and House Majority Leader Terry Kilgore, R-Scott, that would adjust how regulators set the utilities’ profit margin as well as alter the fossil fuel plant retirement timeline set by the VCEA. 

“While this step in the process is complete, important work remains to provide $350 million in immediate rate relief for customers and avoid a $17 increase in monthly fuel costs,” said Dominion spokesperson Aaron Ruby Tuesday, referencing provisions included in the bill Kilgore and Saslaw are carrying. Their bill also includes the new rate-setting authority outlined in the legislation that passed Tuesday.